A Simple Approach to Maximum Intractable Likelihood Estimation

Approximate Bayesian Computation (ABC) can be viewed as an analytic approximation of an intractable likelihood coupled with an elementary simulation step. Such a view, combined with a suitable instrumental prior distribution permits maximum-likelihood (or maximum-a-posteriori) inference to be conducted, approximately, using essentially the same techniques. An elementary approach to this problem which simply obtains a nonparametric approximation of the likelihood surface which is then used as a smooth proxy for the likelihood in a subsequent maximisation step is developed here and the convergence of this class of algorithms is characterised theoretically. The use of non-sufficient summary statistics in this context is considered. Applying the proposed method to four problems demonstrates good performance. The proposed approach provides an alternative for approximating the maximum likelihood estimator (MLE) in complex scenarios

The Properties of Model Selection when Retaining Theory Variables

Economic theories are often fitted directly to data to avoid possible model selection biases. We show that embedding a theory model that specifies the correct set of m relevant exogenous variables, x{t}, within the larger set of m+k candidate variables, (x{t},w{t}), then selection over the second set by their statistical significance can be undertaken without affecting the estimator distribution of the theory parameters. This strategy returns the theory-parameter estimates when the theory is correct, yet protects against the theory being under-specified because some w{t} are relevant.Model selection, theory retention

Inverse Statistics in the Foreign Exchange Market

We investigate intra-day foreign exchange (FX) time series using the inverse statistic analysis developed in [1,2]. Specifically, we study the time-averaged distributions of waiting times needed to obtain a certain increase (decrease) $\rho$ in the price of an investment. The analysis is performed for the Deutsch mark (DM) against the $US for the full year of 1998, but similar results are obtained for the Japanese Yen against the$US. With high statistical significance, the presence of "resonance peaks" in the waiting time distributions is established. Such peaks are a consequence of the trading habits of the markets participants as they are not present in the corresponding tick (business) waiting time distributions. Furthermore, a new {\em stylized fact}, is observed for the waiting time distribution in the form of a power law Pdf. This result is achieved by rescaling of the physical waiting time by the corresponding tick time thereby partially removing scale dependent features of the market activity.Comment: 8 pages. Accepted Physica

Log-periodic self-similarity: an emerging financial law?

A hypothesis that the financial log-periodicity, cascading self-similarity through various time scales, carries signatures of a law is pursued. It is shown that the most significant historical financial events can be classified amazingly well using a single and unique value of the preferred scaling factor lambda=2, which indicates that its real value should be close to this number. This applies even to a declining decelerating log-periodic phase. Crucial in this connection is identification of a "super-bubble" (bubble on bubble) phenomenon. Identifying a potential "universal" preferred scaling factor, as undertaken here, may significantly improve the predictive power of the corresponding methodology. Several more specific related results include evidence that: (i) the real end of the high technology bubble on the stock market started (with a decelerating log-periodic draw down) in the begining of September 2000; (ii) a parallel 2000-2002 decline seen in the Standard & Poor's 500 from the log-periodic perspective is already of the same significance as the one of the early 1930s and of the late 1970s; (iii) all this points to a much more serious global crash in around 2025, of course from a level much higher (at least one order of magnitude) than in 2000.Comment: Talk given by S. Drozdz at International Econophysics Conference, Bali, August 28-31, 2002; typos correcte

Stock mechanics: a general theory and method of energy conservation with applications on DJIA

A new method, based on the original theory of conservation of sum of kinetic and potential energy defined for prices is proposed and applied on Dow Jones Industrials Average (DJIA). The general trends averaged over months or years gave a roughly conserved total energy, with three different potential energies, i.e. positive definite quadratic, negative definite quadratic and linear potential energy for exponential rises (and falls), sinusoidal oscillations and parabolic trajectories, respectively. Corresponding expressions for force (impact) are also given. Keywords:Comment: 14 pages, 3 figures, scehudled for IJMPC 17/ issue

