An alternative approach to investigating lead-lag relationships between stock and stock index futures markets

In the absence of market frictions, the cost-of-carry model of stock index futures pricing predicts that returns on the underlying stock index and the associated stock index futures contract will be perfectly contemporaneously correlated. Evidence suggests, however, that this prediction is violated with clear evidence that the stock index futures market leads the stock market. It is argued that traditional tests, which assume that the underlying data generating process is constant, might be prone to overstate the lead-lag relationship. Using a new test for lead-lag relationships based on cross correlations and cross bicorrelations it is found that, contrary to results from using the traditional methodology, periods where the futures market leads the cash market are few and far between and when any lead-lag relationship is detected, it does not last long. Overall, the results are consistent with the prediction of the standard cost-of-carry model and market efficiency.

Predicting stock index volatility: can market volume help?

This paper explores a number of statistical models for predicting the daily stock return volatility of an aggregate of all stocks traded on the NYSE. An application of linear and non-linear Granger causality tests highlights evidence of bidirectional causality, although the relationship is stronger from volatility to volume than the other way around. The out-of-sample forecasting performance of various linear, GARCH, EGARCH, GJR and neural network models of volatility are evaluated and compared. The models are also augmented by the addition of a measure of lagged volume to form more general ex-ante forecasting models. The results indicate that augmenting models of volatility with measures of lagged volume leads only to very modest improvements, if any, in forecasting performance.

High-latitude influence of the quasi-biennial oscillation

The interannual variability of the stratospheric winter polar vortex is correlated with the phase of the quasi-biennial oscillation (QBO) of tropical stratospheric winds. This dynamical coupling between high and low latitudes, often referred to as the Holton–Tan effect, has been the subject of numerous observational and modelling studies, yet important questions regarding its mechanism remain unanswered. In particular it remains unclear which vertical levels of the QBO exert the strongest influence on the winter polar vortex, and how QBO–vortex coupling interacts with the effects of other sources of atmospheric interannual variability such as the 11-year solar cycle or the El Nino Southern Oscillation. As stratosphere-resolving general circulation models begin to resolve the QBO and represent its teleconnections with other parts of the climate system, it seems timely to summarize what is currently known about the QBO’s high-latitude influence. In this review article, we offer a synthesis of the modelling and observational analyses of QBO–vortex coupling that have appeared in the literature, and update the observational record.

The Corporate Gini Index (CGI) determinants and advantages: lessons from a multinational retail company case study

This article identifies and compares the determinants of CEO compensation to median employee earnings with those of the Corporate Gini Index (CGI). Using a multinational retail company, the article posits that the CGI is an advantageous corporate alternative pay inequality measure that concerns CEO pay multiples to median employee earnings, which regulators should consider using and disclosing in proxy statements. Although CGI and the official measure of multiples of CEO pay to median employee earnings share some of the challenges, the advantages of CGI as an alternative measure are greater. Our findings suggest that the CGI is a much better measure of corporate income inequality bringing clear benefits at both micro and macro levels of intervention.

Predictability of the western North Pacific summer climate associated with different ENSO phases by ENSEMBLES multi-model seasonal forecasts

Predictability of the western North Pacific (WNP) summer climate associated with different El Niño–Southern Oscillation (ENSO) phases is investigated in this study based on the 1-month lead retrospective forecasts of five state-of-the-art coupled models from ENSEMBLES. During the period from 1960 to 2005, the models well capture the WNP summer climate anomalies during most of years in different ENSO phases except the La Niña decaying summers. In the El Niño developing, El Niño decaying and La Niña developing summers, the prediction skills are high for the WNP summer monsoon index (WNPMI), with the prediction correlation larger than 0.7. The high prediction skills of the lower-tropospheric circulation during these phases are found mainly over the tropical western Pacific Ocean, South China Sea and subtropical WNP. These good predictions correspond well to their close teleconnection with ENSO and the high prediction skills of tropical SSTs. By contrast, for the La Niña decaying summers, the prediction skills are considerably low with the prediction correlation for the WNPMI near to zero and low prediction skills around the Philippines and subtropical WNP. These poor predictions relate to the weak summer anomalies of the WNPMI during the La Niña decaying years and no significant connections between the WNP lower-tropospheric circulation anomalies and the SSTs over the tropical central and eastern Pacific Ocean in observations. However, the models tend to predict an apparent anomalous cyclone over the WNP during the La Niña decaying years, indicating a linearity of the circulation response over WNP in the models prediction in comparison with that during the El Niño decaying years which differs from observations. In addition, the models show considerable capability in describing the WNP summer anomalies during the ENSO neutral summers. These anomalies are related to the positive feedback between the WNP lower-tropospheric circulation and the local SSTs. The models can capture this positive feedback but with some uncertainties from different ensemble members during the ENSO neutral summers.

