Bayesian Methods for Improving Credit Scoring Models

We propose a Bayesian methodology that enables banks to improve their credit scoring models by imposing prior information. As prior information, we use coefficients from credit scoring models estimated on other data sets. Through simulations, we explore the default prediction power of three Bayesian estimators in three different scenarios and find that they perform better than standard maximum likelihood estimates. We recommend that banks consider Bayesian estimation for internal and regulatory default prediction models.Credit Scoring, Bayesian Inference, Bankruptcy Prediction

How do Rating Agencies Score in Predicting Firm Performance

We use dynamic panel analysis to examine whether credit rating agencies achieve what they claim to achieve, namely, look into the future when assigning their ratings. We find that Moody's ratings help predict individual financial ratios over a horizon of up to five years. Ratings also predict a multivariate credit score, again over five years. The contribution of ratings appears to be economically significant and robust for different specifications.Credit Ratings, Predictive ability, Dynamic Panel Model.

Predatory short sales and bailouts

This paper extends the literature on predatory short selling and bailouts through a joint analysis of the two. We consider a model with informed short sales, as well as uninformed predatory short sales, which can trigger the inefficient liquidation of a firm. We obtain several novel results: A government commitment to bail out insolvent firms with positive probability can increase welfare because it selectively deters predatory short selling without hampering desirable informed short sales. Contrasting a common view, bailouts can be optimal ex ante but undesirable ex post. Furthermore, bailouts in our model are a better policy tool than short selling restrictions. Welfare gains from the bailout policy are unevenly distributed: shareholders gain while taxpayers lose. Bailout taxes allow ex-ante Pareto improvements

Asymmetry and performance metrics for equity returns

An assumption of symmetric asset returns, together with globally risk averse utility functions, is unappealing for fund managers and other activist investors, whose preferences switch between risk aversion on the downside and risk seeking on the upside. A performance return criterion is originated that is more consistent with the implicit Friedman-Savage utility ordering. Adapted from recent developments in the income distribution literature, the proposed metric weights the lower versus upper conditional expected returns, while a dual spread or dispersion metric also exists. The resulting performance metric is easy to compute. A point of departure is the conventional Sharpe performance ratio, with the empirical comparisons extending to a range of existing performance criteria. In contrast, the proposed W-metric results in different and more embracing performance rankings

Aluminum-, Calcium- And Titanium-Rich Oxide Stardust In Ordinary Chondrite Meteorites

We report isotopic data for a total of 96 presolar oxide grains found in residues of several unequilibrated ordinary chondrite meteorites. Identified grain types include Al2O3, MgAl2O4, hibonite (CaAl12O19) and Ti oxide. This work greatly increases the presolar hibonite database, and is the first report of presolar Ti oxide. O-isotopic compositions of the grains span previously observed ranges and indicate an origin in red giant and asymptotic giant branch (AGB) stars of low mass (<2.5 MSun) for most grains. Cool bottom processing in the parent AGB stars is required to explain isotopic compositions of many grains. Potassium-41 enrichments in hibonite grains are attributable to in situ decay of now-extinct 41Ca. Inferred initial 41Ca/40Ca ratios are in good agreement with model predictions for low-mass AGB star envelopes, provided that ionization suppresses 41Ca decay. Stable Mg and Ca isotopic ratios of most of the hibonite grains reflect primarily the initial compositions of the parent stars and are generally consistent with expectations for Galactic chemical evolution, but require some local interstellar chemical inhomogeneity. Very high 17O/16O or 25Mg/24Mg ratios suggest an origin for some grains in binary star systems where mass transfer from an evolved companion has altered the parent star compositions. A supernova origin for the hitherto enigmatic 18O-rich Group 4 grains is strongly supported by multi-element isotopic data for two grains. The Group 4 data are consistent with an origin in a single supernova in which variable amounts of material from the deep 16O-rich interior mixed with a unique end-member mixture of the outer layers. The Ti oxide grains primarily formed in low-mass AGB stars. They are smaller and rarer than presolar Al2O3, reflecting the lower abundance of Ti than Al in AGB envelopes.Comment: Accepted for publication in ApJ; 47 pages, 13 figure

