Handbook of research methods and applications in empirical finance

The objective of this book is to present the quantitative techniques that are commonly employed in empirical finance research together with real world, state of the art research examples. Each chapter is written by international experts in their fields. The unique approach is to describe a question or issue in finance and then to demonstrate the methodologies that may be used to solve it. All of the techniques described are used to address real problems rather than being presented for their own sake and the areas of application have been carefully selected so that a broad range of methodological approaches can be covered. This book is aimed primarily at doctoral researchers and academics who are engaged in conducting original empirical research in finance. In addition, the book will be useful to researchers in the financial markets and also advanced Masters-level students who are writing dissertations.

The antithrombotic effect of dextran-40 in man is due to enhanced fibrinolysis in vivo

BACKGROUND: Dextran-40 is effective in reducing postoperative Doppler-detectable embolization in patients undergoing carotid endarterectomy (CEA). Dextrans are thought to have antithrombotic and antiplatelet effects. The mode of action is unclear. In rats, dextran blocks uptake of tissue plasminogen activator (tPA) by mannose-binding receptors. Because this would have the effect of enhancing endogenous fibrinolysis, we explored this effect of dextran-40 on fibrinolysis in man. METHODS: Twenty patients undergoing endovascular stenting for abdominal aortic aneurysm were randomized to receive 100 mL of 10% dextran-40 or saline, over 1 hour, during their operation in addition to heparin. Blood samples were taken preoperatively, intraoperatively (immediately after operative procedure), and 24 hours postoperatively. Thrombi were formed in a Chandler loop and used to assess endogenous fibrinolysis over 24 hours, measured as the fall in thrombus weight, and the release of fluorescently labelled fibrinogen from the thrombus. Plasma samples were analyzed for markers of fibrinolysis; plasmin-antiplasmin (PAP), PAI-1, and t-PA, and for functional von Willebrand factor (vWF). Platelet response to thrombin and other agonists was measured by flow cytometry. RESULTS: Thrombi formed ex vivo from the intraoperative blood samples from the dextran-treated patients exhibited significantly greater fibrinolysis vs preoperative samples, seen both as a significantly greater percentage reduction in thrombus weight (from 34.7% to 70.6% reduction) and as an 175% increase in the release of fluorescence (P < .05). Fibrinolysis returned to baseline levels the next day. No change was seen in the saline-treated group. Plasma levels of PAP and PAI-1 increased significantly postoperatively in the dextran-treated group vs the saline group (P < .05). The postoperative level of functional VWF was significantly lower in the dextran-treated group vs controls. A specific reduction occurred in the platelet response to thrombin, but not to other agonists, in the intraoperative samples from the dextran-treated group (11.1% vs 37.1%; P = .022), which was not seen in the controls. CONCLUSIONS: These data are consistent with a rise in plasmin due to dextran blockade of tPA uptake in vivo, leading to enhanced fibrinolysis, cleavage of vWF and of the platelet protease-activated receptor-1 (PAR-1) thrombin receptor. This suggests that dextran exerts a combined therapeutic effect, enhancing endogenous fibrinolysis, whilst also reducing platelet adhesion to vWF and platelet activation by thrombin. The proven antithrombotic efficacy of low-dose dextran in carotid surgery may be applicable to wider therapeutic use.

Anti-platelet effect of aspirin is substantially reduced after administration of heparin during carotid endarterectomy

