Behavioural Finance, Options Markets and Financial Crises: Application to the UK Market 1998-2010

Behavioural Finance, Options Markets and Financial Crises: Application to the UK Market 1998-2010 By Ian Alan Whitfield Abstract This thesis examines the relationship between behavioural finance and options markets. Particular focus is on the analysis of option prices, implied volatility and trading activity which in turn provides insights into predictability, momentum and overreaction. The thesis is contextualised by a general to specific evaluation of the literature that forms the basis of the behavioural finance paradigm. The review is extended to analyse the extent to which support for the behavioural finance approach has been produced by research on options. Behavioural finance retains an element of controversy as it runs counter to a key pillar of neoclassical finance, the efficient markets hypothesis. Hence the onus is on researchers in this field to produce evidence that refutes the notion of market efficiency and to build models with testable implications that are better able to capture the mechanics of financial markets. This thesis is motivated by a desire to investigate, in detail, key aspects of human behaviour and to test whether they are particularly apparent in options markets. It is important to study the information which can be extracted from options data and to analyse whether this has any predictive power for spot prices. By extension, it is of further interest to examine whether movements in spot prices exert influence on option prices. In particular, aspects of options that capture human behaviour such as pricing of puts relative to calls, implied volatility, trading volume and open interest. The topical relevance of the work is highlighted by thorough application to the UK market during two recent periods of intense financial turbulence; the bursting of the dotcom bubble in 2001 and the liquidity/banking crisis of 2007/8. The empirical work examines the pricing of exchange-traded options relative to theoretical values, the forecasting performance of implied volatility indexes, the ability of trading volume and open interest to capture behavioural aspects of trading behaviour, and momentum and overreaction effects. Hence the work provides a unique and thorough investigation into behavioural finance and options markets in the UK. Results indicate an important role for investor sentiment although they do not necessarily indicate exploitable inefficiencies

Ichthyological Bulletin of the J.L.B. Smith Institute of Ichthyology; No. 57

The recruitment of juvenile marine fishes into the Knysna and Swartvlei estuaries was monitored over 30 months using seine, scoop and cast nets. The relative abundance, seasonality and growth of the dominant species are presented, and includes the Cape stumpnose Rhabdosargus holubi, white steenbras Lithognathus lithognathus, blacktail Diplodus sargus, strepie Sarpa salpa, Cape moony Monodactylus falciformis, southern mullet Liza richardsonii, groovy mullet Liza dumerilii, striped mullet Liza tricuspidens, flathead mullet Mugil cephalus, freshwater mullet Myxus capensis and leervis Lichia amia. Information on a further 12 species is also provided. Recruitment of most fish species into the Swartvlei and Knysna estuaries reaches a peak during summer, which coincides with maximum food resource availability and corresponds to the time when systems along this section of the coast are often open to the sea. Artificial winter breaching of the Swartvlei mouth has occurred in the past, and has generally led to the premature closure of the system and loss of the ‘head’ of water needed for the summer opening. This type of mouth manipulation leads to reduced availability of estuarine nursery areas for marine fishes along the southern Cape coast. Comparisons between the recruitment of juvenile fishes into the Knysna and Swartvlei estuaries indicate that higher densities of most species were recorded in the former system. This is attributed mainly to the fact that the Knysna mouth is deep, permanently open, and has a strong marine influence when compared to the shallow, narrow and seasonally closed Swartvlei mouth. However, in a regional context both Knysna and Swartvlei are large, unpolluted systems, which serve as important nursery areas for many species of fish. On this basis alone, these contrasting estuarine systems should be allocated the highest possible conservation status.Rhodes University Libraries (Digitisation

Ecoengineering with Ecohydrology: Successes and failures in estuarine restoration

© 2016 Elsevier Ltd. Ecological Engineering (or Ecoengineering) is increasingly used in estuaries to re-create and restore ecosystems degraded by human activities, including reduced water flow or land poldered for agricultural use. Here we focus on ecosystem recolonization by the biota and their functioning and we separate Type A Ecoengineering where the physico-chemical structure is modified on the basis that ecological structure and functioning will then follow, and Type B Ecoengineering where the biota are engineered directly such as through restocking or replanting. Modifying the physical system to create and restore natural processes and habitats relies on successfully applying Ecohydrology, where suitable physical conditions, especially hydrography and sedimentology, are created to recover estuarine ecology by natural or human-mediated colonisation of primary producers and consumers, or habitat creation. This successional process then allows wading birds and fish to reoccupy the rehabilitated areas, thus restoring the natural food web and recreating nursery areas for aquatic biota. We describe Ecohydrology principles applied during Ecoengineering restoration projects in Europe, Australia, Asia, South Africa and North America. These show some successful and sustainable approaches but also others that were less than successful and not sustainable despite the best of intentions (and which may even have harmed the ecology). Some schemes may be 'good for the ecologists', as conservationists consider it successful that at least some habitat was created, albeit in the short-term, but arguably did little for the overall ecology of the area in space or time. We indicate the trade-offs between the short- and long-term value of restored and created ecosystems, the success at developing natural structure and functioning in disturbed estuaries, the role of this in estuarine and wetland management, and the costs and benefits of Ecoengineering to the socio-ecological system. These global case studies provide important lessons for both the science and management of estuaries, including that successful estuarine restoration is a complex and often difficult process, and that Ecoengineering with Ecohydrology aims to control and/or simulate natural ecosystem processes

