Dynamic modeling of mean-reverting spreads for statistical arbitrage

Statistical arbitrage strategies, such as pairs trading and its generalizations, rely on the construction of mean-reverting spreads enjoying a certain degree of predictability. Gaussian linear state-space processes have recently been proposed as a model for such spreads under the assumption that the observed process is a noisy realization of some hidden states. Real-time estimation of the unobserved spread process can reveal temporary market inefficiencies which can then be exploited to generate excess returns. Building on previous work, we embrace the state-space framework for modeling spread processes and extend this methodology along three different directions. First, we introduce time-dependency in the model parameters, which allows for quick adaptation to changes in the data generating process. Second, we provide an on-line estimation algorithm that can be constantly run in real-time. Being computationally fast, the algorithm is particularly suitable for building aggressive trading strategies based on high-frequency data and may be used as a monitoring device for mean-reversion. Finally, our framework naturally provides informative uncertainty measures of all the estimated parameters. Experimental results based on Monte Carlo simulations and historical equity data are discussed, including a co-integration relationship involving two exchange-traded funds.Comment: 34 pages, 6 figures. Submitte

Attentional WM is not necessarily specifically related with fluid intelligence: the case of smart children with ADHD symptoms.

Executive functions and, in particular, Attentional (active) Working Memory (WM) have been associated with fluid intelligence. The association contrasts with the hypothesis that children with ADHD exhibit problems with WM tasks requiring controlled attention and may have a good fluid intelligence. This paper examines whether children who are intelligent but present ADHD symptoms fail in attentional WM tasks. The latter result would be problematic for theories assuming the generality of a strict relationship between intelligence and WM. To study these issues, a battery of tests was administered to a group of 58 children who all displayed symptoms of ADHD. All children were between the age of 8 and 11 years, and were described by their teachers as smart. Children were compared to a control group matched for age, schooling, and gender. The battery included a test of fluid intelligence (Raven's Coloured Matrices), and a series of visuospatial WM tasks. Results showed that children with ADHD were high in intelligence but significantly lower than the controls in WM tasks requiring high attentional control, whereas there was no difference in WM tasks requiring low attentional control. Furthermore, only high attentional control WM tasks were significantly related to Raven's performance in the control group, whereas all WM tasks were similarly related in the ADHD group. It is concluded that performance in high attentional control WM tasks may be related to fluid intelligence, but also to a specific control component that is independent of intelligence and is poor in children with ADHD

Interactions Between Policy Effects, Population Characteristics and the Tax-Benefit System: An Illustration Using Child Poverty and Child Related Policies in Romania and the Czech Republic

We investigate the impact of the Romanian and Czech family policy systems on the poverty risk of families with children. We focus on separating out the effects of policy design itself and size of benefits from the interaction between policies and population characteristics. We find that interactions between population characteristics, the wider tax benefit system and child related policies are pervasive and large. Both population characteristics and the wider tax-benefit environment can dramatically alter the antipoverty effect of a given set of policies

Failure of Working Memory Training to Enhance Cognition or Intelligence

Fluid intelligence is important for successful functioning in the modern world, but much evidence suggests that fluid intelligence is largely immutable after childhood. Recently, however, researchers have reported gains in fluid intelligence after multiple sessions of adaptive working memory training in adults. The current study attempted to replicate and expand those results by administering a broad assessment of cognitive abilities and personality traits to young adults who underwent 20 sessions of an adaptive dual n-back working memory training program and comparing their post-training performance on those tests to a matched set of young adults who underwent 20 sessions of an adaptive attentional tracking program. Pre- and post-training measurements of fluid intelligence, standardized intelligence tests, speed of processing, reading skills, and other tests of working memory were assessed. Both training groups exhibited substantial and specific improvements on the trained tasks that persisted for at least 6 months post-training, but no transfer of improvement was observed to any of the non-trained measurements when compared to a third untrained group serving as a passive control. These findings fail to support the idea that adaptive working memory training in healthy young adults enhances working memory capacity in non-trained tasks, fluid intelligence, or other measures of cognitive abilities.National Institutes of Health (U.S.) (Blueprint for Neuroscience Research (T90DA022759/R90DA023427)United States. Defense Advanced Research Projects Agency (government contract no. NBCHC070105)United States. Dept. of Defense (National Defense Science and Engineering Fellowship)Massachusetts Institute of Technology (Sheldon Razin (1959) Fellowship

What explains Cambodia’s success in reducing child stunting-2000-2014?

In many developing countries, high levels of child undernutrition persist alongside rapid economic growth. There is considerable interest in the study of countries that have made rapid progress in child nutrition to uncover the driving forces behind these improvements. Cambodia is often cited as a success case having reduced the incidence of child stunting from 51% to 34% over the period 2000 to 2014. To what extent is this success driven by improvements in the underlying determinants of nutrition, such as wealth and education, (“covariate effects”) and to what extent by changes in the strengths of association between these determinants and nutrition outcomes (“coefficient effects”)? Using determinants derived from the widely-applied UNICEF framework for the analysis of child nutrition and data from four Demographic and Health Surveys datasets, we apply quantile regression based decomposition methods to quantify the covariate and coefficient effect contributions to this improvement in child nutrition. The method used in the study allows the covariate and coefficient effects to vary across the entire distribution of child nutrition outcomes. There are important differences in the drivers of improvements in child nutrition between severely stunted and moderately stunted children and between rural and urban areas. The translation of improvements in household endowments, characteristics and practices into improvements in child nutrition (the coefficient effects) may be influenced by macroeconomic shocks or other events such as natural calamities or civil disturbance and may vary substantially over different time periods. Our analysis also highlights the need to explicitly examine the contribution of targeted child health and nutrition interventions to improvements in child nutrition in developing countries

Rising Great Plains fire campaign: Citizens' response to woody plant encroachment

Despite years of accumulating scientific evidence that fire is critical for maintaining the structure and function of grassland ecosystems in the US Great Plains, fire has not been restored as a fundamental grassland process across broad landscapes. The result has been widespread juniper encroachment and the degradation of the multiple valuable ecosystem services provided by grasslands. Here, we review the social-ecological causes and consequences of the transformation of grasslands to juniper woodlands and synthesize the recent emergence of prescribed burn cooperatives, an extensive societal movement by private citizens to restore fire to the Great Plains biome. We discuss how burn cooperatives have helped citizens overcome dominant social constraints that limit the application of prescribed fire to improve management of encroaching woody plants in grasslands. These constraints include the generally held assumptions and political impositions that all fires should be eliminated when wildfire danger increases.Peer reviewedNatural Resource Ecology and Managemen