OBJECTIVES: Aspirin therapy is usually continued throughout the perioperative period to reduce the risk for thromboembolic stroke and myocardial infarction after carotid endarterectomy (CEA). Aspirin irreversibly binds cyclooxygenase-1, thereby reducing platelet aggregation for the lifetime of each platelet. However, recent research from this unit has shown that aggregation in response to arachidonic acid increases significantly, but transiently, during CEA, which suggests that the anti-platelet effect of aspirin is temporarily reversed. The purpose of the current study was to determine when this phenomenon occurs and to identify the possible mechanisms involved. METHODS: Platelet aggregation was measured in platelet-rich plasma from 41 patients undergoing CEA who were stabilized with 150 mg of aspirin daily. Blood was taken at 8 time points: before anesthesia, after anesthesia, before heparinization, 3 minutes after heparinization, 3 minutes after shunt insertion, 10 minutes after flow restoration, 4 hours postoperatively, and 24 hours postoperatively. Platelet aggregation was also measured at similar times in a group of 18 patients undergoing peripheral angioplasty without general anesthesia. RESULTS: All patient platelets were effectively inhibited by aspirin at the start of the operation. There was a significant intraoperative increase in platelet response to arachidonic acid in both groups of patients, which occurred within 3 minutes of administration of unfractionated heparin. In the CEA group this resulted in a greater than 10-fold increase in mean aggregation, to 5 mmol/L of arachidonic acid (5 mmol/L), rising from 3.9% +/- 2.2% preoperatively to 45.1% +/- 29.3% after administration of heparin ( P <.0001). This increased aggregation persisted into the early postoperative period, but by 24 hours post operation aggregation had returned to near preoperative values. Aggregation in response to other platelet agonists (adenosine diphosphate, thrombin receptor agonist peptide) showed only a small increase at the same time, which could be accounted for by a parallel increase in the level of spontaneous aggregation. CONCLUSION: Administration of heparin significantly increases platelet aggregation in response to arachidonic acid, despite adequate inhibition by aspirin administered preoperatively. This apparent reversal in anti-platelet activity persisted into the immediate early postoperative period, and could explain why a small proportion of patients are at increased risk for acute cardiovascular events after major vascular surgery, despite aspirin therapy.

The trial: how procedure shapes substance

The rules and the principles of the common law are formed from the cases decided in courts of common law. The unique nature of the evolution of the common law has long been the subject of study. Less frequently studied has been the impact of procedure upon the development of substantive law. This paper examines how the procedures applicable to the trial of a case can affect the substance of the resulting decision. The focus of the examination is the decision in Bell v Lever Bros [1932] AC 161. While the case has long been regarded as a leading, albeit confusing, contract law case it is also greatly concerned with the conduct of litigation. This paper argues that the substantive decision was largely determined by the civil procedure available. Different rules of civil procedure, it is suggested, would have resulted in a better decision in the English law of contract.

Assessment of intercalibration methods for satellite microwave humidity sounders

Three methods for intercalibrating humidity sounding channels are compared to assess their merits and demerits. The methods use the following: (1) natural targets (Antarctica and tropical oceans), (2) zonal average brightness temperatures, and (3) simultaneous nadir overpasses (SNOs). Advanced Microwave Sounding Unit-B instruments onboard the polar-orbiting NOAA 15 and NOAA 16 satellites are used as examples. Antarctica is shown to be useful for identifying some of the instrument problems but less promising for intercalibrating humidity sounders due to the large diurnal variations there. Owing to smaller diurnal cycles over tropical oceans, these are found to be a good target for estimating intersatellite biases. Estimated biases are more resistant to diurnal differences when data from ascending and descending passes are combined. Biases estimated from zonal-averaged brightness temperatures show large seasonal and latitude dependence which could have resulted from diurnal cycle aliasing and scene-radiance dependence of the biases. This method may not be the best for channels with significant surface contributions. We have also tested the impact of clouds on the estimated biases and found that it is not significant, at least for tropical ocean estimates. Biases estimated from SNOs are the least influenced by diurnal cycle aliasing and cloud impacts. However, SNOs cover only relatively small part of the dynamic range of observed brightness temperatures.