Common Variation in ISL1 Confers Genetic Susceptibility for Human Congenital Heart Disease

Congenital heart disease (CHD) is the most common birth abnormality and the etiology is unknown in the overwhelming majority of cases. ISLET1 (ISL1) is a transcription factor that marks cardiac progenitor cells and generates diverse multipotent cardiovascular cell lineages. The fundamental role of ISL1 in cardiac morphogenesis makes this an exceptional candidate gene to consider as a cause of complex congenital heart disease. We evaluated whether genetic variation in ISL1 fits the common variant–common disease hypothesis. A 2-stage case-control study examined 27 polymorphisms mapping to the ISL1 locus in 300 patients with complex congenital heart disease and 2,201 healthy pediatric controls. Eight genic and flanking ISL1 SNPs were significantly associated with complex congenital heart disease. A replication study analyzed these candidate SNPs in 1,044 new cases and 3,934 independent controls and confirmed that genetic variation in ISL1 is associated with risk of non-syndromic congenital heart disease. Our results demonstrate that two different ISL1 haplotypes contribute to risk of CHD in white and black/African American populations

Weekends affect mortality risk and chance of discharge in critically ill patients: a retrospective study in the Austrian registry for intensive care.

BACKGROUND: In this study, we primarily investigated whether ICU admission or ICU stay at weekends (Saturday and Sunday) is associated with a different risk of ICU mortality or chance of ICU discharge than ICU admission or ICU stay on weekdays (Monday to Friday). Secondarily, we analysed whether weekend ICU admission or ICU stay influences risk of hospital mortality or chance of hospital discharge. METHODS: A retrospective study was performed for all adult patients admitted to 119 ICUs participating in the benchmarking project of the Austrian Centre for Documentation and Quality Assurance in Intensive Care (ASDI) between 2012 and 2015. Readmissions to the ICU during the same hospital stay were excluded. RESULTS: In a multivariable competing risk analysis, a strong weekend effect was observed. Patients admitted to ICUs on Saturday or Sunday had a higher mortality risk after adjustment for severity of illness by Simplified Acute Physiology Score (SAPS) 3, year, month of the year, type of admission, ICU, and weekday of death or discharge. Hazard ratios (95% confidence interval) for death in the ICU following admission on a Saturday or Sunday compared with Wednesday were 1.15 (1.08-1.23) and 1.11 (1.03-1.18), respectively. Lower hazard ratios were observed for dying on a Saturday (0.93 (0.87-1.00)) or Sunday (0.85 (0.80-0.91)) compared with Wednesday. This is probably related to the reduced chance of being discharged from the ICU at the weekend (0.63 (0.62-064) for Saturday and 0.56 (0.55-0.57) for Sunday). Similar results were found for hospital mortality and hospital discharge following ICU admission. CONCLUSIONS: Patients admitted to ICUs at weekends are at increased risk of death in both the ICU and the hospital even after rigorous adjustment for severity of illness. Conversely, death in the ICU and discharge from the ICU are significantly less likely at weekends

Food Searching Strategy of Amoeboid Cells by Starvation Induced Run Length Extension

Food searching strategies of animals are key to their success in heterogeneous environments. The optimal search strategy may include specialized random walks such as Levy walks with heavy power-law tail distributions, or persistent walks with preferred movement in a similar direction. We have investigated the movement of the soil amoebae Dictyostelium searching for food. Dictyostelium cells move by extending pseudopodia, either in the direction of the previous pseudopod (persistent step) or in a different direction (turn). The analysis of ∼4000 pseudopodia reveals that step and turn pseudopodia are drawn from a probability distribution that is determined by cGMP/PLA2 signaling pathways. Starvation activates these pathways thereby suppressing turns and inducing steps. As a consequence, starved cells make very long nearly straight runs and disperse over ∼30-fold larger areas, without extending more or larger pseudopodia than vegetative cells. This ‘win-stay/lose-shift’ strategy for food searching is called Starvation Induced Run-length Extension. The SIRE walk explains very well the observed differences in search behavior between fed and starving organisms such as bumble-bees, flower bug, hoverfly and zooplankton