Averting risk in the face of large losses: Bernoulli vs. Tversky and Kahneman

We experimentally question the assertion of Prospect Theory that people display risk attraction in choices involving high-probability losses. Indeed, our experimental participants tend to avoid fair risks for large (up to ? 90), high-probability (80%) losses. Our research hinges on a novel experimental method designed to alleviate the house-money bias that pervades experiments with real (not hypothetical) loses.Our results vindicate Daniel Bernoulli?s view that risk aversion is the dominant attitude,But, contrary to the Bernoulli-inspired canonical expected utility theory, we do find frequent risk attraction for small amounts of money at stake.In any event, we attempt neither to test expected utility versus nonexpected utility theories, nor to contribute to the important literature that estimates value and weighting functions. The question that we ask is more basic, namely: do people display risk aversion when facing large losses, or large gains? And, at the risk of oversimplifying, our answer is yes.

The good, the bad and the ugly: The fall and resolution of Banco Espírito Santo

This case study – and accompanying teaching note – briefly describes the history of the Espírito Santo family, a banking dynasty who led one of Portugal’s leading economic and financial groups, along with its “crown jewel”, Banco Espírito Santo. It chronicles how the corporate governance issues at BES allowed the family to exploit the bank, its shareholders and its customers, so as to support its unprofitable non-financial businesses. This left the bank in a poor financial situation, which deteriorated beyond control, leaving regulators – whose actions are also analysed here – with no alternative, amidst a severe liquidity crisis, but to apply a resolution measure, pinning large losses on junior bondholders and shareholders before recapitalising the bank.

Distributed Energy Production in the North-West Region of Russia

The energy system of Russia is the world's fourth largest measured by installed power. The largest are that of the the United States of America, China and Japan. After 1990, the electricity consumption decreased as a result of the Russian industry crisis. The vivid economic growth during the latest few years explains the new increase in the demand for energy resources within the State. In 2005 the consumption of electricity achieved the maximum level of 1990 and continues to growth. In the 1980's, the renewal of power facilities was already very slow and practically stopped in the 1990's. At present, the energy system can be very much characterized as outdated, inefficient and uneconomic because of the old equipment, non-effective structure and large losses in the transmission lines. The aim of Russia's energy reform, which was started in 2001, is to achieve a market based energy policy by 2011. This would thus remove the significantly state-controlled monopoly in Russia's energy policy. The reform will stimulateto decrease losses, improve the energy system and employ energy-saving technologies. The Russian energy system today is still based on the use of fossil fuels, and it almost totally ignores the efficient use of renewable sources such as wind, solar, small hydro and biomass, despite of their significant resources in Russia. The main target of this project is to consider opportunities to apply renewable energy production in the North-West Federal Region of Russia to partly solve the above mentioned problems in the energy system.

Influência da temperatura de secagem sobre o rendimento e a composição química do óleo essencial de Tanaecium nocturnum (barb. Rodr.) bur. & K. Shum

The yields and chemical compositions of the essential oils obtained by steam distillation of the fresh and dried (30 and 40 ºC) leaves, stems and roots of Tanaecium nocturnum are reported. The identification and quantification of the volatile constituents were accomplished by GC/MS and GC/FID, respectively. The essential oils obtained from the various parts of the plant were constituted mainly of benzaldehyde. Large losses and variations in the quantities of the components during the drying process were observed. The presence of mandelonitrile in higher concentration in the stem and roots indicates that this species produces cyanogenic glycosides.

Chemical control of morning glory as a function of water restriction levels

Among the herbicides recommended for the dry season and registered to sugarcane crop, amicarbazone, isoxaflutole and the association diuron + hexazinone + sulfomethuron-methyl can be highlighted. These are pre-emergence herbicides efficient against broad-leaved weeds. Morning glory causes large losses in infested sugarcane fields by bending the stalks and interfering in harvesting. In this study the effectiveness of pre-emergence herbicides for two species of morning glory (Ipomoea hederifolia and Ipomoea grandifolia) was evaluated. Treatments were arranged in completely randomized factorial design (4 x 7). There were four periods of water restriction (0, 30, 60 and 90 days), seven chemical treatments [diuron + hexazinone + sulfometuron-methyl (1387 + 391 + 33.35 g a.i. ha-1), diuron + hexazinone + sulfometuron-methyl (1507.5 + 425 + 36.25 g a.i. ha-1), diuron + hexazinone + sulfometuron-methyl (1658.25 + 467.5 + 39.87 g a.i. ha-1), diuron + hexazinone + sulfometuron­methyl (1809 + 510 + 43.5 g a.i. ha-1), amicarbazone (1190 g a.i. ha-1), amicarbazone + isoxaflutole (840 + 82.5 g a.i. ha-1)] and a control with no application. At 7, 14, 21 and 28 days after the restoration of moisture, control was visually evaluated. After the final evaluation, the dry mass of morning glories was measured. At 90 days of water restriction, diuron + hexazinone + sulfometuron-methyl was more effective to control I. hederifolia than the amicarbazone + isoxaflutole tank mixture. The four diuron + hexazinone + sulfometuron­methyl doses have reduced morning glory dry mass to zero; whereas treatments with amicarbazone have not. The most effective treatment for morning glory control was diuron + hexazinone + sulfometuron-methyl. This result may be due to a possible synergistic interaction.