Quantum Computing for Molecular Energy Simulations

Over the last century, a large number of physical and mathematical developments paired with rapidly advancing technology have allowed the field of quantum chemistry to advance dramatically. However, the lack of computationally efficient methods for the exact simulation of quantum systems on classical computers presents a limitation of current computational approaches. We report, in detail, how a set of pre-computed molecular integrals can be used to explicitly create a quantum circuit, i.e. a sequence of elementary quantum operations, that, when run on a quantum computer, to obtain the energy of a molecular system with fixed nuclear geometry using the quantum phase estimation algorithm. We extend several known results related to this idea and discuss the adiabatic state preparation procedure for preparing the input states used in the algorithm. With current and near future quantum devices in mind, we provide a complete example using the hydrogen molecule, of how a chemical Hamiltonian can be simulated using a quantum computer.Chemistry and Chemical Biolog

Quantum Stochastic Walks: A Generalization of Classical Random Walks and Quantum Walks

We introduce the quantum stochastic walk (QSW), which determines the evolution of a generalized quantum-mechanical walk on a graph that obeys a quantum stochastic equation of motion. Using an axiomatic approach, we specify the rules for all possible quantum, classical, and quantum-stochastic transitions from a vertex as defined by its connectivity. We show how the family of possible QSWs encompasses both the classical random walk (CRW) and the quantum walk (QW) as special cases but also includes more general probability distributions. As an example, we study the QSW on a line and the glued tree of depth three to observe the behavior of the QW-to-CRW transition.Chemistry and Chemical Biolog

Comparison of different trap designs for capture of noctuid moths (Lepidoptera: Noctuidae) with pheromone and floral odor attractants

Six trap designs were assessed for capturing noctuid moths in field trials in the UK and Argentina. The traps were baited with either a sex pheromone for Autographa gamma in the UK trials and Helicoverpa gelotopoeon in Argentina, or a floral odor blend. In the UK trials the Universal Trap and a funnel sleeve trap were compared; in Argentina the funnel sleeve trap, a homemade bucket trap, and three sticky traps: LepTrap, wing trap, and delta trap were compared. Comparisons were made between the traps and attractants and captures of noctuid moths and non-target insects. Traps baited with the floral attractant caught a lower number but a wider range of noctuid species including Helicoverpa, Spodoptera, Rachiplusia, Dargida, Mythimna, Chrysodeixis, Agrotis, and Autographa spp, and non-target insects. In the UK trials, the funnel sleeve trap caught significantly more A. gamma than the Universal Trap. The addition of an insecticide to the Universal Trap marginally increased trap catches. In the Argentinian trials, the homemade bucket and the sleeve traps outperformed all sticky traps in most situations regardless of crop environment and attractant type. The homemade bucket and the funnel sleeve traps are also considerably cheaper than the other trap designs. Of the sticky traps the LepTrap caught more noctuids than the wing and delta traps. The results suggest that the bucket trap and the sleeve trap have a much greater maximum capacity and possibly a greater retention efficiency for noctuid moths compared to the sticky traps

Computational Complexity of Time-Dependent Density Functional Theory

Time-dependent density functional theory (TDDFT) is rapidly emerging as a premier method for solving dynamical many-body problems in physics and chemistry. The mathematical foundations of TDDFT are established through the formal existence of a fictitious non-interacting system (known as the Kohn–Sham system), which can reproduce the one-electron reduced probability density of the actual system. We build upon these works and show that on the interior of the domain of existence, the Kohn–Sham system can be efficiently obtained given the time-dependent density. We introduce a V-representability parameter which diverges at the boundary of the existence domain and serves to quantify the numerical difficulty of constructing the Kohn–Sham potential. For bounded values of V-representability, we present a polynomial time quantum algorithm to generate the time-dependent Kohn–Sham potential with controllable error bounds.Chemistry and Chemical Biolog

Biological responses to a resumption in river flow in a freshwaterdeprived, permanently open Southern African estuary

