Pairs trading in the UK equity market: risk and return

In this paper, we provide the first comprehensive UK evidence on the profitability of the pairs trading strategy. Evidence suggests that the strategy performs well in crisis periods, so we control for both risk and liquidity to assess performance. To evaluate the effect of market frictions on the strategy, we use several estimates of transaction costs. We also present evidence on the performance of the strategy in different economic and market states. Our results show that pairs trading portfolios typically have little exposure to known equity risk factors such as market, size, value, momentum and reversal. However, a model controlling for risk and liquidity explains a far larger proportion of returns. Incorporating different assumptions about bid-ask spreads leads to reductions in performance estimates. When we allow for time-varying risk exposures, conditioned on the contemporaneous equity market return, risk-adjusted returns are generally not significantly different from zero

Minimum requirements for feedback enhanced force sensing

The problem of estimating an unknown force driving a linear oscillator is revisited. When using linear measurement, feedback is often cited as a mechanism to enhance bandwidth or sensitivity. We show that as long as the oscillator dynamics are known, there exists a real-time estimation strategy that reproduces the same measurement record as any arbitrary feedback protocol. Consequently some form of nonlinearity is required to gain any advantage beyond estimation alone. This result holds true in both quantum and classical systems, with non-stationary forces and feedback, and in the general case of non-Gaussian and correlated noise. Recently, feedback enhanced incoherent force sensing has been demonstrated [Nat. Nano. \textbf{7}, 509 (2012)], with the enhancement attributed to a feedback induced modification of the mechanical susceptibility. As a proof-of-principle we experimentally reproduce this result through straightforward filtering.Comment: 5 pages + 2 pages of Supplementary Informatio

Predictability revisited: UK equity returns, 1965-2007

This study tests a large sample of UK equity returns from 1965 to 2007 for predictability. Returns are tested using the Lo and MacKinlay (1988) variance ratio test and the Chow and Denning (1993) multiple variance ratio tests. Overall, the results show strong signs of predictability. There is a size effect, in which small equities appear more predictable in the first half of the sample (1965–1985), and mid- to large-size equities appear more predictable in the second half of the sample (1986–2007)

Entropy and the variational principle for actions of sofic groups

Recently Lewis Bowen introduced a notion of entropy for measure-preserving actions of a countable sofic group on a standard probability space admitting a generating partition with finite entropy. By applying an operator algebra perspective we develop a more general approach to sofic entropy which produces both measure and topological dynamical invariants, and we establish the variational principle in this context. In the case of residually finite groups we use the variational principle to compute the topological entropy of principal algebraic actions whose defining group ring element is invertible in the full group C*-algebra.Comment: 44 pages; minor changes; to appear in Invent. Mat

The Dust Content of Galaxy Clusters

We report on the detection of reddening toward z ~ 0.2 galaxy clusters. This is measured by correlating the Sloan Digital Sky Survey cluster and quasar catalogs and by comparing the photometric and spectroscopic properties of quasars behind the clusters to those in the field. We find mean E(B-V) values of a few times 10^-3 mag for sight lines passing ~Mpc from the clusters' center. The reddening curve is typical of dust but cannot be used to distinguish between different dust types. The radial dependence of the extinction is shallow near the cluster center suggesting that most of the detected dust lies at the outskirts of the clusters. Gravitational magnification of background z ~ 1.7 sources seen on Mpc (projected) scales around the clusters is found to be of order a few per cent, in qualitative agreement with theoretical predictions. Contamination by different spectral properties of the lensed quasar population is unlikely but cannot be excluded.Comment: 4 pages, 3 figure

Greater V˙O2peak is correlated with greater skeletal muscle deoxygenation amplitude and hemoglobin concentration within individual muscles during ramp-incremental cycle exercise.

It is axiomatic that greater aerobic fitness (V˙O2peak) derives from enhanced perfusive and diffusive O2 conductances across active muscles. However, it remains unknown how these conductances might be reflected by regional differences in fractional O2 extraction (i.e., deoxy [Hb+Mb] and tissue O2 saturation [StO2]) and diffusive O2 potential (i.e., total[Hb+Mb]) among muscles spatially heterogeneous in blood flow, fiber type, and recruitment (vastus lateralis, VL; rectus femoris, RF). Using quantitative time-resolved near-infrared spectroscopy during ramp cycling in 24 young participants (V˙O2peak range: ~37.4-66.4 mL kg-1 min-1), we tested the hypotheses that (1) deoxy[Hb+Mb] and total[Hb+Mb] at V˙O2peak would be positively correlated with V˙O2peak in both VL and RF muscles; (2) the pattern of deoxygenation (the deoxy[Hb+Mb] slopes) during submaximal exercise would not differ among subjects differing in V˙O2peak Peak deoxy [Hb+Mb] and StO2 correlated with V˙O2peak for both VL (r = 0.44 and -0.51) and RF (r = 0.49 and -0.49), whereas for total[Hb+Mb] this was true only for RF (r = 0.45). Baseline deoxy[Hb+Mb] and StO2 correlated with V˙O2peak only for RF (r = -0.50 and 0.54). In addition, the deoxy[Hb+Mb] slopes were not affected by aerobic fitness. In conclusion, while the pattern of deoxygenation (the deoxy[Hb+Mb] slopes) did not differ between fitness groups the capacity to deoxygenate [Hb+Mb] (index of maximal fractional O2 extraction) correlated significantly with V˙O2peak in both RF and VL muscles. However, only in the RF did total[Hb+Mb] (index of diffusive O2 potential) relate to fitness

The Connections between QSO Absorption Systems and Galaxies: Low-Redshift Observations

Quasar absorption lines have long been recognized to be a sensitive probe of the abundances, physical conditions, and kinematics of gas in a wide variety of environments including low-density intergalactic regions that probably cannot be studied by any other means. While some pre-Hubble Space Telescope (HST) observations indicated that Mg II absorption lines arise in gaseous galactic halos with a large covering factor, many early QSO absorber studies were hampered by a lack of information about the context of the absorbers and their connections with galaxies. By providing access to crucial ultraviolet resonance lines at low redshifts, deployment of HST and the Far Ultraviolet Spectroscopic Explorer enabled detailed studies of the relationships between QSO absorbers and galaxies. The advent of large surveys such as the Sloan Digital Sky Survey (SDSS) has also advanced the topic by greatly improving the size of absorber and galaxy samples. This paper briefly reviews some observational results on absorber-galaxy connections that have been obtained in the HST/SDSS era, including Mg II absorbers, the low-z Lyman alpha forest, Lyman limit and damped Lyman alpha absorbers, and O VI systems.Comment: Review paper presented at IAU Colloquium 199, Probing Galaxies through Quasar Absorption Lines, eds. P. R. Williams, C. Shu, and B. Menard. 19 pages, 10 figure