Variation in risk seeking behaviour following large losses : a natural experiment

This study explores people's risk taking behaviour after having suffered large real-world losses following a natural disaster. Using the margins of the 2011 Australian floods (Brisbane) as a natural experimental setting, we find that homeowners who were victims of the floods and face large losses in property values are 50% more likely to opt for a risky gamble -- a scratch card giving a small chance of a large gain ($500,000) -- than for a sure amount of comparable value ($10). This finding is consistent with prospect theory predictions regarding the adoption of a risk-seeking attitude after a loss.

Variation in risk seeking behavior in a natural experiment following a large negative wealth shock induced by a natural disaster

An ongoing challenge in behavioral economics is to understand the variations observed in risk attitudes as a function of their environmental context. Of particular interest is the effect of wealth on risk attitudes. The research in this area has however faced two constraints: the difficulty to study the causal effects of large changes in wealth, and the causal effects of losses on risk behavior. The present paper address this double limitation by providing evidence of the variation of risk attitude after large losses using a natural disaster (Brisbane floods) as the setting for a natural experiment.

Forecasting time-varying value-at-risk

In this thesis we are interested in financial risk and the instrument we want to use is Value-at-Risk (VaR). VaR is the maximum loss over a given period of time at a given confidence level. Many definitions of VaR exist and some will be introduced throughout this thesis. There two main ways to measure risk and VaR: through volatility and through percentiles. Large volatility in financial returns implies greater probability of large losses, but also larger probability of large profits. Percentiles describe tail behaviour. The estimation of VaR is a complex task. It is important to know the main characteristics of financial data to choose the best model. The existing literature is very wide, maybe controversial, but helpful in drawing a picture of the problem. It is commonly recognised that financial data are characterised by heavy tails, time-varying volatility, asymmetric response to bad and good news, and skewness. Ignoring any of these features can lead to underestimating VaR with a possible ultimate consequence being the default of the protagonist (firm, bank or investor). In recent years, skewness has attracted special attention. An open problem is the detection and modelling of time-varying skewness. Is skewness constant or there is some significant variability which in turn can affect the estimation of VaR? This thesis aims to answer this question and to open the way to a new approach to model simultaneously time-varying volatility (conditional variance) and skewness. The new tools are modifications of the Generalised Lambda Distributions (GLDs). They are four-parameter distributions, which allow the first four moments to be modelled nearly independently: in particular we are interested in what we will call para-moments, i.e., mean, variance, skewness and kurtosis. The GLDs will be used in two different ways. Firstly, semi-parametrically, we consider a moving window to estimate the parameters and calculate the percentiles of the GLDs. Secondly, parametrically, we attempt to extend the GLDs to include time-varying dependence in the parameters. We used the local linear regression to estimate semi-parametrically conditional mean and conditional variance. The method is not efficient enough to capture all the dependence structure in the three indices —ASX 200, S&P 500 and FT 30—, however it provides an idea of the DGP underlying the process and helps choosing a good technique to model the data. We find that GLDs suggest that moments up to the fourth order do not always exist, there existence appears to vary over time. This is a very important finding, considering that past papers (see for example Bali et al., 2008; Hashmi and Tay, 2007; Lanne and Pentti, 2007) modelled time-varying skewness, implicitly assuming the existence of the third moment. However, the GLDs suggest that mean, variance, skewness and in general the conditional distribution vary over time, as already suggested by the existing literature. The GLDs give good results in estimating VaR on three real indices, ASX 200, S&P 500 and FT 30, with results very similar to the results provided by historical simulation.

A compact interferometric sensor design using three waveguide coupling

The use of metal stripes for the guiding of plasmons is a well established technique for the infrared regime and has resulted in the development of a myriad of passive optical components and sensing devices. However, the plasmons suffer from large losses around sharp bends, making the compact design of nanoscale sensors and circuits problematic. A compact alternative would be to use evanescent coupling between two sufficiently close stripes, and thus we propose a compact interferometer design using evanescent coupling. The sensitivity of the design is compared with that achieved using a hand-held sensor based on the Kretschmann style surface plasmon resonance technique. Modeling of the new interferometric sensor is performed for various structural parameters using finite-difference time-domain and COMSOL Multiphysics. The physical mechanisms behind the coupling and propagation of plasmons in this structure are explained in terms of the allowed modes in each section of the device.

Adaptation lessons from cyclone Tracy

This case study will review the impact of Tropical Cyclone Tracy on the city and people of Darwin, the Australian engineering and institutional responses that it invoked and the relevance of these lessons to a world threatened by global climate change. At Christmas, 1974, Tropical Cyclone Tracy laid waste the city of Darwin, an iconic episode in the history of Australian natural disasters. It provides one of the clearest and most successful examples worldwide of adaptation to a catastrophe. Following large losses in Townsville from Tropical Cyclone Althea in 1971, the level of destruction in Darwin was such that it led to new regulations mandating the use of the wind code for reconstruction, and eventually to similar regulations for new construction in other cyclone-prone areas of Australia.

Do nursing students have the recall of bioscience necessary to study pharmacology?