Response of tropical cyclones to idealized climate change experiments in a global high resolution coupled general circulation model

We present an assessment of how tropical cyclone activity might change due to the influence of increased atmospheric carbon dioxide concentrations, using the UK’s High Resolution Global Environment Model (HiGEM) with N144 resolution (~90 km in the atmosphere and ~40 km in the ocean). Tropical cyclones are identified using a feature tracking algorithm applied to model output. Tropical cyclones from idealized 30-year 2×CO2 (2CO2) and 4×CO2 (4CO2) simulations are compared to those identified in a 150-year present-day simulation, which is separated into a 5-member ensemble of 30-year integrations. Tropical cyclones are shown to decrease in frequency globally by 9% in the 2CO2 and 26% in the 4CO2. Tropical cyclones only become more intese in the 4CO2, however uncoupled time slice experiments reveal an increase in intensity in the 2CO2. An investigation into the large-scale environmental conditions, known to influence tropical cyclone activity in the main development regions, is used to determine the response of tropical cyclone activity to increased atmospheric CO2. A weaker Walker circulation and a reduction in zonally averaged regions of updrafts lead to a shift in the location of tropical cyclones in the northern hemisphere. A decrease in mean ascent at 500 hPa contributes to the reduction of tropical cyclones in the 2CO2 in most basins. The larger reduction of tropical cyclones in the 4CO2 arises from further reduction of mean ascent at 500 hPa and a large enhancement of vertical wind shear, especially in the southern hemisphere, North Atlantic and North East Pacific.

The HadGEM2-ES implementation of CMIP5 centennial simulations

The scientific understanding of the Earth’s climate system, including the central question of how the climate system is likely to respond to human-induced perturbations, is comprehensively captured in GCMs and Earth System Models (ESM). Diagnosing the simulated climate response, and comparing responses across different models, is crucially dependent on transparent assumptions of how the GCM/ESM has been driven – especially because the implementation can involve subjective decisions and may differ between modelling groups performing the same experiment. This paper outlines the climate forcings and setup of the Met Office Hadley Centre ESM, HadGEM2-ES for the CMIP5 set of centennial experiments. We document the prescribed greenhouse gas concentrations, aerosol precursors, stratospheric and tropospheric ozone assumptions, as well as implementation of land-use change and natural forcings for the HadGEM2-ES historical and future experiments following the Representative Concentration Pathways. In addition, we provide details of how HadGEM2-ES ensemble members were initialised from the control run and how the palaeoclimate and AMIP experiments, as well as the “emission driven” RCP experiments were performed.

Medieval foreign exchange: a time series analysis

This chapter applies rigorous statistical analysis to existing datasets of medieval exchange rates quoted in merchants’ letters sent from Barcelona, Bruges and Venice between 1380 and 1310, which survive in the archive of Francesco di Marco Datini of Prato. First, it tests the exchange rates for stationarity. Second, it uses regression analysis to examine the seasonality of exchange rates at the three financial centres and compares them against contemporary descriptions by the merchant Giovanni di Antonio da Uzzano. Third, it tests for structural breaks in the exchange rate series.

Endocannabinoids in neuroendopsychology: multiphasic control of mitochondrial function

The endocannabinoid system (ECS) is a construct based on the discovery of receptors that are modulated by the plant compound tetrahydrocannabinol and the subsequent identification of a family of nascent ligands, the 'endocannabinoids'. The function of the ECS is thus defined by modulation of these receptors-in particular, by two of the best-described ligands (2-arachidonyl glycerol and anandamide), and by their metabolic pathways. Endocannabinoids are released by cell stress, and promote both cell survival and death according to concentration. The ECS appears to shift the immune system towards a type 2 response, while maintaining a positive energy balance and reducing anxiety. It may therefore be important in resolution of injury and inflammation. Data suggest that the ECS could potentially modulate mitochondrial function by several different pathways; this may help explain its actions in the central nervous system. Dose-related control of mitochondrial function could therefore provide an insight into its role in health and disease, and why it might have its own pathology, and possibly, new therapeutic directions.