Energetic Extremes in Aquatic Locomotion by Coral Reef Fishes

Underwater locomotion is challenging due to the high friction and resistance imposed on a body moving through water and energy lost in the wake during undulatory propulsion. While aquatic organisms have evolved streamlined shapes to overcome such resistance, underwater locomotion has long been considered a costly exercise. Recent evidence for a range of swimming vertebrates, however, has suggested that flapping paired appendages around a rigid body may be an extremely efficient means of aquatic locomotion. Using intermittent flow-through respirometry, we found exceptional energetic performance in the Bluelined wrasse Stethojulis bandanensis, which maintains tuna-like optimum cruising speeds (up to 1 metre s(-1)) while using 40% less energy than expected for their body size. Displaying an exceptional aerobic scope (22-fold above resting), streamlined rigid-body posture, and wing-like fins that generate lift-based thrust, S. bandanensis literally flies underwater to efficiently maintain high optimum swimming speeds. Extreme energetic performance may be key to the colonization of highly variable environments, such as the wave-swept habitats where S. bandanensis and other wing-finned species tend to occur. Challenging preconceived notions of how best to power aquatic locomotion, biomimicry of such lift-based fin movements could yield dramatic reductions in the power needed to propel underwater vehicles at high speed.Funding was provided by the Australian Research Council (to CJF) and the Danish Agency for Science, Technology and Innovation (to JFS). The funders had no role in study design, data collection and analysis, decision to publish, or preparation of the manuscript

Selecting a Regression Saturated by Indicators

We consider selecting a regression model, using a variant of Gets, when there are more variables than observations, in the special case that the variables are impulse dummies (indicators) for every observation. We show that the setting is unproblematic if tackled appropriately, and obtain the finite-sample distribution of estimators of the mean and variance in a simple location-scale model under the null that no impulses matter. A Monte Carlo simulation confirms the null distribution, and shows power against an alternative of interest.indicators; regression saturation; subset selection; model selection

Protoplanetary Disk Turbulence Driven by the Streaming Instability: Non-Linear Saturation and Particle Concentration

We present simulations of the non-linear evolution of streaming instabilities in protoplanetary disks. The two components of the disk, gas treated with grid hydrodynamics and solids treated as superparticles, are mutually coupled by drag forces. We find that the initially laminar equilibrium flow spontaneously develops into turbulence in our unstratified local model. Marginally coupled solids (that couple to the gas on a Keplerian time-scale) trigger an upward cascade to large particle clumps with peak overdensities above 100. The clumps evolve dynamically by losing material downstream to the radial drift flow while receiving recycled material from upstream. Smaller, more tightly coupled solids produce weaker turbulence with more transient overdensities on smaller length scales. The net inward radial drift is decreased for marginally coupled particles, whereas the tightly coupled particles migrate faster in the saturated turbulent state. The turbulent diffusion of solid particles, measured by their random walk, depends strongly on their stopping time and on the solids-to-gas ratio of the background state, but diffusion is generally modest, particularly for tightly coupled solids. Angular momentum transport is too weak and of the wrong sign to influence stellar accretion. Self-gravity and collisions will be needed to determine the relevance of particle overdensities for planetesimal formation.Comment: Accepted for publication in ApJ (17 pages). Movies of the simulations can be downloaded at http://www.mpia.de/~johansen/research_en.ph

The Turbulent Magnetic Prandtl Number of MHD Turbulence in Disks

The magnetic Prandtl number Pr_M is the ratio of viscosity to resistivity. In astrophysical disks the diffusion of angular momentum (viscosity) and magnetic fields (resistivity) are controlled by turbulence. Phenomenological models of the evolution of large scale poloidal magnetic fields in disks suggest that the turbulent magnetic Prandtl number Pr_{M,T} controls the rate of escape of vertical field from the disk; for Pr_{M,T} leq R/H vertical field diffuses outward before it can be advected inward by accretion. Here we measure field diffusion and angular momentum transport due to MHD turbulence in a shearing box, and thus Pr_{M,T}, by studying the evolution of a sinusoidal perturbation in the magnetic field that is injected into a turbulent background. We show that the perturbation is always stable, decays approximately exponentially, has decay rate proportional to k^2, and that the implied Pr_{M,T} ~ 1.Comment: 15pages, 1 figure, accepted by Ap