Background: For medical and allied health students, bioscience knowledge underpins the successful scaffolding of learning in their developmental and advanced level units. Many of these students complete theory-based Bioscience units, followed by a unit in Pharmacology, which specifically requires knowledge of anatomy, physiology and microbiology. In general, studies of recall report relatively large losses over short retention intervals (months), which accumulate, but level off, for longer retention intervals (years) (Custers, 2010). However, there are no studies that specifically test the recall of bioscience knowledge by allied health students. Methods: We are tracking the recall of bioscience in nursing students prior to, and during, their Pharmacology unit. In each semester, students complete short, basic, knowledge-based MCQ quizzes on concepts from (i) the gastrointestinal system and (ii) fundamental microbiology. Students were given 5 days warning about the microbiology quizzes but were given no warning prior to the gastrointestinal system quiz. Performance in these quizzes was compared to individual student’s results in the final examination on these topics in the first semester of their degree. Results: At the start of the study, the nursing students performed better in the exam MCQs on the gastrointestinal system than on microbiology. In the exam, the students’ mean marks for the gastrointestinal system ranged from 69–83%, and this was successively reduced to 63%, 53% and 49% after 4, 9 and 16 months, respectively. The mean exam marks for microbiology was 48–58%, and this did not change significantly after 4 (63%), 9 (59%) or 16 months (47%). This suggests that warning the nursing students that they were to be quizzed on microbiology may have helped their recall. However, after 16 months regardless of the subject, the nursing students undertaking the Pharmacology unit recalled less than half of the bioscience quiz answers. Conclusions: Nursing students may not have the recall of bioscience necessary to study pharmacology, and this may limit their success in pharmacology. Reference: Custers, E. J. F. M. (2010). Long-term retention of basic science knowledge: a review study. Advances in Health Science Education, 15, 109–128.

GM solutions to root diseases of cereals - A situation analysis and business case

Root disease causes about $503 million in losses annually to Australia's wheat and barley industries. Because of these large losses and in many cases the difficulty in reducing these losses through breeding or management, root diseases are candidates for solutions through genetic modification (GM). Through an extensive review of the scientific literature and patents, a range of approaches to GM solutions to root diseases are critically discussed. Given the high cost of regulatory approval for GM crops and a complex intellectual property (IP) landscape, it is likely that research in this area will be done in collaboration with international partners.

RESPONSES OF Elodea nuttallii AND Ceratophyllum demersum TO HIGH TEMPERATURE

There were large losses of exotic species Elodea nuttallii during summer in eutrophic lakes of the middle and lower reaches of the Yanatze River, China. To investigate the main causes, the heat tolerance of E. nuttallii was studied and compared with that of native species Ceratopkyllum demersum by using an aquaria system in the laboratory. Under 4500 lx light intensity and 12-h L/12-h D cycle, E. nuttallii cultured in 1/5 Hoaglands solution at 39 degrees C showed a positive growth rate during the first 15 days, and the growth rate was higher than that at 35 degrees C. But after 15 days, the growth rates became negative for those cultured both at 39 and 35 degrees C. However, the growth rate was positive for more than 20 days for those cultured at 25 degrees C. Under the same conditions, the growth rate, productivity and chlorophyll content of E. nuttallii were significantly higher than that of C. demersum. Heat tolerance of E. nuttallii was also stronger than that of C. demersum. The optimal temperature for the growth of the two plants depended on the experimental period: both plants grew at an optimal rate at higher temperature if the experimental period was short; nevertheless the plants achieved optimal growth at a lower temperature if the experiment was conducted for a longer period. At the same light intensity, the heat tolerance of C. demersum in tap water with sediment was markedly stronger than that of E. nuttallii at 39 degrees C. Average growth rate of C. demersum was 4.5 times higher than that of E. nuttallii within 25 days. The positive growth period lasted for less than 25 days for E. nuttallii and for more than 25 days for C. demersum. When they were cultured in 1/5 Hoaglands solution and in tap water with sediment, the growth rate of C. demersum increased from 0.4 to 79.4 mg/d.g fresh weight (FW) within 20 days. E. nuttallii increased from 8.3 to 24.4 mg/d-g FW within 20 days. Both grew better in tap water with sediment than in 1/5 Hoaglands solution. The results demonstrated that the nutritional status of the water other than the high temperature affected the heat tolerance of E. nuttallii during summer. E. nuttallii has great ecological safe risk in China.

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.

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.

The effect of exercise and nutrition on the mechanostat

In this review, we discuss the effect of increased and decreased loading and nutrition deficiency on muscle and bone mass and strength (and bone length and architecture) independently and combined. Both exercise and nutrition are integral components of the mechanostat model but both have distinctly different roles. Mechanical strain imparted by muscle action is responsible for the development of the external size and shape of the bone and subsequently the bone strength. In contrast, immobilization during growth results in reduced growth in bone length and a loss of bone strength due to large losses in bone mass (a result of endosteal resorption in cortical bone and trabecular thinning) and changes in geometry (bone shafts do not develop their characteristic shape but rather develop a rounded default shape). The use of surrogate measures for peak muscle forces acting on bone (muscle strength, size, or mass) limits our ability to confirm a cause-and-effect relationship between peak muscle force acting on bone and changes in bone strength. However, the examples presented in this review support the notion that under adequate nutrition, exercise has the potential to increase peak muscle forces acting on bone and thus can lead to a proportional increase in bone strength. In contrast, nutrition alone does not influence muscle or bone in a dose-dependent manner. Muscle and bone are only influenced when there is nutritional deficiency – and in this case the effect is profound. Similar to immobilization, the immediate effect of malnutrition is a reduction in longitudinal growth. More specifically, protein and energy malnutrition results in massive bone loss due to endosteal resorption in cortical bone and trabecular thinning. Unlike loading however, there is indirect evidence that severe malnutrition when associated with menstrual dysfunction can shift the mechanostat set point upward, thus leading to less bone accrual for a given amount of bone strain.

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.