Cross‐Section Stock Return and Implied Covariance between Jump and Diffusive Volatility

I examine the information content of option‐implied covariance between jumps and diffusive risk in the cross‐sectional variation in future returns. This paper documents that the difference between realized volatility and implied covariance (RV‐ICov) can predict future returns. The results show a significant and negative association of expected return and realized volatility–implied covariance spread in both the portfolio level analysis and cross‐sectional regression study. A trading strategy of buying a portfolio with the lowest RV‐ICov quintile portfolio and selling with the highest one generates positive and significant returns. This RV‐Cov anomaly is robust to controlling for size, book‐to‐market value, liquidity and systematic risk proportion. Copyright © 2015 John Wiley & Sons, Ltd.     

A decision rule to minimize daily capital charges in forecasting value‐at‐risk

Under the Basel II Accord, banks and other authorized deposit‐taking institutions (ADIs) have to communicate their daily risk estimates to the monetary authorities at the beginning of the trading day, using a variety of value‐at‐risk (VaR) models to measure risk. Sometimes the risk estimates communicated using these models are too high, thereby leading to large capital requirements and high capital costs. At other times, the risk estimates are too low, leading to excessive violations, so that realized losses are above the estimated risk. In this paper we analyze the profit‐maximizing problem of an ADI subject to capital requirements under the Basel II Accord as ADIs have to choose an optimal VaR reporting strategy that minimizes daily capital charges. Accordingly, we suggest a dynamic communication and forecasting strategy that responds to violations in a discrete and instantaneous manner, while adapting more slowly in periods of no violations. We apply the proposed strategy to Standard & Poor's 500 Index and show there can be substantial savings in daily capital charges, while restricting the number of violations to within the Basel II penalty limits. Copyright © 2009 John Wiley & Sons, Ltd.     

Price–Dividend Ratios and Stock Price Predictability

A long‐standing puzzle to financial economists is the difficulty of outperforming the benchmark random walk model in out‐of‐sample contests. Using data from the USA over the period of 1872–2007, this paper re‐examines the out‐of‐sample predictability of real stock prices based on price–dividend (PD) ratios. The current research focuses on the significance of the time‐varying mean and nonlinear dynamics of PD ratios in the empirical analysis. Empirical results support the proposed nonlinear model of the PD ratio and the stationarity of the trend‐adjusted PD ratio. Furthermore, this paper rejects the non‐predictability hypothesis of stock prices statistically based on in‐ and out‐of‐sample tests and economically based on the criteria of expected real return per unit of risk. Copyright © 2011 John Wiley & Sons, Ltd.     

Exploring Survey‐Based Inflation Forecasts

This paper first shows that survey‐based expectations (SBE) outperform standard time series models in US quarterly inflation out‐of‐sample prediction and that the term structure of survey‐based inflation forecasts has predictive power over the path of future inflation changes. It then proposes some empirical explanations for the forecasting success of survey‐based inflation expectations. We show that SBE pool a large amount of heterogeneous information on inflation expectations and react more flexibly and accurately to macro conditions both contemporaneously and dynamically. We illustrate the flexibility of SBE forecasts in the context of the 2008 financial crisis. Copyright © 2011 John Wiley & Sons, Ltd.     

Rad51 and DNA-PKcs are involved in the generation of specific telomere aberrations induced by the quadruplex ligand 360A that impair mitotic cell progression and lead to cell death

Functional telomeres are protected from non-homologous end-joining (NHEJ) and homologous recombination (HR) DNA repair pathways. Replication is a critical period for telomeres because of the requirement for reconstitution of functional protected telomere conformations, a process that involves DNA repair proteins. Using knockdown of DNA-PKcs and Rad51 expression in three different cell lines, we demonstrate the respective involvement of NHEJ and HR in the formation of telomere aberrations induced by the G-quadruplex ligand 360A during or after replication. HR contributed to specific chromatid-type aberrations (telomere losses and doublets) affecting the lagging strand telomeres, whereas DNA-PKcs-dependent NHEJ was responsible for sister telomere fusions as a direct consequence of G-quadruplex formation and/or stabilization induced by 360A on parental telomere G strands. NHEJ and HR activation at telomeres altered mitotic progression in treated cells. In particular, NHEJ-mediated sister telomere fusions were associated with altered metaphase-anaphase transition and anaphase bridges and resulted in cell death during mitosis or early G1. Collectively, these data elucidate specific molecular and cellular mechanisms triggered by telomere targeting by the G-quadruplex ligand 360A, leading to cancer cell death.     

The impact of cyclin-dependent kinase 5 depletion on poly(ADP-ribose) polymerase activity and responses to radiation

Cyclin-dependent kinase 5 (Cdk5) has been identified as a determinant of sensitivity to poly(ADP-ribose) polymerase (PARP) inhibitors. Here, the consequences of its depletion on cell survival, PARP activity, the recruitment of base excision repair (BER) proteins to DNA damage sites, and overall DNA single-strand break (SSB) repair were investigated using isogenic HeLa stably depleted (KD) and Control cell lines. Synthetic lethality achieved by disrupting PARP activity in Cdk5-deficient cells was confirmed, and the Cdk5^KD cells were also found to be sensitive to the killing effects of ionizing radiation (IR) but not methyl methanesulfonate or neocarzinostatin. The recruitment profiles of GFP-PARP-1 and XRCC1-YFP to sites of micro-irradiated Cdk5^KD cells were slower and reached lower maximum values, while the profile of GFP-PCNA recruitment was faster and attained higher maximum values compared to Control cells. Higher basal, IR, and hydrogen peroxide-induced polymer levels were observed in Cdk5^KD compared to Control cells. Recruitment of GFP-PARP-1 in which serines 782, 785, and 786, potential Cdk5 phosphorylation targets, were mutated to alanines in micro-irradiated Control cells was also reduced. We hypothesize that Cdk5-dependent PARP-1 phosphorylation on one or more of these serines results in an attenuation of its ribosylating activity facilitating persistence at DNA damage sites. Despite these deficiencies, Cdk5^KD cells are able to effectively repair SSBs probably via the long patch BER pathway, suggesting that the enhanced radiation sensitivity of Cdk5^KD cells is due to a role of Cdk5 in other pathways or the altered polymer levels.     

