When are Contrarian Profits Due to Stock Market Overreaction?

The profitability of contrarian investment strategies need not be the result of stock market overreaction. Even if returns on individual securities are temporally independent, portfolio strategies that attempt to exploit return reversals may still earn positive expected profits. This is due to the effects of cross-autocovariances from which contrarian strategies inadvertently benefit. We provide an informal taxonomy of return-generating processes that yield positive [and negative] expected profits under a particular contrarian portfolio strategy, and use this taxonomy to reconcile the empirical findings of weak negative autocorrelation for returns on individual stocks with the strong positive autocorrelation of portfolio returns. We present empirical evidence against overreaction as the primary source of contrarian profits, and show the presence of important lead-lag relations across securities.

Data-Snooping Biases in Tests of Financial Asset Pricing Models

We investigate the extent to which tests of financial asset pricing models may be biased by using properties of the data to construct the test statistics. Specifically, we focus on tests using returns to portfolios of common stock where portfolios are constructed by sorting on some empirically motivated characteristic of the securities such as market value of equity. We present both analytical calculations and Monte Carlo simulations that show the effects of this type of data-snooping to be substantial. Even when the sorting characteristic is only marginally correlated with individual security statistics, 5 percent tests based on sorted portfolio returns may reject with probability one under the null hypothesis. This bias is shown to worsen as the number of securities increases given a fixed number of portfolios, and as the number of portfolios decreases given a fixed number of securities. We provide an empirical example that illustrates the practical relevance of these biases.

Stock Market Prices Do Not Follow Random Walks: Evidence From a Simple Specification Test

In this paper, we test the random walk hypothesis for weekly stock market returns by comparing variance estimators derived from data sampled at different frequencies. The random walk model is strongly rejected for the entire sample period (1962-1985) and for all sub-periods for a variety of aggregate returns indexes and size-sorted portfolios. Although the rejections are largely due to the behavior of small stocks, they cannot be ascribed to either the effects of infrequent trading or time-varying volatilities. Moreover, the rejection of the random walk cannot be interpreted as supporting a mean-reverting stationary model of asset prices, but is more consistent with a specific nonstationary alternative hypothesis.

Literacy, Numeracy and Labour Market Outcomes in Canada

Most research on the contribution of human capital to economic growth and its role in the distribution of income uses indirect measures of human capital such as educational attainment and work experience. Such measures are arguably inputs into the production of human capital in the form of skills, competencies and knowledge. This study uses Canadian data from the international Adult Literacy Survey to analyse the role of directly observed skills -- specifically, prose, document and quantitative literacy -- on individual labour market earnings. The contributions of unobserved skills are taken into account using input measures (education and experience). We find that literacy skills have a large and statistically significant causal effect on earnings. As much as one-third of the return to education may be due to the combined effects of education on literacy and of literacy skills on earnings. In contrast, very little of the return to labour market experience is associated with the combined effects of experience on literacy and literacy skills on earnings.

Modeling Grain Boundaries using a Phase Field Technique

We propose a two dimensional frame-invariant phase field model of grain impingement and coarsening. One dimensional analytical solutions for a stable grain boundary in a bicrystal are obtained, and equilibrium energies are computed. We are able to calculate the rotation rate for a free grain between two grains of fixed orientation. For a particular choice of functional dependencies in the model the grain boundary energy takes the same analytic form as the microscopic (dislocation) model of Read and Shockley.Comment: 4 pages, 2 figure

Reheating in the Presence of Noise

Explosive particle production due to parametric resonance is a crucial feature of reheating in inflationary cosmology. Coherent oscillations of the inflaton field act as a periodically varying mass in the evolution equation for matter fields which couple to the inflaton. This in turn results in the parametric resonance instability. Thermal and quantum noise will lead to a nonperiodic perturbation in the mass. We study the resulting equation for the evolution of matter fields and demonstrate that noise (at least if it is temporally uncorrelated) will increase the rate of particle production. We also estimate the limits on the magnitude of the noise for which the resonant behavior is qualitatively unchanged.Comment: 26 pages, 2 figures, uses LATE

New remarks on the Cosmological Argument

We present a formal analysis of the Cosmological Argument in its two main forms: that due to Aquinas, and the revised version of the Kalam Cosmological Argument more recently advocated by William Lane Craig. We formulate these two arguments in such a way that each conclusion follows in first-order logic from the corresponding assumptions. Our analysis shows that the conclusion which follows for Aquinas is considerably weaker than what his aims demand. With formalizations that are logically valid in hand, we reinterpret the natural language versions of the premises and conclusions in terms of concepts of causality consistent with (and used in) recent work in cosmology done by physicists. In brief: the Kalam argument commits the fallacy of equivocation in a way that seems beyond repair; two of the premises adopted by Aquinas seem dubious when the terms `cause' and `causality' are interpreted in the context of contemporary empirical science. Thus, while there are no problems with whether the conclusions follow logically from their assumptions, the Kalam argument is not viable, and the Aquinas argument does not imply a caused origination of the universe. The assumptions of the latter are at best less than obvious relative to recent work in the sciences. We conclude with mention of a new argument that makes some positive modifications to an alternative variation on Aquinas by Le Poidevin, which nonetheless seems rather weak.Comment: 12 pages, accepted for publication in International Journal for Philosophy of Religio

