Impossible Frontiers

A key result of the capital asset pricing model (CAPM) is that the market portfolio—the portfolio of all assets in which each asset's weight is proportional to its total market capitalization—lies on the mean-variance-efficient frontier, the set of portfolios having mean-variance characteristics that cannot be improved upon. Therefore, the CAPM cannot be consistent with efficient frontiers for which every frontier portfolio has at least one negative weight or short position. We call such efficient frontiers “impossible,” and show that impossible frontiers are difficult to avoid. In particular, as the number of assets, n, grows, we prove that the probability that a generically chosen frontier is impossible tends to one at a geometric rate. In fact, for one natural class of distributions, nearly one-eighth of all assets on a frontier is expected to have negative weights for every portfolio on the frontier. We also show that the expected minimum amount of short selling across frontier portfolios grows linearly with n, and even when short sales are constrained to some finite level, an impossible frontier remains impossible. Using daily and monthly U.S. stock returns, we document the impossibility of efficient frontiers in the data.AlphaSimplex Group, LLCMassachusetts Institute of Technology. Laboratory for Financial Engineerin

Convergently emergent- ecological and enactive approaches to the texture of agency (Pre-published)

Enactive and ecological approaches to cognitive science both claim a “mutuality” between agents and their environments – that they have a complementary nature and should be addressed as a single whole system. Despite this apparent agreement, each offers criticisms of the other on precisely this point – enactivists claiming that ecological psychologists over-emphasize the environment, while the complementary criticism, of agent-centered constructivism, is leveled by ecological psychologists at enactivists. In this paper I suggest that underlying the confusion between the two approaches is the complexity of agency, which comes in different forms, at different scales or levels of analysis. Cognitive science has not theorized the relationship between these different forms in a sufficiently disciplined manner, and a task therefore remains of finding a way to map the complex territory of agency.Ye

Enhancing CVaR portfolio optimisation performance with GAM factor models

We propose a discrete-time econometric model that combines autoregressive filters with factor regressions to predict stock returns for portfolio optimisation purposes. In particular, we test both robust linear regressions and general additive models on two different investment universes composed of the Dow Jones Industrial Average and the Standard & Poor's 500 indexes, and we compare the out-of-sample performances of mean-CVaR optimal portfolios over a horizon of six years. The results show a substantial improvement in portfolio performances when the factor model is estimated with general additive models

The logic of appearance : Dennett, phenomenology and psychoanalysis

In the present essay, we aim to develop and contrast three different positions toward Sellars’ distinction between the manifest and scientific images of man: Dennett’s philosophical reconstruction of neurocognitive science, contemporary phenomenology and psychoanalysis. We will suggest that these respective traditions and the substantial differences between them can be understood in terms of a ‘logic of appearance.’ Related to this are differing ideas about the rights and limits of the first-person perspective, the relation between conscious experience and belief, and the issue of naturalization. In the final part, we will try to specify, on the basis of a detailed reading of the disagreement between Dennett and phenomenology, in what way psychoanalytic theory could respond to these different issues

Capital asset pricing model (CAPM): teste empírico ao modelo e a construção do envelope portfolio