Evidence for a second meal cognitive effect: glycaemic responses to high and low glycaemic index evening meals are associated with cognition the following morning

Low glycaemic index (GI) foods consumed at breakfast can enhance memory in comparison to high-GI foods; however, the impact of evening meal GI manipulations on cognition the following morning remains unexplored. Fourteen healthy males consumed a high-GI evening meal or a low-GI evening meal in a counterbalanced order on two separate evenings. Memory and attention were assessed before and after a high-GI breakfast the following morning. The high-GI evening meal elicited significantly higher evening glycaemic responses than the low-GI evening meal. Verbal recall was better the morning following the high-GI evening meal compared to after the low-GI evening meal. In summary, the GI of the evening meal was associated with memory performance the next day, suggesting a second meal cognitive effect. The present findings imply that an overnight fast may not be sufficient to control for previous nutritional consumption.

MODIS-based vegetation index has sufficient sensitivity to indicate stand-level intra-seasonal climatic stress in oak and beech forests

Context: Variation in photosynthetic activity of trees induced by climatic stress can be effectively evaluated using remote sensing data. Although adverse effects of climate on temperate forests have been subjected to increased scrutiny, the suitability of remote sensing imagery for identification of drought stress in such forests has not been explored fully. Aim: To evaluate the sensitivity of MODIS-based vegetation index to heat and drought stress in temperate forests, and explore the differences in stress response of oaks and beech. Methods: We identified 8 oak and 13 beech pure and mature stands, each covering between 4 and 13 MODIS pixels. For each pixel, we extracted a time series of MODIS NDVI from 2000 to 2010. We identified all sequences of continuous unseasonal NDVI decline to be used as the response variable indicative of environmental stress. Neural Networks-based regression modelling was then applied to identify the climatic variables that best explain observed NDVI declines. Results: Tested variables explained 84–97% of the variation in NDVI, whilst air temperature-related climate extremes were found to be the most influential. Beech showed a linear response to the most influential climatic predictors, while oak responded in a unimodal pattern suggesting a better coping mechanism. Conclusions: MODIS NDVI has proved sufficiently sensitive as a stand-level indicator of climatic stress acting upon temperate broadleaf forests, leading to its potential use in predicting drought stress from meteorological observations and improving parameterisation of forest stress indices.

Propagation of the Madden-Julian Oscillation through the Maritime Continent and scale interaction with the diurnal cycle of precipitation

