Forecasting exchange rate volatility using conditional variance models selected by information criteria

This paper uses appropriately modified information criteria to select models from the GARCH family, which are subsequently used for predicting US dollar exchange rate return volatility. The out of sample forecast accuracy of models chosen in this manner compares favourably on mean absolute error grounds, although less favourably on mean squared error grounds, with those generated by the commonly used GARCH(1, 1) model. An examination of the orders of models selected by the criteria reveals that (1, 1) models are typically selected less than 20% of the time.

Episodic nonstationarity in exchange rates

We examine a method recently proposed by Hinich and Patterson (mimeo, University of Texas at Austin, 1995) for testing the validity of specifying a GARCH error structure for financial time series data in the context of a set of ten daily Sterling exchange rates. The results demonstrate that there are statistical structures present in the data that cannot be captured by a GARCH model, or any of its variants. This result has important implications for the interpretation of the recent voluminous literature which attempts to model financial asset returns using this family of models.

Chaos in foreign exchange markets: a sceptical view

This paper tests directly for deterministic chaos in a set of ten daily Sterling-denominated exchange rates by calculating the largest Lyapunov exponent. Although in an earlier paper, strong evidence of nonlinearity has been shown, chaotic tendencies are noticeably absent from all series considered using this state-of-the-art technique. Doubt is cast on many recent papers which claim to have tested for the presence of chaos in economic data sets, based on what are argued here to be inappropriate techniques.

Linear and non-linear (non-)forecastability of high-frequency exchange rates

This paper forecasts Daily Sterling exchange rate returns using various naive, linear and non-linear univariate time-series models. The accuracy of the forecasts is evaluated using mean squared error and sign prediction criteria. These show only a very modest improvement over forecasts generated by a random walk model. The Pesaran–Timmerman test and a comparison with forecasts generated artificially shows that even the best models have no evidence of market timing ability.

Testing for non-linearity in daily sterling exchange rates

A number of tests for non-linear dependence in time series are presented and implemented on a set of 10 daily sterling exchange rates covering the entire post Bretton-Woods era until the present day. Irrefutable evidence of non-linearity is shown in many of the series, but most of this dependence can apparently be explained by reference to the GARCH family of models. It is suggested that the literature in this area has reached an impasse, with the presence of ARCH effects clearly demonstrated in a large number of papers, but with the tests for non-linearity which are currently available being unable to classify any additional non-linear structure.

A measure of persistence in daily pound exchange rates

An alternative procedure to that of Lo is proposed for assessing whether there is significant evidence of persistence in time series. The technique estimates the Hurst exponent itself, and significance testing is based on an application of bootstrapping using surrogate data. The method is applied to a set of 10 daily pound exchange rates. A general lack of long-term memory is found to characterize all the series tested, in sympathy with the findings of a number of other recent papers which have used Lo's techniques.

Hot and cold IPO markets : the case of the stock exchange of Mauritius

The aim of this study is to assess the characteristics of the hot and cold IPO markets on the Stock Exchange of Mauritius (SEM). The results show that the hot issues exhibit, on average, a greater degree of underpricing than the cold issues, although the hot issue phenomenon is not a significant driving force in explaining this short-run underpricing. The results are consistent with the predictions of the changing risk composition hypothesis in suggesting that firms going public during hot markets are on average relatively more risky. The findings also support the time adverse selection hypothesis in that the firms’ quality dispersion is statistically different between hot and cold markets. Finally, the study concludes that firms which go public during hot markets do not underperform those going public in cold markets over the longer term.

Energy exchange in a dense urban environment – part I: temporal variability of long-term observations in central London

Though anthropogenic impacts on boundary layer climates are expected to be large in dense urban areas, to date very few studies of energy flux observations are available. We report on 3.5 years of measurements gathered in central London, UK. Radiometer and eddy covariance observations at two adjacent sites, at different heights, were analysed at various temporal scales and with respect to meteorological conditions, such as cloud cover. Although the evaporative flux is generally small due to low moisture availability and a predominately impervious surface, the enhancement following rainfall usually lasts for 12–18 h. As both the latent and sensible heat fluxes are larger in the afternoon, they maintain a relatively consistent Bowen ratio throughout the middle of the day. Strong storage and anthropogenic heat fluxes sustain high and persistently positive sensible heat fluxes. At the monthly time scale, the urban surface often loses more energy by this turbulent heat flux than is gained from net all-wave radiation. Auxiliary anthropogenic heat flux information suggest human activities in the study area are sufficient to provide this energy.

