On the limitations of comparing mean square forecast errors

Linear models are invariant under non-singular, scale-preserving linear transformations, whereas mean square forecast errors (MSFEs) are not. Different rankings may result across models or methods from choosing alternative yet isomorphic representations of a process. One approach can dominate others for comparisons in levels, yet lose to another for differences, to a second for cointegrating vectors and to a third for combinations of variables. The potential for switches in ranking is related to criticisms of the inadequacy of MSFE against encompassing criteria, which are invariant under linear transforms and entail MSFE dominance. An invariant evaluation criterion which avoids misleading outcomes is examined in a Monte Carlo study of forecasting methods.     

Combining multivariate volatility forecasts using weighted losses

The ability to improve out-of-sample forecasting performance by combining forecasts is well established in the literature. This paper advances this literature in the area of multivariate volatility forecasts by developing two combination weighting schemes that exploit volatility persistence to emphasise certain losses within the combination estimation period. A comprehensive empirical analysis of the out-of-sample forecast performance across varying dimensions, loss functions, sub-samples and forecast horizons show that new approaches significantly outperform their counterparts in terms of statistical accuracy. Within the financial applications considered, significant benefits from combination forecasts relative to the individual candidate models are observed. Although the more sophisticated combination approaches consistently rank higher relative to the equally weighted approach, their performance is statistically indistinguishable given the relatively low power of these loss functions. Finally, within the applications, further analysis highlights how combination forecasts dramatically reduce the variability in the parameter of interest, namely the portfolio weight or beta.     

A somitic Wnt16/Notch pathway specifies haematopoietic stem cells

Haematopoietic stem cells (HSCs) are a self-renewing population of cells that continuously replenish all blood and immune cells during the lifetime of an individual. HSCs are used clinically to treat a wide array of diseases, including acute leukaemias and congenital blood disorders, but obtaining suitable numbers of cells and finding immune-compatible donors remain serious problems. These difficulties have led to an interest in the conversion of embryonic stem cells or induced pluripotent stem cells into HSCs, which is not possible using current methodologies. To accomplish this goal, it is critical to understand the native mechanisms involved in the specification of HSCs during embryonic development. Here we demonstrate in zebrafish that Wnt16 controls a novel genetic regulatory network required for HSC specification. Non-canonical signalling by Wnt16 is required for somitic expression of the Notch ligands deltaC (dlc) and deltaD (dld), and these ligands are, in turn, required for the establishment of definitive haematopoiesis. Notch signalling downstream of Dlc and Dld is earlier than, and distinct from, known cell-autonomous requirements for Notch, strongly suggesting that novel Notch-dependent relay signal(s) induce the first HSCs in parallel to other established pathways. Our results demonstrate that somite-specific gene expression is required for the production of haemogenic endothelium.     

A new mechanism for induced vitamin D deficiency in calcium deprivation

Synthesis of vitamin D in the skin in response to ultraviolet light is the main determinant of vitamin D status in man and it is therefore surprising that rickets and osteomalacia, clinical signs of vitamin D deficiency, remain common in tropical and subtropical countries. Skin pigmentation can reduce vitamin D formation but this is a negligible limitation in people exposed to abundant ultraviolet light. Earlier studies in animals and man suggested that another environmental factor, the low calcium/high cereal diet typical of susceptible populations, might affect the efficiency of vitamin D utilization. We show here in rats that the rate of inactivation of vitamin D in the liver is increased by calcium deprivation. The effect is mediated by 1,25-dihydroxyvitamin D, produced in response to secondary hyperparathyroidism, which promotes hepatic conversion of vitamin D to polar inactivation products that are excreted in bile. This finding has widespread implications both for understanding the pathogenesis of endemic rickets and in that it provides a unifying mechanism for the development of vitamin D deficiency in many clinical disorders.     

The suppression of star formation by powerful active galactic nuclei

The old, red stars that constitute the bulges of galaxies, and the massive black holes at their centres, are the relics of a period in cosmic history when galaxies formed stars at remarkable rates and active galactic nuclei (AGN) shone brightly as a result of accretion onto black holes. It is widely suspected, but unproved, that the tight correlation between the mass of the black hole and the mass of the stellar bulge results from the AGN quenching the surrounding star formation as it approaches its peak luminosity. X-rays trace emission from AGN unambiguously, whereas powerful star-forming galaxies are usually dust-obscured and are brightest at infrared and submillimetre wavelengths. Here we report submillimetre and X-ray observations that show that rapid star formation was common in the host galaxies of AGN when the Universe was 2-6 billion years old, but that the most vigorous star formation is not observed around black holes above an X-ray luminosity of 10(44) ergs per second. This suppression of star formation in the host galaxy of a powerful AGN is a key prediction of models in which the AGN drives an outflow, expelling the interstellar medium of its host and transforming the galaxy's properties in a brief period of cosmic time.     

Moving beyond Volatility Index (VIX): HARnessing the term structure of implied volatility

This paper considers how information from the implied volatility (IV) term structure can be harnessed to improve stock return volatility forecasting within the state-of-the-art HAR model. Factors are extracted from the IV term structure and included as exogenous variables in the HAR framework. We found that including slope and curvature factors leads to significant forecast improvements over the HAR benchmark at a range of forecast horizons, compared with the standard HAR model and HAR model with VIX as IV information set.     

Channel kinetics determine the time course of NMDA receptor-mediated synaptic currents

Synaptic release of glutamate results in a two component excitatory postsynaptic current (e.p.s.c.) at many vertebrate central synapses. Non-N-methyl-D-aspartate receptors mediate a component that has a rapid onset and decay while the component mediated by N-methyl-D-aspartate (NMDA) receptors has a slow rise-time and a decay of several hundred milliseconds, 100 times longer than the mean open time of NMDA channels. The slow decay of the NMDA-mediated e.p.s.c. could be due to residual glutamate in the synaptic cleft resulting in repeated binding and activation of NMDA receptors. However, in cultured hippocampal neurons, we find that the NMDA receptor antagonist D-2-amino-5-phosphonopentanoate has no effect on the slow e.p.s.c. when rapidly applied after activation of the synapse, suggesting that rebinding of glutamate does not occur. In addition, a brief pulse of glutamate to an outside-out membrane patch results in openings of NMDA channels that persist for hundreds of milliseconds, indicating that glutamate can remain bound for this period. These results imply that a brief pulse of glutamate in the synaptic cleft is sufficient to account for the slow e.p.s.c.     

A gene-driven approach to the identification of ENU mutants in the mouse

The construction of parallel archives of DNA and sperm from mice mutagenized with ethylnitrosurea (ENU) represents a potentially powerful and rapid approach for identifying point mutations in any gene in the mouse genome. We provide support for this approach and report the identification of mutations in the gene (Gjb2) encoding connexin 26, using archives established from the UK ENU mutagenesis program.