Effect of blanching time on selective mineral elements extraction from the spinach substitute (Tetragonia expansa) commonly used in Brazil

The true spinach (Spinacia oleracea) does not grow well in warm climates and for that reason is not commercialized in Brazil. Instead, a spinach substitute (Tetragonia expansa), originally from New Zealand, is widely used in the country. There is scant information on the mineral profile and none on the soluble mineral fraction of this vegetable. The solubility of a mineral is one of the important factors for its absorption. For this reason, the calcium, magnesium, iron, manganese, copper, zinc, potassium, and sodium soluble fractions in the raw spinach substitute were determined and the effect of blanching times on the solubility of these minerals was investigated. Blanching times of 1, 5, and 15 minutes were employed. The magnesium, manganese, potassium, and sodium soluble fractions increased sizably with shorter blanching time. Longer blanching time (15 minutes) caused large losses of minerals. The soluble mineral fractions can contribute poorly to diet in terms of potassium, magnesium, manganese, and zinc. The spinach substitute cannot be considered a dietary source of calcium, iron and copper due to the insolubility of these minerals in the vegetable, possibly caused by the large oxalate content.

Carbon and nitrogen emissions from stored manure and cropped fields in irrigated mountain oases of Oman

Little is known about gaseous carbon (C) and nitrogen (N) emissions from traditional terrace agriculture in irrigated high mountain agroecosystems of the subtropics. In an effort towards filling this knowledge gap measurements of carbon dioxide (CO_2), methane (CH_4), ammonia (NH_3) and dinitrous oxide (N_2O) were taken with a mobile photoacoustic infrared multi-gas monitor on manure-filled PE-fibre storage bags and on flood-irrigated untilled and tilled fields in three mountain oases of the northen Omani Al Jabal al Akhdar mountains. During typical 9-11 day irrigation cycles of March, August and September 2006 soil volumetric moisture contents of fields dominated by fodder wheat, barley, oats and pomegranate ranged from 46-23%. While manure incorporation after application effectively reduced gaseous N losses, prolonged storage of manure in heaps or in PE-fibre bags caused large losses of C and N. Given the large irrigation-related turnover of organic C, sustainable agricultural productivity of oasis agriculture in Oman seems to require the integration of livestock which allows for several applications of manure per year at individual rates of 20 t dry matter ha^−1.

The effect of cooking on acrylamide and its precursors in potato, wheat and rye

The relationship between acrylamide and its precursors, namely free asparagine and reducing sugars, was studied in simple cakes made from potato flake, wholemeal wheat and wholemeal rye, cooked at 180 degrees C, from 5 to 60 min. Between 5 and 20 min, large losses of asparagine, water and total reducing sugars were accompanied by large increases in acrylamide, which maximized in all three products between 25 and 30 min, followed by a slow linear reduction. Acrylamide formation did not occur to any extent until the moisture contents of the cakes fell below 5%. A comparison of each type of cake with a commercial product, made from the same food material, showed that acrylamide levels in all three commercial products were well below the maximum levels in the cooked cakes.

When does direct real estate improve portfolio performance?

For over twenty years researchers have been recommending that investors diversify their portfolios by adding direct real estate. Based on the tenets of modern portfolio theory (MPT) investors are told that the primary reason they should include direct real estate is that they will enjoy decreased volatility (risk) through increased diversification. However, the MPT methodology hides where this reduction in risk originates. To over come this deficiency we use a four-quadrant approach to break down the co-movement between direct real estate and equities and bonds into negative and positive periods. Then using data for the last 25-years we show that for about 70% of the time a holding in direct real estate would have hurt portfolio returns, i.e. when the other assets showed positive performance. In other words, for only about 30% of the time would a holding in direct real estate lead to improvements in portfolio returns. However, this increase in performance occurs when the alternative asset showed negative returns. In addition, adding direct real estate always leads to reductions in portfolio risk, especially on the downside. In other words, although adding direct real estate helps the investor to avoid large losses it also reduces the potential for large gains. Thus, if the goal of the investor is offsetting losses, then the results show that direct real estate would have been of some benefit. So in answer to the question when does direct real estate improve portfolio performance the answer is on the downside, i.e. when it is most needed.

