The Empirical Foundations of the Arbitrage Pricing Theory I: The Empirical Tests

This paper provides a detailed and extensive examination of the validity of the APT based on maximum likelihood factor analysis of large cross-sections of securities. Our empirical implementation of the theory proved in capable of explaining expected returns on portfolios composed of securities with different market capitalizations although it provided an adequate account of the expected returns of portfolios formed on the basis of dividend yield and own variance where risk adjustment with the CAPM employing the usual market proxies failed. In addition, it appears that the zero beta version of the APT is sharply rejected in favor of the riskless rate model and that there is little basis for discriminating among five and ten factor versions of the theory.

Diversification and the Optimal Construction of Basis Portfolios

Nontrivial diversification possibilities arise when a factor model describes security returns. In this paper, we provide a comprehensive examination of the merits of various strategies for constructing basis portfolios that are, in principle, highly correlated with the common factors underlying security returns. Three main conclusions emerge from our study. First, increasing the number of securities included in the analysis dramatically improves basis portfolio performance. Our results indicate that factor models involving 750 securities provide markedly superior performance to those involving 30 or 250 securities. Second, comparatively efficient estimation procedures such as maximum likelihood and restricted maximum likelihood factor analysis (which imposes the APT mean restriction) significantly outperform the less efficient instrumental variables and principal components procedures that have been proposed in the literature. Third, a variant of the usual Fama-MacBeth portfolio formation procedure, which we call the minimum idiosyncratic risk portfolio formation procedure, outperformed the Fama-MacBeth procedure and proved equal to or better than more expensive quadratic programming procedures.

Mutual Fund Performance Evaluation: A Comparison of Benchmarks and Benchmark Comparisons

Our primary goal in this paper is to ascertain whether the absolute and relative rankings of managed funds are sensitive to the benchmark chosen to measure normal performance. We employ the standard CAPM benchmarks and a variety of APT benchmarks to investigate this question. We found that there is little similarity between the absolute and relative mutual fund rankings obtained from alternative benchmarks which suggests the importance of knowing the appropriate model for risk and expected return in this context. In addition, the rankings are quite sensitive to the method used to construct the APT benchmark. One would reach very different conclusions about the funds' performance using smaller numbers of securities in the analysis or the less efficient methods for estimating the necessary factor models than one would arrive at using the maximum likelihood procedures with 750 securities. We did, however, find the rankings of the funds are not very sensitive to the exact number of common sources of systematic risk that are assumed to impinge on security returns. Finally, we found statistically significant measured abnormal performance using all the benchmarks. The economic explanation of this phenomenon appears to be an open question.

Challenges in the development of the orbiter radiator system

Major technical challenges which were met in the design and development of the Space Shuttle Orbiter Radiator System are discussed. This system rejects up to 30 kW of waste heat from eight individual radiators having a combined surface area of 175 sq m. The radiators, which are deployable, are mounted on the inside of the payload bay doors for protection from aerodynamic heating during ascent and re-entry. While in orbit the payload bay doors are opened to expose the radiators for operation. An R21 coolant loop accumulates waste heat from various components in the Orbiter and delivers the heat to the radiators for rejection to space. Specific challenges included high acoustically induced loads during lift-off, severe radiating area constraints, demanding heat load control requirements, and long life goals. Details of major design and analysis efforts are discussed. The success of the developed hardware in satisfying mission objectives showed how well the design challenge was met

Correlating Fourier phase information with real-space higher order statistics

We establish for the first time heuristic correlations between harmonic space phase information and higher order statistics. Using the spherical full-sky maps of the cosmic microwave background as an example we demonstrate that known phase correlations at large spatial scales can gradually be diminished when subtracting a suitable best-fit (Bianchi-) template map of given strength. The weaker phase correlations lead in turn to a vanishing signature of anisotropy when measuring the Minkowski functionals and scaling indices in real-space and comparing them with surrogate maps being free of phase correlations. Those investigations can open a new road to a better understanding of signatures of non-Gaussianities in complex spatial structures by elucidating the meaning of Fourier phase correlations and their influence on higher order statistics.Comment: 6 pages plus 1 supplemental page, 4 figures, submitte

Non-equilibrium electromagnetic fluctuations: Heat transfer and interactions

The Casimir force between arbitrary objects in equilibrium is related to scattering from individual bodies. We extend this approach to heat transfer and Casimir forces in non-equilibrium cases where each body, and the environment, is at a different temperature. The formalism tracks the radiation from each body and its scatterings by the other objects. We discuss the radiation from a cylinder, emphasizing its polarized nature, and obtain the heat transfer between a sphere and a plate, demonstrating the validity of proximity transfer approximation at close separations and arbitrary temperatures.Comment: 4 pages, 2 figures, published version, minor changes (e.g. typos

Probing non-Gaussianities in the CMB on an incomplete sky using surrogates

We demonstrate the feasibility to generate surrogates by Fourier-based methods for an incomplete data set. This is performed for the case of a CMB analysis, where astrophysical foreground emission, mainly present in the Galactic plane, is a major challenge. The shuffling of the Fourier phases for generating surrogates is now enabled by transforming the spherical harmonics into a new set of basis functions that are orthonormal on the cut sky. The results show that non-Gaussianities and hemispherical asymmetries in the CMB as identified in several former investigations, can still be detected even when the complete Galactic plane (|b| < 30{\deg}) is removed. We conclude that the Galactic plane cannot be the dominant source for these anomalies. The results point towards a violation of statistical isotropy.Comment: 9 pages, 13 figures, accepted by Physical Review

Deterministic Partial Differential Equation Model for Dose Calculation in Electron Radiotherapy

Treatment with high energy ionizing radiation is one of the main methods in modern cancer therapy that is in clinical use. During the last decades, two main approaches to dose calculation were used, Monte Carlo simulations and semi-empirical models based on Fermi-Eyges theory. A third way to dose calculation has only recently attracted attention in the medical physics community. This approach is based on the deterministic kinetic equations of radiative transfer. Starting from these, we derive a macroscopic partial differential equation model for electron transport in tissue. This model involves an angular closure in the phase space. It is exact for the free-streaming and the isotropic regime. We solve it numerically by a newly developed HLLC scheme based on [BerCharDub], that exactly preserves key properties of the analytical solution on the discrete level. Several numerical results for test cases from the medical physics literature are presented.Comment: 20 pages, 7 figure