O objetivo deste trabalho é testar se o modelo CAPM de fator único é válido na bolsa de valores portuguesa e em outras bolsas da zona euro, quando comparado com o modelo CAPM multifatorial proposto por Fama e French – Carhart. Utilizando a metodologia de Fama e French (1993; 1996), para o período de fevereiro de 2001 – julho de 2014 através de três conjuntos de dados, dez ativos da bolsa de Lisboa e 50 carteiras para a zona euro repartidas em 25 carteiras formadas em tamanho e índice book-to-market e 25 carteiras formadas em tamanho e momento, aplicou-se o teste de regressão linear simples e múltipla. Os resultados obtidos sugerem que, para o período em análise, o modelo CAPM multifatorial, aplicado à bolsa de Lisboa, não é estatisticamente suficiente para explicar a rendibilidade média esperada, ou seja, os fatores de risco proposto por Fama e French – Carhart, para o período em análise não captam a rendibilidade média que o fator risco de mercado não é capaz de explicar. Estes resultados parecem não apresentar evidência estatística suficiente para rejeitar o modelo CAPM de fator único. Para as 50 carteiras da zona euro, os resultados sugerem que o fator risco de mercado é parte influente e significativa para explicar a rendibilidade média esperada. Pretende-se ainda construir uma carteira de investimento para o conjunto de ativos do PSI20 em análise usando a metodologia desenvolvida por Benninga (2008) para formar o envelope portfolio. Para a otimização do mesmo será aplicado o modelo de Black e Litterman (1991).El objetivo de este trabajo es comprobar si el modelo CAPM de solo factor es válido en la bolsa portuguesa y otras bolsas de la zona euro, en comparación con el CAPM multifactorial propuesto por Fama y French - Carhart. Utilizando la metodología de Fama y French (1993; 1996), durante un período de febrero de 2001 – julio de 2014 a través del análisis de tres conjuntos de datos, diez activos de la bolsa de valores de Lisboa y 50 carteras para la zona euro divididas en 25 carteras formadas en tamaño e índice book-to-market y 25 carteras formadas en tamaño e momentum, se aplicó pruebas de regresión lineal simple y múltiple. Los resultados sugieren que, para el período en análisis, el CAPM multifactorial aplicado a la bolsa de valores de Lisboa no es estadísticamente suficiente para explicar la rentabilidad media esperada, es decir, los factores de riesgo propuestos por Fama y French - Carhart, para el período bajo análisis, no capturan la rentabilidad media que el factor el riesgo de mercado no puede explicar. Estos resultados parecen no presentar suficiente evidencia estadística para rechazar el modelo CAPM de un solo factor. Para las 50 carteras de la zona euro, los resultados sugieren que el factor. riesgo de mercado es parte importante e influyente para explicar la rentabilidad media esperada. También se propone construir una cartera de inversiones para el PSI20 utilizando la metodología desarrollada por Benninga (2008) para formar el envelope portfolio . La optimización misma será aplicado el modelo de Black y Litterman (1991).The aim of this paper is to test whether the single-factor CAPM model is valid in the Portuguese stock exchange and other stock exchanges in the euro zone, compared to the multifactor CAPM proposed by Fama and French-Carhart. Using the methodology of Fame and French (1993; 1996), for a period of february 2001 – july 2014 through analysis of three data sets, ten assets listed on Lisbon stock exchange and 50 portfolios for the euro zone divided into 25 portfolios formed in size and book-to-market index and 25 portfolios formed in size and momentum applied simple and multiple linear regression test. The results suggest that, for the period under analysis, the multifactor CAPM model, applied to the Lisbon stock exchange, is not statistically sufficient to explain the expected average return, ie, the risk factors proposed by Fama and French - Carhart, for the period under analysis, do not capture the average return that the factor market risk cannot explain. These results do not seem to present enough statistical evidence to reject the single-factor CAPM model. For the 50 portfolios of the euro zone, the results suggest that factor market risk is significant and influential part to explain the expected average return. It also intends to build an investment portfolio for the PSI20 using the methodology developed by Benninga (2008) to form the envelope portfolio. The same optimization will be applied the model of Black and Litterman (1991)

Reduced Handgrip Strength in Congenital Heart Disease With Regard to the Shunt Procedure in Infancy

Objective: In many patients with congenital heart disease (CHD) arterial blood flow to the arms is inhibited due to shunt surgery in infancy. This study investigates the handgrip strength of patients with CHD in regard to previous shunt procedures.Patients and Methods: Handgrip was evaluated in 424 patients with various CHD (189 female, age 28.1 ± 13.4 years) including 63 with shunt procedures in infancy; and 123 controls (51 female, 35.6 ± 14.2 years) using a Jamar dynamometer adjusted for hand size. The best of three repetitions was recorded for each side and the right-to-left hand ratio was calculated. The 63 shunted patients were grouped considering the side of the shunt: 14 right, 35 central and 14 left.Results: Patients with CHD, especially shunts, had significantly lower handgrip strength in the dominant hand than controls (controls: 43.2 ± 14.8 kg, CHD: 36.8 ± 14.8 kg, left shunt: 33.6 ± 14.6 kg, central shunt: 30.7 ± 15.2 kg and right shunt 27.8 ± 13.6 kg; p < 0.001). In controls the right hand was 8.3% stronger, comparable to patients with either no shunt or central shunt (controls: 8.3 ± 13.2%; no shunt: 7.9 ± 15.3%; central shunt: 9.5 ± 18.1% p = 0.820). In patients with a left shunt the right hand was 22.5 ± 17.8% stronger than the left (p = 0.027 compared to central) while in those with a right shunt the right hand was 2.3 ± 18.3% weaker (p = 0.049 compared to central).Conclusions: Shunt procedures in infancy cause reduced handgrip strength in adulthood and diminished handgrip strength of the ipsilateral site

Smokejumper Magazine, July 2012

This issue of the National Smokejumper Association (NSA) Smokejumper Magazine contains the following articles: Remembering Norton Creek Disaster (Historic-Gary Watts), Legacy of Skip Stratton, My Toughest Race (Del Hessel), article on death of Mark Hentze in South America, 1st NSA Leadership Awards. Smokejumper Magazine continues Static Line, which was the original title of the NSA quarterly magazine.https://dc.ewu.edu/smokejumper_mag/1079/thumbnail.jp

