Measuring portfolio performance using a modified measure of risk

This paper reports the results of an investigation into the properties of a theoretical modification of beta proposed by Leland (1999) and based on earlier work of Rubinstein (1976). It is shown that when returns are elliptically symmetric, beta is the appropriate measure of risk and that there are other situations in which the modified beta will be similar to the traditional measure based on the capital asset pricing model. For the case where returns have a normal distribution, it is shown that the criterion either does not exist or reduces exactly to the conventional beta. It is therefore conjectured that the modified measure will only be useful for portfolios that have nonstandard return distributions which incorporate skewness. For such situations, it is shown how to estimate the measure using regression and how to compare the resulting statistic with a traditional estimated beta using Hotelling's test. An empirical study based on stocks from the FTSE350 does not find evidence to support the use of the new measure even in the presence of skewness.Journal of Asset Management (2007) 7, 388-403. doi:10.1057/palgrave.jam.225005

Revealed Preferences with Plural Motives: Axiomatic Foundations of Normative Assessments in Non-Utilitarian Welfare Economics

This paper explores the possibility of defining a non-utilitarian normative standard for assessments of welfare and deprivation. The paper formalises a key aspect of Amartya Sen’s critique of the assumption of consistent utility-maximisation in the revealed preference theory and proposes a generalisation of the standard Samuelsonian choice model for the case in which choices are based on plural motives (here, self-interested and moral motives). Based on a set of intuitive assumptions about the way in which unobservable motives are linked to observable choices, we then construct an alternative normative ranking rule that can be used in non-utilitarian welfare economics to rank social outcomes or provide a normative basis for the construction of composite indices, for instance

Anchoring of proteins to lactic acid bacteria

The anchoring of proteins to the cell surface of lactic acid bacteria (LAB) using genetic techniques is an exciting and emerging research area that holds great promise for a wide variety of biotechnological applications. This paper reviews five different types of anchoring domains that have been explored for their efficiency in attaching hybrid proteins to the cell membrane or cell wall of LAB. The most exploited anchoring regions are those with the LPXTG box that bind the proteins in a covalent way to the cell wall. In recent years, two new modes of cell wall protein anchoring have been studied and these may provide new approaches in surface display. The important progress that is being made with cell surface display of chimaeric proteins in the areas of vaccine development and enzyme- or whole-cell immobilisation is highlighted.

Methane drizzle on Titan

Saturn's moon Titan shows landscapes with fluvial features(1) suggestive of hydrology based on liquid methane. Recent efforts in understanding Titan's methane hydrological cycle have focused on occasional cloud outbursts near the south pole(2-4) or cloud streaks at southern mid-latitudes(5,6) and the mechanisms of their formation. It is not known, however, if the clouds produce rain or if there are also non-convective clouds, as predicted by several models(7-11). Here we show that the in situ data on the methane concentration and temperature profile in Titan's troposphere point to the presence of layered optically thin stratiform clouds. The data indicate an upper methane ice cloud and a lower, barely visible, liquid methane-nitrogen cloud, with a gap in between. The lower, liquid, cloud produces drizzle that reaches the surface. These non-convective methane clouds are quasi-permanent features supported by the global atmospheric circulation, indicating that methane precipitation occurs wherever there is slow upward motion. This drizzle is a persistent component of Titan's methane hydrological cycle and, by wetting the surface on a global scale, plays an active role in the surface geology of Titan.Peer Reviewedhttp://deepblue.lib.umich.edu/bitstream/2027.42/62668/1/nature04948.pd

The Emergence of Consensus: a primer

The origin of population-scale coordination has puzzled philosophers and scientists for centuries. Recently, game theory, evolutionary approaches and complex systems science have provided quantitative insights on the mechanisms of social consensus. This paper overviews the main dimensions over which the debate has unfolded and discusses some representative results, with a focus on those situations in which consensus emerges `spontaneously' in absence of centralised institutions. Covered topics include the macroscopic consequences of the different microscopic rules of behavioural contagion, the role of social networks, and the mechanisms that prevent the formation of a consensus or alter it after it has emerged. Special attention is devoted to the recent wave of experiments on the emergence of consensus in social systems