Genome-wide copy number variation study associates metabotropic glutamate receptor gene networks with attention deficit hyperactivity disorder

Attention deficit hyperactivity disorder (ADHD) is a common, heritable neuropsychiatric disorder of unknown etiology. We performed a whole-genome copy number variation (CNV) study on 1,013 cases with ADHD and 4,105 healthy children of European ancestry using 550,000 SNPs. We evaluated statistically significant findings in multiple independent cohorts, with a total of 2,493 cases with ADHD and 9,222 controls of European ancestry, using matched platforms. CNVs affecting metabotropic glutamate receptor genes were enriched across all cohorts (P = 2.1 × 10(-9)). We saw GRM5 (encoding glutamate receptor, metabotropic 5) deletions in ten cases and one control (P = 1.36 × 10(-6)). We saw GRM7 deletions in six cases, and we saw GRM8 deletions in eight cases and no controls. GRM1 was duplicated in eight cases. We experimentally validated the observed variants using quantitative RT-PCR. A gene network analysis showed that genes interacting with the genes in the GRM family are enriched for CNVs in ～10% of the cases (P = 4.38 × 10(-10)) after correction for occurrence in the controls. We identified rare recurrent CNVs affecting glutamatergic neurotransmission genes that were overrepresented in multiple ADHD cohorts.     

Common variants at MS4A4/MS4A6E, CD2AP, CD33 and EPHA1 are associated with late-onset Alzheimer's disease

The Alzheimer Disease Genetics Consortium (ADGC) performed a genome-wide association study of late-onset Alzheimer disease using a three-stage design consisting of a discovery stage (stage 1) and two replication stages (stages 2 and 3). Both joint analysis and meta-analysis approaches were used. We obtained genome-wide significant results at MS4A4A (rs4938933; stages 1 and 2, meta-analysis P (P(M)) = 1.7 × 10(-9), joint analysis P (P(J)) = 1.7 × 10(-9); stages 1, 2 and 3, P(M) = 8.2 × 10(-12)), CD2AP (rs9349407; stages 1, 2 and 3, P(M) = 8.6 × 10(-9)), EPHA1 (rs11767557; stages 1, 2 and 3, P(M) = 6.0 × 10(-10)) and CD33 (rs3865444; stages 1, 2 and 3, P(M) = 1.6 × 10(-9)). We also replicated previous associations at CR1 (rs6701713; P(M) = 4.6 × 10(-10), P(J) = 5.2 × 10(-11)), CLU (rs1532278; P(M) = 8.3 × 10(-8), P(J) = 1.9 × 10(-8)), BIN1 (rs7561528; P(M) = 4.0 × 10(-14), P(J) = 5.2 × 10(-14)) and PICALM (rs561655; P(M) = 7.0 × 10(-11), P(J) = 1.0 × 10(-10)), but not at EXOC3L2, to late-onset Alzheimer's disease susceptibility.     

Forecasting economic indicators using a consumer sentiment index: Survey‐based versus text‐based data

Given the confirmed effectiveness of the survey‐based consumer sentiment index (CSI) as a leading indicator of real economic conditions, the CSI is actively used in making policy judgments and decisions in many countries. However, although the CSI offers qualitative information for presenting current conditions and predicting a household's future economic activity, the survey‐based method has several limitations. In this context, we extracted sentiment information from online economic news articles and demonstrated that the Korean cases are a good illustration of applying a text mining technique when generating a CSI using sentiment analysis. By applying a simple sentiment analysis based on the lexicon approach, this paper confirmed that news articles can be an effective source for generating an economic indicator in Korea. Even though cross‐national comparative research results are suited better than national‐level data to generalize and verify the method used in this study, international comparisons are quite challenging to draw due to the necessary linguistic preprocessing. We hope to encourage further cross‐national comparative research to apply the approach proposed in this study.     

The impact of parameter and model uncertainty on market risk predictions from GARCH‐type models

We study the effect of parameter and model uncertainty on the left‐tail of predictive densities and in particular on VaR forecasts. To this end, we evaluate the predictive performance of several GARCH‐type models estimated via Bayesian and maximum likelihood techniques. In addition to individual models, several combination methods are considered, such as Bayesian model averaging and (censored) optimal pooling for linear, log or beta linear pools. Daily returns for a set of stock market indexes are predicted over about 13 years from the early 2000s. We find that Bayesian predictive densities improve the VaR backtest at the 1% risk level for single models and for linear and log pools. We also find that the robust VaR backtest exhibited by linear and log pools is better than the backtest of single models at the 5% risk level. Finally, the equally weighted linear pool of Bayesian predictives tends to be the best VaR forecaster in a set of 42 forecasting techniques.