Direct soil moisture controls of future global soil carbon changes: An important source of uncertainty

The nature of the climate–carbon cycle feedback depends critically on the response of soil carbon to climate, including changes in moisture. However, soil moisture–carbon feedback responses have not been investigated thoroughly. Uncertainty in the response of soil carbon to soil moisture changes could arise from uncertainty in the relationship between soil moisture and heterotrophic respiration. We used twelve soil moisture–respiration functions (SMRFs) with a soil carbon model (RothC) and data from a coupled climate–carbon cycle general circulation model to investigate the impact of direct heterotrophic respiration dependence on soil moisture on the climate carbon cycle feedback. Global changes in soil moisture acted to oppose temperature‐driven decreases in soil carbon and hence tended to increase soil carbon storage. We found considerable uncertainty in soil carbon changes due to the response of soil respiration to soil moisture. The use of different SMRFs resulted in both large losses and small gains in future global soil carbon stocks, whether considering all climate forcings or only moisture changes. Regionally, the greatest range in soil carbon changes across SMRFs was found where the largest soil carbon changes occurred. Further research is needed to constrain the soil moisture–respiration relationship and thus reduce uncertainty in climate–carbon cycle feedbacks. There may also be considerable uncertainty in the regional responses of soil carbon to soil moisture changes since climate model predictions of regional soil moisture changes are less coherent than temperature changes.

Tail risk in the hedge fund industry

The dissertation goal is to quantify the tail risk premium embedded into hedge funds' returns. Tail risk is the probability of extreme large losses. Although it is a rare event, asset pricing theory suggests that investors demand compensation for holding assets sensitive to extreme market downturns. By de nition, such events have a small likelihood to be represented in the sample, what poses a challenge to estimate the e ects of tail risk by means of traditional approaches such as VaR. The results show that it is not su cient to account for the tail risk stemming from equities markets. Active portfolio management employed by hedge funds demand a speci c measure to estimate and control tail risk. Our proposed factor lls that void inasmuch it presents explanatory power both over the time series as well as the cross-section of funds' returns.

Relación entre el recuento de células somáticas y la producción de leche de búfalas en el estado de São Paulo, Brasil

Mastitis is an inflammatory process in the udder that can affect the quality and quantity of milk produced causing economic losses and risks for health. Considering the somatic cell count (SCCs) as indicator of udder health and the milk yield (MY) of buffaloes from São Paulo State, this study aimed to quantify the related losses in milk due to somatic cells count (SCC). 9404 sources of information from 2198 lactations that occurred between 1997 and 2004 were analysed. There was no relation between MY and the SCCs in the buffaloes at first parity. For the second parity in the months 1, 2, 5, 6 and 7 of lactation, there was a negative and significant relationship between SCCs and MY. For parities of three or more there was a significant and negative regression coefficient during every month of lactation betrween MY and SCC. The average losses varied from 0,18 to 2,2 milk liters per unit of SCCs. The results indicated large losses observed in the miltiparous buffaloes and that this category needs received special attention in terms of udder health. The effect of farm, parity and year, must be considered comparison between animals.

Espécies arbóreas que ocorrem na região do Bolsão Sul-Mato-Grossense e variação genética para caracteres silviculturais em um teste de progênies com três espécies em consórcio

Coordenação de Aperfeiçoamento de Pessoal de Nível Superior (CAPES)