The convectively active part of the Madden-Julian Oscillation (MJO) propagates eastward through the warm pool, from the Indian Ocean through the Maritime Continent (the Indonesian archipelago) to the western Pacific. The Maritime Continent's complex topography means the exact nature of the MJO propagation through this region is unclear. Model simulations of the MJO are often poor over the region, leading to local errors in latent heat release and global errors in medium-range weather prediction and climate simulation. Using 14 northern winters of TRMM satellite data it is shown that, where the mean diurnal cycle of precipitation is strong, 80% of the MJO precipitation signal in the Maritime Continent is accounted for by changes in the amplitude of the diurnal cycle. Additionally, the relationship between outgoing long-wave radiation (OLR) and precipitation is weakened here, such that OLR is no longer a reliable proxy for precipitation. The canonical view of the MJO as the smooth eastward propagation of a large-scale precipitation envelope also breaks down over the islands of the Maritime Continent. Instead, a vanguard of precipitation (anomalies of 2.5 mm day^-1 over 10^6 km^2) jumps ahead of the main body by approximately 6 days or 2000 km. Hence, there can be enhanced precipitation over Sumatra, Borneo or New Guinea when the large-scale MJO envelope over the surrounding ocean is one of suppressed precipitation. This behaviour can be accommodated into existing MJO theories. Frictional and topographic moisture convergence and relatively clear skies ahead of the main convective envelope combine with the low thermal inertia of the islands, to allow a rapid response in the diurnal cycle which rectifies onto the lower-frequency MJO. Hence, accurate representations of the diurnal cycle and its scale interaction appear to be necessary for models to simulate the MJO successfully.

The effect of the Madden-Julian Oscillation on station rainfall and river level in the Fly River system, Papua New Guinea

The Madden-Julian oscillation (MJO) is the dominant mode of intraseasonal variability in tropical rainfall on the large scale, but its signal is often obscured in individual station data, where effects are most directly felt at the local level. The Fly River system, Papua New Guinea, is one of the wettest regions on Earth and is at the heart of the MJO envelope. A 16 year time series of daily precipitation at 15 stations along the river system exhibits strong MJO modulation in rainfall. At each station, the difference in rainfall rate between active and suppressed MJO conditions is typically 40% of the station mean. The spread of rainfall between individual MJO events was small enough such that the rainfall distributions between wet and dry phases of the MJO were clearly separated at the catchment level. This implies that successful prediction of the large-scale MJO envelope will have a practical use for forecasting local rainfall. In the steep topography of the New Guinea Highlands, the mean and MJO signal in station precipitation is twice that in the satellite Tropical Rainfall Measuring Mission 3B42HQ product, emphasizing the need for ground-truthing satellite-based precipitation measurements. A clear MJO signal is also present in the river level, which peaks simultaneously with MJO precipitation input in its upper reaches but lags the precipitation by approximately 18 days on the flood plains.

The Madden-Julian Oscillation and the diurnal cycle over the Maritime Continent: scale interactions and modelling

The Maritime Continent archipelago, situated on the equator at 95-165E, has the strongest land-based precipitation on Earth. The latent heat release associated with the rainfall affects the atmospheric circulation throughout the tropics and into the extra-tropics. The greatest source of variability in precipitation is the diurnal cycle. The archipelago is within the convective region of the Madden-Julian Oscillation (MJO), which provides the greatest variability on intra-seasonal time scales: large-scale (∼10^7 km^2) active and suppressed convective envelopes propagate slowly (∼5 m s^-1) eastwards between the Indian and Pacific Oceans. High-resolution satellite data show that a strong diurnal cycle is triggered to the east of the advancing MJO envelope, leading the active MJO by one-eighth of an MJO cycle (∼6 days). Where the diurnal cycle is strong its modulation accounts for 81% of the variability in MJO precipitation. Over land this determines the structure of the diagnosed MJO. This is consistent with the equatorial wave dynamics in existing theories of MJO propagation. The MJO also affects the speed of gravity waves propagating offshore from the Maritime Continent islands. This is largely consistent with changes in static stability during the MJO cycle. The MJO and its interaction with the diurnal cycle are investigated in HiGEM, a high-resolution coupled model. Unlike many models, HiGEM represents the MJO well with eastward-propagating variability on intra-seasonal time scales at the correct zonal wavenumber, although the inter-tropical convergence zone's precipitation peaks strongly at the wrong time, interrupting the MJO's spatial structure. However, the modelled diurnal cycle is too weak and its phase is too early over land. The modulation of the diurnal amplitude by the MJO is also too weak and accounts for only 51% of the variability in MJO precipitation. Implications for forecasting and possible causes of the model errors are discussed, and further modelling studies are proposed.