New HEAVY Models for Fat-Tailed Realized Covariances and Returns

ABSTRACT

We develop a new score-driven model for the joint dynamics of fat-tailed realized covariance matrix observations and daily returns. The score dynamics for the unobserved true covariance matrix are robust to outliers and incidental large observations in both types of data by assuming a matrix-F distribution for the realized covariance measures and a multivariate Student's t distribution for the daily returns. The filter for the unknown covariance matrix has a computationally efficient matrix formulation, which proves beneficial for estimation and simulation purposes. We formulate parameter restrictions for stationarity and positive definiteness. Our simulation study shows that the new model is able to deal with high-dimensional settings (50 or more) and captures unobserved volatility dynamics even if the model is misspecified. We provide an empirical application to daily equity returns and realized covariance matrices up to 30 dimensions. The model statistically and economically outperforms competing multivariate volatility models out-of-sample. Supplementary materials for this article are available online.     

Efficiency and robustness of hogg’s adaptive trimmed means

The adaptive trimmed means of Hogg (1974) and modified by De Wet and van Wvk (1978) are studied in this paper for finite samples. They are shown to have good intervals and afficiency Properties for Sample sizes 20 and larger Confidence intervals pased on these estimator are also considered and found to be fairly ro-bust for sample sizes 40 and larger.     

Shewhart x-charts with estimated process variance

Properties of the Shewhart X-chart for controlling the mean of a process with a normal distribution are investigated for the situation where the process variance Ó²must be estimated from initial sample data. The control limits of the X-chart depend on the estimate of Ó²and thus, unlike the case when Ó²is known, the X-chart is not equivalent to a sequence of independent tests. When Ó²is estimated the distribution of the run length is not geometric and cannot be characterized simply in terms of the probability of a signal at a given point. The average run length (ARL) for the X-chart is expressed in terms of an integral involving the normal cdf, and it is shown that the chart signals with

probability one, but the ARL may not be finite if the size of the 2 sample used to estimate Ó²is sufficiently small. In addition, certain bounds for the ARL are also derived. Numerical integration is use to show that the effect of using small sample sizes in estimating Ó²is to increase the ARL and the variance of the run length distribution     

Clinical Care of Gambling Disorders: Training, Experience, and Competence Among VHA Psychologists

Problem gambling is a common, highly destructive disorder which is often overlooked by clinicians. Levels of clinical training, clinical experience, and professional competence for providing clinical services for problem gambling were examined in a survey of 181 clinical psychologists working in the Veterans Healthcare Administration (VHA). The results suggest that the majority of clinical psychologists have little or no formal training and little or no past or current clinical experience in the treatment of disordered gambling, nor do they see themselves as competent to evaluate or treat patients with disordered gambling. Most have not referred patients for treatment of problem gambling and do not know of a competent provider to whom they can refer. There is an identifiable subgroup, representing 9% of respondents, who do have more training, provide services, and see themselves as competent to provide care for patients with problem gambling. The amount of formal training is positively correlated with care provided and self-ratings of competence. Despite the lack of training and experience, most respondents expressed interest in receiving additional training. These data suggest that to improve rates of diagnosis and treatment of patients with problem gambling in mental health settings, additional training needs to be made available for mental health providers as a group, with specialized training for clinicians interested in specializing in this area.     

A uniform saddlepoint expansion for the null‐distribution of the wilcoxon‐mann‐whitney statistic

The authors give the exact coefficient of 1/N in a saddlepoint approximation to the Wilcoxon‐Mann‐Whitney null‐distribution. This saddlepoint approximation is obtained from an Edgeworth approximation to the exponentially tilted distribution. Moreover, the rate of convergence of the relative error is uniformly of order O (1/N) in a large deviation interval as defined in Feller (1971). The proposed method for computing the coefficient of 1/N can be used to obtain the exact coefficients of 1/Nⁱ, for any i. The exact formulas for the cumulant generating function and the cumulants, needed for these results, are those of van Dantzig (1947‐1950).     

An investigation of order release and flow time allowance policies for assembly job shops

The effects of a number of essentially different work order release and flow time allowance policies on the assembly order flow times and assembly order due date performance are investigated. Work orders within an assembly order have different routing length. The assembly order flow time is the time that elapses between the release of the first work order and the completion of the last work order of the assembly order. The timing of the release of work orders, and the distribution of the flow time allowance over the work orders in an assembly order were varied, and used systematic computer simulation to investigate the effects on performance. The results show that the best performance is obtained with simultaneous work order release, an average operation flow time allowance equal to the average operation waiting time and equalized flow time allowances per work order in an assembly order.     

A Rational Theory of Mutual Funds' Attention Allocation

The question of whether and how mutual fund managers provide valuable services for their clients motivates one of the largest literatures in finance. One candidate explanation is that funds process information about future asset values and use that information to invest in high‐valued assets. But formal theories are scarce because information choice models with many assets are difficult to solve as well as difficult to test. This paper tackles both problems by developing a new attention allocation model that uses the state of the business cycle to predict information choices, which in turn, predict observable patterns of portfolio investments and returns. The predictions about fund portfolios' covariance with payoff shocks, cross‐fund portfolio and return dispersion, and their excess returns are all supported by the data. These findings offer new evidence that some investment managers have skill and that attention is allocated rationally.     

What About the Grandparents? Children's Postdivorce Residence Arrangements and Contact With Grandparents

Despite the importance of grandparents in their grandchildren's lives, little is known about grandparent–grandchild contact after parental divorce. In this study, the authors investigated differences in grandparent–grandchild contact across 3 postdivorce residence arrangements (mother residence, father residence, and shared residence) using recent survey data from the Netherlands (N = 3,842). The results indicated that contact with maternal grandparents after divorce was highest in mother‐residence arrangements, followed by shared residence and then father residence. Contact with paternal grandparents was highest for children in father‐residence and shared‐residence arrangements, followed by mother residence. Parental conflict had little influence on children's contact with maternal grandparents, but it decreased contact with paternal grandparents. Moreover, the results partly support the assumption that conflict moderates the relationship between residence arrangements and grandparental contact, with differences between residence arrangements being more pronounced in the case of high‐conflict divorced families than in low‐conflict ones.