Reciprocity as a foundation of financial economics

This paper argues that the subsistence of the fundamental theorem of contemporary financial mathematics is the ethical concept ‘reciprocity’. The argument is based on identifying an equivalence between the contemporary, and ostensibly ‘value neutral’, Fundamental Theory of Asset Pricing with theories of mathematical probability that emerged in the seventeenth century in the context of the ethical assessment of commercial contracts in a framework of Aristotelian ethics. This observation, the main claim of the paper, is justified on the basis of results from the Ultimatum Game and is analysed within a framework of Pragmatic philosophy. The analysis leads to the explanatory hypothesis that markets are centres of communicative action with reciprocity as a rule of discourse. The purpose of the paper is to reorientate financial economics to emphasise the objectives of cooperation and social cohesion and to this end, we offer specific policy advice

Alteration of Sequence Specificity of the Type IIS Restriction Endonuclease BtsI

The Type IIS restriction endonuclease BtsI recognizes and digests at GCAGTG(2/0). It comprises two subunits: BtsIA and BtsIB. The BtsIB subunit contains the recognition domain, one catalytic domain for bottom strand nicking and part of the catalytic domain for the top strand nicking. BtsIA has the rest of the catalytic domain that is responsible for the DNA top strand nicking. BtsIA alone has no activity unless it mixes with BtsIB to reconstitute the BtsI activity. During characterization of the enzyme, we identified a BtsIB mutant R119A found to have a different digestion pattern from the wild type BtsI. After characterization, we found that BtsIB(R119A) is a novel restriction enzyme with a previously unreported recognition sequence CAGTG(2/0), which is named as BtsI-1. Compared with wild type BtsI, BtsI-1 showed different relative activities in NEB restriction enzyme reaction buffers NEB1, NEB2, NEB3 and NEB4 and less star activity. Similar to the wild type BtsIB subunit, the BtsI-1 B subunit alone can act as a bottom nicking enzyme recognizing CAGTG(-/0). This is the first successful case of a specificity change among this restriction endonuclease type

Reciprocity and the tragedies of maintaining and providing the commons

Social cooperation often requires collectively beneficial but individually costly restraint to maintain a public good, or it needs costly generosity to create one. Status quo effects predict that maintaining a public good is easier than providing a new one. Here, we show experimentally and with simulations that even under identical incentives, low levels of cooperation (the ‘tragedy of the commons’) are systematically more likely in maintenance than provision. Across three series of experiments, we find that strong and weak positive reciprocity, known to be fundamental tendencies underpinning human cooperation, are substantially diminished under maintenance compared with provision. As we show in a fourth experiment, the opposite holds for negative reciprocity (‘punishment’). Our findings suggest that incentives to avoid the ‘tragedy of the commons’ need to contend with dilemma specific reciprocity

Cooperation, Norms, and Revolutions: A Unified Game-Theoretical Approach

Cooperation is of utmost importance to society as a whole, but is often challenged by individual self-interests. While game theory has studied this problem extensively, there is little work on interactions within and across groups with different preferences or beliefs. Yet, people from different social or cultural backgrounds often meet and interact. This can yield conflict, since behavior that is considered cooperative by one population might be perceived as non-cooperative from the viewpoint of another. To understand the dynamics and outcome of the competitive interactions within and between groups, we study game-dynamical replicator equations for multiple populations with incompatible interests and different power (be this due to different population sizes, material resources, social capital, or other factors). These equations allow us to address various important questions: For example, can cooperation in the prisoner's dilemma be promoted, when two interacting groups have different preferences? Under what conditions can costly punishment, or other mechanisms, foster the evolution of norms? When does cooperation fail, leading to antagonistic behavior, conflict, or even revolutions? And what incentives are needed to reach peaceful agreements between groups with conflicting interests? Our detailed quantitative analysis reveals a large variety of interesting results, which are relevant for society, law and economics, and have implications for the evolution of language and culture as well