Inflammatory modulation of exercise salience: using hormesis to return to a healthy lifestyle

Most of the human population in the western world has access to unlimited calories and leads an increasingly sedentary lifestyle. The propensity to undertake voluntary exercise or indulge in spontaneous physical exercise, which might be termed "exercise salience", is drawing increased scientific attention. Despite its genetic aspects, this complex behaviour is clearly modulated by the environment and influenced by physiological states. Inflammation is often overlooked as one of these conditions even though it is known to induce a state of reduced mobility. Chronic subclinical inflammation is associated with the metabolic syndrome; a largely lifestyle-induced disease which can lead to decreased exercise salience. The result is a vicious cycle that increases oxidative stress and reduces metabolic flexibility and perpetuates the disease state. In contrast, hormetic stimuli can induce an anti-inflammatory phenotype, thereby enhancing exercise salience, leading to greater biological fitness and improved functional longevity. One general consequence of hormesis is upregulation of mitochondrial function and resistance to oxidative stress. Examples of hormetic factors include calorie restriction, extreme environmental temperatures, physical activity and polyphenols. The hormetic modulation of inflammation, and thus, exercise salience, may help to explain the highly heterogeneous expression of voluntary exercise behaviour and therefore body composition phenotypes of humans living in similar obesogenic environments.

Endocannabinoids, FOXO and the metabolic syndrome: redox, function and tipping point--the view from two systems

The endocannabinoid system (ECS) was only 'discovered' in the 1990s. Since then, many new ligands have been identified, as well as many new intracellular targets--ranging from the PPARs, to mitochondria, to lipid rafts. It was thought that blocking the CB-1 receptor might reverse obesity and the metabolic syndrome. This was based on the idea that the ECS was dysfunctional in these conditions. This has met with limited success. The reason may be that the ECS is a homeostatic system, which integrates energy seeking and storage behaviour with resistance to oxidative stress. It could be viewed as having thrifty actions. Thriftiness is an innate property of life, which is programmed to a set point by both environment and genetics, resulting in an epigenotype perfectly adapted to its environment. This thrifty set point can be modulated by hormetic stimuli, such as exercise, cold and plant micronutrients. We have proposed that the physiological and protective insulin resistance that underlies thriftiness encapsulates something called 'redox thriftiness', whereby insulin resistance is determined by the ability to resist oxidative stress. Modern man has removed most hormetic stimuli and replaced them with a calorific sedentary lifestyle, leading to increased risk of metabolic inflexibility. We suggest that there is a tipping point where lipotoxicity in adipose and hepatic cells induces mild inflammation, which switches thrifty insulin resistance to inflammation-driven insulin resistance. To understand this, we propose that the metabolic syndrome could be seen from the viewpoint of the ECS, the mitochondrion and the FOXO group of transcription factors. FOXO has many thrifty actions, including increasing insulin resistance and appetite, suppressing oxidative stress and shifting the organism towards using fatty acids. In concert with factors such as PGC-1, they also modify mitochondrial function and biogenesis. Hence, the ECS and FOXO may interact at many points; one of which may be via intracellular redox signalling. As cannabinoids have been shown to modulate reactive oxygen species production, it is possible that they can upregulate anti-oxidant defences. This suggests they may have an 'endohormetic' signalling function. The tipping point into the metabolic syndrome may be the result of a chronic lack of hormetic stimuli (in particular, physical activity), and thus, stimulus for PGC-1, with a resultant reduction in mitochondrial function and a reduced lipid capacitance. This, in the context of a positive calorie environment, will result in increased visceral adipose tissue volume, abnormal ectopic fat content and systemic inflammation. This would worsen the inflammatory-driven pathological insulin resistance and inability to deal with lipids. The resultant oxidative stress may therefore drive a compensatory anti-oxidative response epitomised by the ECS and FOXO. Thus, although blocking the ECS (e.g. via rimonabant) may induce temporary weight loss, it may compromise long-term stress resistance. Clues about how to modulate the system more safely are emerging from observations that some polyphenols, such as resveratrol and possibly, some phytocannabinoids, can modulate mitochondrial function and might improve resistance to a modern lifestyle.

Lifestyle-induced metabolic inflexibility and accelerated ageing syndrome: insulin resistance, friend or foe?