Adaptive control of compliant robots with Reservoir Computing

In modern society, robots are increasingly used to handle dangerous, repetitive and/or heavy tasks with high precision. Because of the nature of the tasks, either being dangerous, high precision or simply repetitive, robots are usually constructed with high torque motors and sturdy materials, that makes them dangerous for humans to handle. In a car-manufacturing company, for example, a large cage is placed around the robot’s workspace that prevents humans from entering its vicinity. In the last few decades, efforts have been made to improve human-robot interaction. Often the movement of robots is characterized as not being smooth and clearly dividable into sub-movements. This makes their movement rather unpredictable for humans. So, there exists an opportunity to improve the motion generation of robots to enhance human-robot interaction. One interesting research direction is that of imitation learning. Here, human motions are recorded and demonstrated to the robot. Although the robot is able to reproduce such movements, it cannot be generalized to other situations. Therefore, a dynamical system approach is proposed where the recorded motions are embedded into the dynamics of the system. Shaping these nonlinear dynamics, according to recorded motions, allows for dynamical system to generalize beyond demonstration. As a result, the robot can generate motions of other situations not included in the recorded human demonstrations. In this dissertation, a Reservoir Computing approach is used to create a dynamical system in which such demonstrations are embedded. Reservoir Computing systems are Recurrent Neural Network-based approaches that are efficiently trained by considering only the training of the readout connections and retaining all other connections of such a network unchanged given their initial randomly chosen values. Although they have been used to embed periodic motions before, they were extended to embed discrete motions, or both. This work describes how such a motion pattern-generating system is built, investigates the nature of the underlying dynamics and evaluates their robustness in the face of perturbations. Additionally, a dynamical system approach to obstacle avoidance is proposed that is based on vector fields in the presence of repellers. This technique can be used to extend the motion abilities of the robot without need for changing the trained Motion Pattern Generator (MPG). Therefore, this approach can be applied in real-time on any system that generates a certain movement trajectory. Assume that the MPG system is implemented on an industrial robotic arm, similar to the ones used in a car factory. Even though the obstacle avoidance strategy presented is able to modify the generated motion of the robot’s gripper in such a way that it avoids obstacles, it does not guarantee that other parts of the robot cannot collide with a human. To prevent this, engineers have started to use advanced control algorithms that measure the amount of torque that is applied on the robot. This allows the robot to be aware of external perturbations. However, it turns out that, even with fast control loops, the adaptation to compensate for a sudden perturbation, is too slow to prevent high interaction forces. To reduce such forces, researchers started to use mechanical elements that are passively compliant (e.g., springs) and light-weight flexible materials to construct robots. Although such compliant robots are much safer and inherently energy efficient to use, their control becomes much harder. Most control approaches use model information about the robot (e.g., weight distribution and shape). However, when constructing a compliant robot it is hard to determine the dynamics of these materials. Therefore, a model-free adaptive control framework is proposed that assumes no prior knowledge about the robot. By interacting with the robot it learns an inverse robot model that is used as controller. The more it interacts, the better the control be- comes. Appropriately, this framework is called Inverse Modeling Adaptive (IMA) control framework. I have evaluated the IMA controller’s tracking ability on sev- eral tasks, investigating its model independence and stability. Furthermore, I have shown its fast learning ability and comparable performance to taskspecific designed controllers. Given both the MPG and IMA controllers, it is possible to improve the inter- actability of a compliant robot in a human-friendly environment. When the robot is to perform human-like motions for a large set of tasks, we need to demonstrate motion examples of all these tasks. However, biological research concerning the motion generation of animals and humans revealed that a limited set of motion patterns, called motion primitives, are modulated and combined to generate advanced motor/motion skills that humans and animals exhibit. Inspired by these interesting findings, I investigate if a single motion primitive indeed can be modulated to achieve a desired motion behavior. By some elementary experiments, where an MPG is controlled by an IMA controller, a proof of concept is presented. Furthermore, a general hierarchy is introduced that describes how a robot can be controlled in a biology-inspired manner. I also investigated how motion primitives can be combined to produce a desired motion. However, I was unable to get more advanced implementations to work. The results of some simple experiments are presented in the appendix. Another approach I investigated assumes that the primitives themselves are undefined. Instead, only a high-level description is given, which describes that every primitive on average should contribute equally, while still allowing for a single primitive to specialize in a part of the motion generation. Without defining the behavior of a primitive, only a set of untrained IMA controllers is used of which each will represent a single primitive. As a result of the high-level heuristic description, the task space is tiled into sub-regions in an unsupervised manner. Resulting in controllers that indeed represent a part of the motion generation. I have applied this Modular Architecture with Control Primitives (MACOP) on an inverse kinematic learning task and investigated the emerged primitives. Thanks to the tiling of the task space, it becomes possible to control redundant systems, because redundant solutions can be spread over several control primitives. Within each sub region of the task space, a specific control primitive is more accurate than in other regions allowing for the task complexity to be distributed over several less complex tasks. Finally, I extend the use of an IMA-controller, which is tracking controller, to the control of under-actuated systems. By using a sample-based planning algorithm it becomes possible to explore the system dynamics in which a path to a desired state can be planned. Afterwards, MACOP is used to incorporate feedback and to learn the necessary control commands corresponding to the planned state space trajectory, even if it contains errors. As a result, the under-actuated control of a cart pole system was achieved. Furthermore, I presented the concept of a simulation based control framework that allows the learning of the system dynamics, planning and feedback control iteratively and simultaneously

Frontiers of Asset Pricing

This book is comprised of articles published in a Special Issue of the Journal of Risk and Financial Management entitled "Frontiers in Asset Pricing" with Guest Editors Professor James W. Kolari and Professor Seppo Pynnonen. The book contains papers in various areas related to asset pricing: (1) models; (2) multifactors; (3) theory; (4) empirical tests; (5) applications; (6) other asset classes; and (7) international tests