Robustness of alternative non‐linearity tests for SETAR models

In recent years there has been a growing interest in exploiting potential forecast gains from the non‐linear structure of self‐exciting threshold autoregressive (SETAR) models. Statistical tests have been proposed in the literature to help analysts check for the presence of SETAR‐type non‐linearities in an observed time series. It is important to study the power and robustness properties of these tests since erroneous test results might lead to misspecified prediction problems. In this paper we investigate the robustness properties of several commonly used non‐linearity tests. Both the robustness with respect to outlying observations and the robustness with respect to model specification are considered. The power comparison of these testing procedures is carried out using Monte Carlo simulation. The results indicate that all of the existing tests are not robust to outliers and model misspecification. Finally, an empirical application applies the statistical tests to stock market returns of the four little dragons (Hong Kong, South Korea, Singapore and Taiwan) in East Asia. The non‐linearity tests fail to provide consistent conclusions most of the time. The results in this article stress the need for a more robust test for SETAR‐type non‐linearity in time series analysis and forecasting. Copyright © 2004 John Wiley & Sons, Ltd.     

Forecasting trend output in the Euro area

This paper is an applied study about forecasting trend output and the output gap in the Euro area. The need for trend output forecasts is justified by an analysis of the monetary strategy of the European Central Bank. Trend output serves as a direct inflation indicator and helps to determine the reference value for money. For both purposes, trend output has to be forecasted. A permanent–transitory decomposition based on cointegration restrictions gives an estimate of trend output in the Euro area. Ex‐ante point forecasts of trend output are computed and bootstrap simulation is employed to construct prediction intervals that take estimation uncertainty into consideration. The uncertainty of trend output and the output gap is quite large and raises questions about their usefulness as indicators for monetary policy. Copyright © 2002 John Wiley & Sons, Ltd.     

A Simple Linear Regression Approach to Modeling and Forecasting Mortality Rates

Observing that a sequence of negative logarithms of 1‐year survival probabilities displays a linear relationship with the sequence of corresponding terms with a time lag of a certain number of years, we propose a simple linear regression to model and forecast mortality rates. Our model assuming the linearity between two mortality sequences with a time lag each other does not need to formulate the time trends of mortality rates across ages for mortality prediction. Moreover, the parameters of our model for a given age depend on the mortality rates for that age only. Therefore, whether the span of the study ages with the age included is widened or shortened will not affect the results of mortality fitting and forecasting for that age. In the empirical testing, the regression results using the mortality data for the UK, USA and Japan show a satisfactory goodness of fit, which convinces us of the appropriateness of the linear assumption. Empirical illustrations further show that our model's performances of fitting and forecasting mortality rates are quite satisfactory compared with the existing well‐known mortality models. Copyright © 2015 John Wiley & Sons, Ltd.     

WTI crude oil option implied VaR and CVaR: An empirical application

Using option market data we derive naturally forward‐looking, nonparametric and model‐free risk estimates, three desired characteristics hardly obtainable using historical returns. The option‐implied measures are only based on the first derivative of the option price with respect to the strike price, bypassing the difficult task of estimating the tail of the return distribution. We estimate and backtest the 1%, 2.5%, and 5% WTI crude oil futures option‐implied value at risk and conditional value at risk for the turbulent years 2011–2016 and for both tails of the distribution. Compared with risk estimations based on the filtered historical simulation methodology, our results show that the option‐implied risk metrics are valid alternatives to the statistically based historical models.     

The total cost of misclassification in credit scoring: A comparison of generalized linear models and generalized additive models

This study examines whether the evaluation of a bankruptcy prediction model should take into account the total cost of misclassification. For this purpose, we introduce and apply a validity measure in credit scoring that is based on the total cost of misclassification. Specifically, we use comprehensive data from the annual financial statements of a sample of German companies and analyze the total cost of misclassification by comparing a generalized linear model and a generalized additive model with regard to their ability to predict a company's probability of default. On the basis of these data, the validity measure we introduce shows that, compared to generalized linear models, generalized additive models can reduce substantially the extent of misclassification and the total cost that this entails. The validity measure we introduce is informative and justifies the argument that generalized additive models should be preferred, although such models are more complex than generalized linear models. We conclude that to balance a model's validity and complexity, it is necessary to take into account the total cost of misclassification.     