The metabolic syndrome may have its origins in thriftiness, insulin resistance and one of the most ancient of all signalling systems, redox. Thriftiness results from an evolutionarily-driven propensity to minimise energy expenditure. This has to be balanced with the need to resist the oxidative stress from cellular signalling and pathogen resistance, giving rise to something we call 'redox-thriftiness'. This is based on the notion that mitochondria may be able to both amplify membrane-derived redox growth signals as well as negatively regulate them, resulting in an increased ATP/ROS ratio. We suggest that 'redox-thriftiness' leads to insulin resistance, which has the effect of both protecting the individual cell from excessive growth/inflammatory stress, while ensuring energy is channelled to the brain, the immune system, and for storage. We also suggest that fine tuning of redox-thriftiness is achieved by hormetic (mild stress) signals that stimulate mitochondrial biogenesis and resistance to oxidative stress, which improves metabolic flexibility. However, in a non-hormetic environment with excessive calories, the protective nature of this system may lead to escalating insulin resistance and rising oxidative stress due to metabolic inflexibility and mitochondrial overload. Thus, the mitochondrially-associated resistance to oxidative stress (and metabolic flexibility) may determine insulin resistance. Genetically and environmentally determined mitochondrial function may define a 'tipping point' where protective insulin resistance tips over to inflammatory insulin resistance. Many hormetic factors may induce mild mitochondrial stress and biogenesis, including exercise, fasting, temperature extremes, unsaturated fats, polyphenols, alcohol, and even metformin and statins. Without hormesis, a proposed redox-thriftiness tipping point might lead to a feed forward insulin resistance cycle in the presence of excess calories. We therefore suggest that as oxidative stress determines functional longevity, a rather more descriptive term for the metabolic syndrome is the 'lifestyle-induced metabolic inflexibility and accelerated ageing syndrome'. Ultimately, thriftiness is good for us as long as we have hormetic stimuli; unfortunately, mankind is attempting to remove all hormetic (stressful) stimuli from his environment.

The integration of lipid-sensing and anti-inflammatory effects: how the PPARs play a role in metabolic balance

The peroxisomal proliferating-activated receptors (PPARs) are lipid-sensing transcription factors that have a role in embryonic development, but are primarily known for modulating energy metabolism, lipid storage, and transport, as well as inflammation and wound healing. Currently, there is no consensus as to the overall combined function of PPARs and why they evolved. We hypothesize that the PPARs had to evolve to integrate lipid storage and burning with the ability to reduce oxidative stress, as energy storage is essential for survival and resistance to injury/infection, but the latter increases oxidative stress and may reduce median survival (functional longevity). In a sense, PPARs may be an evolutionary solution to something we call the 'hypoxia-lipid' conundrum, where the ability to store and burn fat is essential for survival, but is a 'double-edged sword', as fats are potentially highly toxic. Ways in which PPARs may reduce oxidative stress involve modulation of mitochondrial uncoupling protein (UCP) expression (thus reducing reactive oxygen species, ROS), optimising forkhead box class O factor (FOXO) activity (by improving whole body insulin sensitivity) and suppressing NFkB (at the transcriptional level). In light of this, we therefore postulate that inflammation-induced PPAR downregulation engenders many of the signs and symptoms of the metabolic syndrome, which shares many features with the acute phase response (APR) and is the opposite of the phenotype associated with calorie restriction and high FOXO activity. In genetically susceptible individuals (displaying the naturally mildly insulin resistant 'thrifty genotype'), suboptimal PPAR activity may follow an exaggerated but natural adipose tissue-related inflammatory signal induced by excessive calories and reduced physical activity, which normally couples energy storage with the ability to mount an immune response. This is further worsened when pancreatic decompensation occurs, resulting in gluco-oxidative stress and lipotoxicity, increased inflammatory insulin resistance and oxidative stress. Reactivating PPARs may restore a metabolic balance and help to adapt the phenotype to a modern lifestyle.