Chemical control of morning glory as a function of water restriction levels

Among the herbicides recommended for the dry season and registered to sugarcane crop, amicarbazone, isoxaflutole and the association diuron + hexazinone + sulfomethuron-methyl can be highlighted. These are pre-emergence herbicides efficient against broad-leaved weeds. Morning glory causes large losses in infested sugarcane fields by bending the stalks and interfering in harvesting. In this study the effectiveness of pre-emergence herbicides for two species of morning glory (Ipomoea hederifolia and Ipomoea grandifolia) was evaluated. Treatments were arranged in completely randomized factorial design (4 x 7). There were four periods of water restriction (0, 30, 60 and 90 days), seven chemical treatments [diuron + hexazinone + sulfometuron-methyl (1387 + 391 + 33.35 g a.i. ha-1), diuron + hexazinone + sulfometuron-methyl (1507.5 + 425 + 36.25 g a.i. ha-1), diuron + hexazinone + sulfometuron-methyl (1658.25 + 467.5 + 39.87 g a.i. ha-1), diuron + hexazinone + sulfometuron­methyl (1809 + 510 + 43.5 g a.i. ha-1), amicarbazone (1190 g a.i. ha-1), amicarbazone + isoxaflutole (840 + 82.5 g a.i. ha-1)] and a control with no application. At 7, 14, 21 and 28 days after the restoration of moisture, control was visually evaluated. After the final evaluation, the dry mass of morning glories was measured. At 90 days of water restriction, diuron + hexazinone + sulfometuron-methyl was more effective to control I. hederifolia than the amicarbazone + isoxaflutole tank mixture. The four diuron + hexazinone + sulfometuron­methyl doses have reduced morning glory dry mass to zero; whereas treatments with amicarbazone have not. The most effective treatment for morning glory control was diuron + hexazinone + sulfometuron-methyl. This result may be due to a possible synergistic interaction.

Dry spell mitigation to upgrade semi-arid rainfed agriculture : Water harvesting and soil nutrient management for smallholder maize cultivation in Machakos, Kenya

Improvements in on-farm water and soil fertility management through water harvesting may prove key to up-grade smallholder farming systems in dry sub-humid and semi-arid sub-Sahara Africa (SSA). The currently experienced yield levels are usually less than 1 t ha-1, i.e., 3-5 times lower than potential levels obtained by commercial farmers and researchers for similar agro-hydrological conditions. The low yield levels are ascribed to the poor crop water availability due to variable rainfall, losses in on-farm water balance and inherently low soil nutrient levels. To meet an increased food demand with less use of water and land in the region, requires farming systems that provide more yields per water unit and/or land area in the future. This thesis presents the results of a project on water harvesting system aiming to upgrade currently practised water management for maize (Zea mays, L.) in semi-arid SSA. The objectives were to a) quantify dry spell occurrence and potential impact in currently practised small-holder grain production systems, b) test agro-hydrological viability and compare maize yields in an on-farm experiment using combinations supplemental irrigation (SI) and fertilizers for maize, and c) estimate long-term changes in water balance and grain yields of a system with SI compared to farmers currently practised in-situ water harvesting. Water balance changes and crop growth were simulated in a 20-year perspective with models MAIZE1&2. Dry spell analyses showed that potentially yield-limiting dry spells occur at least 75% of seasons for 2 locations in semi-arid East Africa during a 20-year period. Dry spell occurrence was more frequent for crop cultivated on soil with low water-holding capacity than on high water-holding capacity. The analysis indicated large on-farm water losses as deep percolation and run-off during seasons despite seasonal crop water deficits. An on-farm experiment was set up during 1998-2001 in Machakos district, semi-arid Kenya. Surface run-off was collected and stored in a 300m3 earth dam. Gravity-fed supplemental irrigation was carried out to a maize field downstream of the dam. Combinations of no irrigation (NI), SI and 3 levels of N fertilizers (0, 30, 80 kg N ha-1) were applied. Over 5 seasons with rainfall ranging from 200 to 550 mm, the crop with SI and low nitrogen fertilizer gave 40% higher yields (**) than the farmers’ conventional in-situ water harvesting system. Adding only SI or only low nitrogen did not result in significantly different yields. Accounting for actual ability of a storage system and SI to mitigate dry spells, it was estimated that a farmer would make economic returns (after deduction of household consumption) between year 2-7 after investment in dam construction depending on dam sealant and labour cost used. Simulating maize growth and site water balance in a system of maize with SI increased annual grain yield with 35 % as a result of timely applications of SI. Field water balance changes in actual evapotranspiration (ETa) and deep percolation were insignificant with SI, although the absolute amount of ETa increased with 30 mm y-1 for crop with SI compared to NI. The dam water balance showed 30% productive outtake as SI of harvested water. Large losses due to seepage and spill-flow occurred from the dam. Water productivity (WP, of ETa) for maize with SI was on average 1 796 m3 per ton grain, and for maize without SI 2 254 m3 per ton grain, i.e, a decerase of WP with 25%. The water harvesting system for supplemental irrigation of maize was shown to be both biophysically and economically viable. However, adoption by farmers will depend on other factors, including investment capacity, know-how and legislative possibilities. Viability of increased water harvesting implementation in a catchment scale needs to be assessed so that other down-stream uses of water remains uncompromised.