Energy exchange in a dense urban environment Part II: impact of spatial heterogeneity of the surface

The centre of cities, characterised by spatial and temporal complexity, are challenging environments for micrometeorological research. This paper considers the impact of sensor location and heterogeneity of the urban surface on flux observations in the dense city centre of London, UK. Data gathered at two sites in close vicinity, but with different measurement heights, were analysed to investigate the influence of source area characteristics on long-term radiation and turbulent heat fluxes. Combining consideration of diffuse radiation and effects of specular reflections, the non-Lambertian urban surface is found to impact the measurements of surface albedo. Comparisons of observations from the two sites reveal that turbulent heat fluxes are similar under some flow conditions. However, they mostly observe processes at different scales due to their differing measurement heights, highlighting the critical impact of siting sensors in urban areas. A detailed source area analysis is presented to investigate the surface controls influencing the energy exchanges at the different scales

Development of a food-exchange model to replace saturated fat with MUFAS and n-6 PUFAS in adults at moderate cardiovascular risk

The recommendation to reduce saturated fatty acid (SFA) consumption to ≤10% of total energy (%TE) is a key public health target aimed at lowering cardiovascular disease (CVD) risk. Replacement of SFA with unsaturated fats may provide greater benefit than replacement with carbohydrates, yet the optimal type of fat is unclear. The aim was to develop a flexible food-exchange model to investigate the effects of substituting SFAs with monounsaturated fatty acids (MUFAs) or n-6 (ω-6) polyunsaturated fatty acids (PUFAs) on CVD risk factors. In this parallel study, UK adults aged 21-60 y with moderate CVD risk (50% greater than the population mean) were identified using a risk assessment tool (n = 195; 56% females). Three 16-wk isoenergetic diets of specific fatty acid (FA) composition (%TE SFA:%TE MUFA:%TE n-6 PUFA) were designed using spreads, oils, dairy products, and snacks as follows: 1) SFA-rich diet (17:11:4; n = 65); 2) MUFA-rich diet (9:19:4; n = 64); and 3) n-6 PUFA-rich diet (9:13:10; n = 66). Each diet provided 36%TE total fat. Dietary targets were broadly met for all intervention groups, reaching 17.6 ± 0.4%TE SFA, 18.5 ± 0.3%TE MUFA, and 10.4 ± 0.3%TE n-6 PUFA in the respective diets, with significant overall diet effects for the changes in SFA, MUFA, and n-6 PUFA between groups (P < 0.001). There were no differences in the changes of total fat, protein, carbohydrate, and alcohol intake or anthropometric measures between groups. Plasma phospholipid FA composition showed changes from baseline in the proportions of total SFA, MUFA, and n-6 PUFA for each diet group, with significant overall diet effects for total SFA and MUFA between groups (P < 0.001). In conclusion, successful implementation of the food-exchange model broadly achieved the dietary target intakes for the exchange of SFA with MUFA or n-6 PUFA with minimal disruption to the overall diet in a free-living population. This trial was registered at clinicaltrials.gov as NCT01478958.

Geophysical characterization of the complex dynamics of groundwater and seawater exchange in a highly stressed aquifer system linked to a coastal lagoon (SE Spain)

Anthropogenic pressure influences the two-way interactions between shallow aquifers and coastal lagoons. Aquifer overexploitation may lead to seawater intrusion, and aquifer recharge from rainfall plus irrigation may, in turn, increase the groundwater discharge into the lagoon. We analyse the evolution, since the 1950s up to the present, of the interactions between the Campo de Cartagena Quaternary aquifer and the Mar Menor coastal lagoon (SE Spain). This is a very heterogeneous and anisotropic detrital aquifer, where aquifer–lagoon interface has a very irregular geometry. Using electrical resistivity tomography, we clearly identified the freshwater–saltwater transition zone and detected areas affected by seawater intrusion. Severity of the intrusion was spatially variable and significantly related to the density of irrigation wells in 1950s–1960s, suggesting the role of groundwater overexploitation. We distinguish two different mechanisms by which water from the sea invades the land: (a) horizontal advance of the interface due to a wide exploitation area and (b) vertical rise (upconing) caused by local intensive pumping. In general, shallow parts of the geophysical profiles show higher electrical resistivity associated with freshwater mainly coming from irrigation return flows, with water resources mostly from deep confined aquifers and imported from Tagus river, 400 km north. This indicates a likely reversal of the former seawater intrusion process.

Spin polarization, orbital occupation and band gap opening in vanadium dioxide: the effect of screened Hartree–Fock exchange

The metal–insulator transition of VO2 so far has evaded an accurate description by density functional theory. The screened hybrid functional of Heyd, Scuseria and Ernzerhof leads to reasonable solutions for both the low-temperature monoclinic and high-temperature rutile phases only if spin polarization is excluded from the calculations. We explore whether a satisfactory agreement with experiment can be achieved by tuning the fraction of Hartree Fock exchange (a) in the density functional. It is found that two branches of locally stable solutions exist for the rutile phase for 12:5% 6 a 6 20%. One is metallic and has the correct stability as compared to the monoclinic phase, the other is insulating with lower energy than the metallic branch. We discuss these observations based on the V 3d orbital occupations and conclude that a ¼ 10% is the best possible choice for spin-polarized VO2 calculations.

The long-run performance of IPOs: the case of the Stock Exchange of Mauritius

This study examines the long-run performance of initial public offerings on the Stock Exchange of Mauritius (SEM). The results show that the 3-year equally weighted cumulative adjusted returns average −16.5%. The magnitude of this underperformance is consistent with most reported studies in different developed and emerging markets. Based on multivariate regression models, firms with small issues and higher ex ante financial strength seem on average to experience greater long-run underperformance, supporting the divergence of opinion and overreaction hypotheses. On the other hand, Mauritian firms do not on average time their offerings to lower cost of capital and as such, there seems to be limited support for the windows of opportunity hypothesis.