MHD Wave Propagation in the Neighbourhood of Two Null Points

The nature of fast magnetoacoustic and Alfv\'en waves is investigated in a zero $\beta$ plasma in the neighbourhood of a pair of two-dimensional null points. This gives an indication of wave propagation in the low $\beta$ solar corona, for a more complicated magnetic configuration than that looked at by McLaughlin & Hood (2004). It is found that the fast wave is attracted to the null points and that the front of the wave slows down as it approaches the null point pair, with the wave splitting and part of the wave accumulating at one null and the rest at the other. Current density will then accumulate at these points and ohmic dissipation will then extract the energy in the wave at these points. This suggests locations where wave heating will occur in the corona. The Alfv\'en wave behaves in a different manner in that the wave accumulates along the separatrices. Hence, the current density will accumulate at this part of the topology and this is where wave heating will occur. However, the phenomenon of wave accumulation at a specific place is a feature of both wave types, and illustrates the importance of studying the topology of the corona when considering MHD wave propagation.Comment: 11 pages, 14 figure

Local cytokine transcription in naïve and previously infected sheep and lambs following challenge with Teladorsagia circumcincta

<b>Background</b><p></p> The abomasal helminth Teladorsagia circumcincta is one of the most economically important parasites affecting sheep in temperate regions. Infection is particularly detrimental to lambs, in which it can cause pronounced morbidity and severe production losses. Due to the spreading resistance of this parasite to all classes of anthelmintic drugs, teladorsagiosis is having an increasingly severe impact on the sheep industry with significant implications for sheep welfare. Protective immunity develops slowly, wanes rapidly and does not appear to be as effective in young lambs. To investigate the development of immunity to T. circumcincta in sheep and lambs, we used cytokine transcript profiling to examine differences in the abomasal mucosa and gastric lymph node of naïve and previously infected sheep and lambs following challenge.<p></p> <b>Results</b><p></p> The results of these experiments demonstrated that the abomasal mucosa is a major source of cytokines during abomasal helminth infection. A local Th2-type cytokine response was observed in the abomasal mucosa and gastric lymph node of the previously infected sheep and lambs when compared with those of the naïve during the early stages of infection. In contrast, a pro-inflammatory component more was evident in the abomasal mucosa and gastric lymph node of the naïve sheep when compared with those of the previously infected, which was not observed in the lambs.<p></p> <b>Conclusions</b><p></p> The greater levels of Th2-type cytokine transcripts in both the abomasum and gastric lymph node of the previously infected compared with naïve sheep and lambs emphasises the importance of these mechanisms in the immune response to T. circumcincta infection. Younger lambs appear to be able to generate similar Th2-type responses in the abomasum suggesting that the increased morbidity and apparent lack of resistance in younger lambs following continuous or repeated exposure to T. circumcincta is unlikely to be due to a lack of appropriate Th2-type cytokine production

EXIST: Mission Design Concept and Technology Program

The Energetic X-ray Imaging Survey Telescope (EXIST) is a proposed very large area coded aperture telescope array, incorporating 8m^2 of pixellated Cd-Zn-Te (CZT) detectors, to conduct a full-sky imaging and temporal hard x-ray (10-600 keV) survey each 95min orbit. With a sensitivity (5sigma, 1yr) of ~0.05mCrab (10-150 keV), it will extend the ROSAT soft x-ray (0.5-2.5keV) and proposed ROSITA medium x-ray (2-10 keV) surveys into the hard x-ray band and enable identification and study of sources ~10-20X fainter than with the ~15-100keV survey planned for the upcoming Swift mission. At ~100-600 keV, the ~1mCrab sensitivity is 300X that achieved in the only previous (HEAO-A4, non-imaging) all-sky survey. EXIST will address a broad range of key science objectives: from obscured AGN and surveys for black holes on all scales, which constrain the accretion history of the universe, to the highest sensitivity and resolution studies of gamma-ray bursts it will conduct as the Next Generation Gamma-Ray Burst mission. We summarize the science objectives and mission drivers, and the results of a mission design study for implementation as a free flyer mission, with Delta IV launch. Key issues affecting the telescope and detector design are discussed, and a summary of some of the current design concepts being studied in support of EXIST is presented for the wide-field but high resolution coded aperture imaging and very large area array of imaging CZT detectors. Overall mission design is summarized, and technology development needs and a development program are outlined which would enable the launch of EXIST by the end of the decade, as recommended by the NAS/NRC Decadal Survey.Comment: 14 pages, 8 figures, 2 tables. PDF file only. Presented at SPIE (Aug. 2002) and to appear in Proc. SPIE, vol. 485