14-3-3sigma controls mitotic translation to facilitate cytokinesis

14-3-3 proteins are crucial in a wide variety of cellular responses including cell cycle progression, DNA damage checkpoints and apoptosis. One particular 14-3-3 isoform, sigma, is a p53-responsive gene, the function of which is frequently lost in human tumours, including breast and prostate cancers as a result of either hypermethylation of the 14-3-3sigma promoter or induction of an oestrogen-responsive ubiquitin ligase that specifically targets 14-3-3sigma for proteasomal degradation. Loss of 14-3-3sigma protein occurs not only within the tumours themselves but also in the surrounding pre-dysplastic tissue (so-called field cancerization), indicating that 14-3-3sigma might have an important tumour suppressor function that becomes lost early in the process of tumour evolution. The molecular basis for the tumour suppressor function of 14-3-3sigma is unknown. Here we report a previously unknown function for 14-3-3sigma as a regulator of mitotic translation through its direct mitosis-specific binding to a variety of translation/initiation factors, including eukaryotic initiation factor 4B in a stoichiometric manner. Cells lacking 14-3-3sigma, in marked contrast to normal cells, cannot suppress cap-dependent translation and do not stimulate cap-independent translation during and immediately after mitosis. This defective switch in the mechanism of translation results in reduced mitotic-specific expression of the endogenous internal ribosomal entry site (IRES)-dependent form of the cyclin-dependent kinase Cdk11 (p58 PITSLRE), leading to impaired cytokinesis, loss of Polo-like kinase-1 at the midbody, and the accumulation of binucleate cells. The aberrant mitotic phenotype of 14-3-3sigma-depleted cells can be rescued by forced expression of p58 PITSLRE or by extinguishing cap-dependent translation and increasing cap-independent translation during mitosis by using rapamycin. Our findings show how aberrant mitotic translation in the absence of 14-3-3sigma impairs mitotic exit to generate binucleate cells and provides a potential explanation of how 14-3-3sigma-deficient cells may progress on the path to aneuploidy and tumorigenesis.     

Adaptive subwavelength control of nano-optical fields

Adaptive shaping of the phase and amplitude of femtosecond laser pulses has been developed into an efficient tool for the directed manipulation of interference phenomena, thus providing coherent control over various quantum-mechanical systems. Temporal resolution in the femtosecond or even attosecond range has been demonstrated, but spatial resolution is limited by diffraction to approximately half the wavelength of the light field (that is, several hundred nanometres). Theory has indicated that the spatial limitation to coherent control can be overcome with the illumination of nanostructures: the spatial near-field distribution was shown to depend on the linear chirp of an irradiating laser pulse. An extension of this idea to adaptive control, combining multiparameter pulse shaping with a learning algorithm, demonstrated the generation of user-specified optical near-field distributions in an optimal and flexible fashion. Shaping of the polarization of the laser pulse provides a particularly efficient and versatile nano-optical manipulation method. Here we demonstrate the feasibility of this concept experimentally, by tailoring the optical near field in the vicinity of silver nanostructures through adaptive polarization shaping of femtosecond laser pulses and then probing the lateral field distribution by two-photon photoemission electron microscopy. In this combination of adaptive control and nano-optics, we achieve subwavelength dynamic localization of electromagnetic intensity on the nanometre scale and thus overcome the spatial restrictions of conventional optics. This experimental realization of theoretical suggestions opens a number of perspectives in coherent control, nano-optics, nonlinear spectroscopy, and other research fields in which optical investigations are carried out with spatial or temporal resolution.