The Kariega Estuary is a freshwater-deprived system due to numerous impoundments in the catchment. This system has had little or no horizontal salinity gradient over the last 15 years, with hypersaline conditions sometimes predominating in the upper reaches. Following high rainfall events in the catchment during the spring of 2006, including a flood event (approximate 1:10 year) in August 2006, a series of riverine pulses entered the estuary and a horizontal salinity gradient was established. This study examined the influence of this freshwater pulse on four components of the biota within the estuary, namely the zooplankton, and larval, littoral and demersal fishes. The study demonstrated that in three of these components elevated densities were recorded following the riverine input, with only the littoral fishes retaining an almost constant density. In addition, changes in the relative contributions of the estuarine utilisation classes for all three fish groups examined indicated that freshwater input into these systems positively influences the abundances. This has significant implications for water managers as it demonstrates the importance of an Ecological Reserve (defined as ‘the water required to protect the aquatic ecosystems of the water resource’) for this system.Keywords: biotic response, freshwater pulse, river inflow, Kariega Estuar

Ichthyological Bulletin J.L.B. Smith Institute of Ichthyology; No. 64

The fishes of three small Natal estuaries, the Mhlanga, Damba and Zotsha were sampled over a period of two years. A total of 68 fish taxa representing 24 families, 39 genera and 55 species were captured during this study. Forty seven fish taxa were recorded in the Mhlanga estuary of which Gilchristella aestuaria, Oreochromis mossambicus, Valamugil cunnesius, Valamugil sp. and juvenile mugilids numerically dominated. In terms of biomass, O. mossambicus, V. cunnesius, Liza alata, Myxus capensis and Mugil cephalus dominated the ichthyofauna of the Mhlanga system. In the Damba estuary, 24 fish taxa were recorded, the most abundant being Glossogobius callidus,M. capensis and 0. mossambicus. M. capensis, M. cephalus, O. mossambicus and G. callidus dominated the fish biomass captured in the Damba system. A total of 56 fish taxa were recorded in the Zotsha estuary during this study, with the ichthyofauna numerically dominated by juvenile mugilids, G. aestuaria, O. mossambicus, Rhabdosargus holubi, Terapon jarbua, Ambassis productus and G. callidus. The species which dominated the fish biomass in the Zotsha system were 0. mossambicus L. alata, Valamugil robustus, V. buchanani, M. capensis, M. cephalus and V. cunnesius. Classifying the species according to whether they were resident estuarine, freshwater, estuarine-dependent marine or marine species revealed that the first three groups were all well represented in the systems. Oreochromis mossambicus was the dominant freshwater species in all three estuaries. Gilchristella aestuaria and Glossogobius callidus were the principal estuarine species in the Mhlanga and the Damba respectively, with G. aestuaria, A. productus and G. callidus being the dominant estuarine species captured in the Zotsha. The principal estuarine-dependent marine fishes captured in the Mhlanga were V. cunnesius, Valamugil sp., juvenile mugilids, M. capensis, M. cephalus and L. alata. In the Damba, M. capensis and M. cephalus were the dominant estuarine-dependent marine species and in the Zotsha juvenile mugilids, R. holubi, T. jarbua, M. capensis, V. cunnesius, V. robustus, M. cephalus, L. alata and V. buchanani were the principal estuarine-dependent marine species. The results of this study indicate that the estuaries are dominated at different periods by different assemblages of fishes. This is linked to the spawning and migration patterns of the various species as well as the hydrological regime of each estuary. During the winter these systems are normally closed with relatively deep waters and high food resource and habitat availability. Freshwater and estuarine species mainly inhabit the upper reaches of the systems while estuarine-dependent marine species, which dominate the fish community, mainly occupy the middle and lower reaches. When these estuaries open with the onset of the spring/summer rains, adult and sub-adult estuarine-dependent marine species emigrate to the marine environment and juveniles begin recruiting into the systems. Spring is also the peak breeding period of resident estuarine and freshwater species, resulting in an increase in the contribution of these fishes to the overall ichthyofauna during this period. When closed estuaries open the water level falls and this results in the fishes concentrating in the lower reaches of the system where moderate water depths are present, thus further contributing to an increase in the proportion of freshwater and estuarine species in this region. The breaching of closed estuaries also results in a reduction in food resources and habitat availability. Competition and possible increased vulnerability to avian predation (due to the shallow nature of the systems), may contribute to a decrease in the proportion of estuarine and freshwater species in summer. The prolonged recruitment of Of-juveniles of estuarine-dependent marine species results in an increase in the proportion of these fishes present in the estuaries during summer. In autumn, the systems normally close, water levels rise and available food resources and habitat increase. This allows the redistribution of freshwater and estuarine species upstream, leaving estuarine-dependent marine species to dominate the middle and lower reaches. Although temporarily open/closed estuaries along the Natal coast may not be as diverse as permanently open estuaries in terms of their ichthyofauna, their importance must not be underestimated, since by providing a series of sheltered habitats along the coast they may contribute significantly to the viability of estuarine-dependent marine fish stocks.Rhodes University Libraries (Digitisation