Numbers Count

Numbers Count

Autocorrelation is the cross-correlation of a datum with itself. The kernel estimation method is a nonparametric procedure for testing economic models.

The two preceding sentences make little sense unless understood in the bigger context.

Statistical tools have been of considerable help to the economics, finance, business and accounting industries. A solid grounding in derivatives and mathematical notation is a must if one wants to work through countless proofs and demonstrations ubiquitous in econometric literature.

In mathematics, an asymptotic function portrayed graphically looks like a normal distribution bell curve with tails that never touch the horizon. Some definitions lists include that financial analysis models can be multivariate and univariate. Also, the martingale is a mathematical property used in financial modeling.

Financial forecasts are a complex task to say the least. Bollerslev (2001) shows that financial time series analysis is further complicated with market volatility. Through time, price changes follow market activity, clouding forecasts further.

Building on realized power variation, Barndorff-Nielsen & Shephard (2003) introduced the concept of realized bipower variation. Is bipower variation robust to jumps? The authors demonstrate that under certain circumstances, it can accurately predict integrated variance even with jumps.

Numbers count. Photo by Elena

Most undergraduate business or commerce programs have required mathematics courses as minimum conditions for entry. The mathematical background program is usually Linear Algebra and Calculus I and II, or any combination thereof. The prerequisites make perfect sense. Lacking a grasp on such foundations as the compound Poisson process and normal inverse Gaussian distribution, at least in the case of financial econometrics, the material would be all but impossible to comprehend. Nonetheless, the GraphPad Software Website provides an online calculator enabling computation of Binomial, Gaussian and Poisson probabilities.

Skewness refers to a situation in statistical analysis where the data group towards one side. Distributions can be normal, left-skewed or right-skewed. While skewness focuses on tails, kurtosis measures the peaks of the distribution.

Another statistical predictor has to do with least squares. According to the least squares estimation – respecting certain assumptions – determined model parameters would be good estimates of the parameters of the mechanism that brought forth the sample.

A financial econometrician wants to find the joint conditional density, to estimate expected return of market portfolios. Engle (2001) potential multivariate extensions to techniques estimating conditional densities.

The prevalence of subdivisions and overlapping of academic fields makes it somewhat harder to pin point the exact concepts that apply to financial econometrics. Still, it would be difficult to imagine this branch without mentioning these key ideas. Hopefully, the above has introduced the theoretical framework of the subject matter and related branches of learning such as mathematical finance.

References:

    Barndorff-Nielsen, O. E. & Shephard, N. (2003). Power and bipower variation with stochastic volatility and jumps. Working paper series No.152. CAF: Centre for Analytical Finance. University of Aarhus – Aarhus School of Business.

    Bollerslev, T. (2001). Financial econometrics: Past developments and future challenges. Journal of Econometrics, 100 (1): 41-51.

    Engle, R. (2001). Financial econometrics – A new discipline with new methods. Journal of Econometrics, 100 (1): 53-56.

    Raible, S. (1998). Levy processes in finance: Theory, numerics, and empirical facts. PhD Thesis. Mathematics Faculty, Freiburg University, Freiburg.

Cracking the Secret to Productivity

Cracking the Secret to Productivity

Everyone wants to be productive, whether it may be working or studying. We would like to emphasize the fact that studying is something on every university student’s mind nowadays. However, what is true secret to being productive?

The problem most of us have in not a lack of motivation to be productive, but rather, the need to stay disciplined and maintain productivity on a daily basis. In fact we can try and explore the many aspects of the thoughts in our minds and attempt to solve this age-old problem of productivity.

Willpower is not enough. This may be a scary thought, but it is actually true. So should we give up on being productive now and just go frolic in the snow while in the winter season or bathe in a swimming pool in the summer? According to scientific research done by Janet Polivy and Kenneth McGraw, we often tend to project the thought of the most difficult parts of a task we are trying to achieve, such as memorizing pathways of biochemistry, reading through hundreds of pages of your course pack or trying to understand exactly what that page of complicated physics formulas meant.

Numerous studies have also shown that there is a concept called “ego-depletion” which states that our willpower is limited and we are thus unable to rely on the idea of “willing” something to happen just by thinking about it. Instead, we tend to spend our time in small meaningless tasks such as going on Facebook or playing World of Tanks.

Avoid robot behavior which is counter-intuitive if nothing is going in your brain while your are working. Image: © Megan Jorgensen (Elena)

Zeigarnik Effect

So how do we overcome this intrinsic barrier which prevents us to be productive? Naturally, the first thing that should be done is to “get started”. Often the most difficult part of a task is starting on it; however, once you do begin, there is a mechanism in the brain called the Zeigarnik Effect. It seems that it is human nature to finish what we start and if we do not finish the task, we experience dissonance and discomfort.

The Zeigarnik Effect is almost like there is something poking your brain, telling you to finish the task you have started previously and will not stop unless you get back to it.

Now that we have started, how should we maintain focus and complete the task at hand? Research from the Federal Aviation Administration has revealed that taking breaks around 15 to 20 minutes in between long work sessions around 90 minutes resulted in a 16% increase in awareness and focus as well as the maintenance of higher level of energy throughout the day.

Therefore it appears that it is more effective taking breaks in between your work sessions instead of cramming everything into one long nine hour study session.

Discipline

How do we stay disciplined? The first step to improving your productivity habits is to create schedules and deadlines. These deadlines may not necessarily be the ones imposed by your boss, but rather ones throughout the day to maintain your productive progress. Studies conducted by Dan Ariely and al. revealed that university students who imposed deadlines for themselves performed far better and more consistently in school than those who did not. Furthermore Ariely and al. also found that those students who gave themselves too much time to complete a task before there generous deadline performed similarly to those who did not set a deadline at all.

Set a chart

Finally, set an accountability chart for yourself. An accountability chart is used to track your progress throughout the day and match it with your set deadlines.

Tracking your progress using this method will increase self-control because it allows you to see the work you have actually accomplished versus the over- and under-estimation of the work you think you have accomplished. This strategy also allows you to stop engaging in “robot behavior” which can actually be counter-intuitive if nothing is going in your brain while you are re-listening to that lecture you missed.

Conclusion

In conclusion, there are many aspects of productivity that we can understand and potentially overcome with the appropriate strategies. Understanding that willpower is simply not enough is the first step to a better and more productive live. Starting on a long journey ahead is important because it allows your brain to urge you to complete the task that you left unfinished. Pacing yourself is also important, since no one wants to spend hours upon hours staring at the computer screen or a textbook.

Finally, a word of advice is to stay disciplined by planning your day and tracking your progress throughout your completed tasks at hand.

With these strategies in mind, perhaps the next time you have to complete a task, you will not groan at the thought, but rather approach it in a positive and energetic manner.

References and sources:

•     Gary Huang. Techophilic, Winter 2013, page 11 (Technophilic is published by Technophilic Magazine Inc. by McGill Engineering Undergraduate Society).
•     Procrastination, deadlines and performance: self-control by precommitment. Ariely and Wertenbroch.
•     Getting a bigger slice of a pie. Polivy, Herman and Deo.
•     Undermining the Zeigarnik Effect: Another hidden cost of reward. McGrow and Fiala.
•     Ego depletion: Is the active self a limited resource? Baumeister, Bratslavsky, Muraven and Tice.
•     Implementation Intentions and Goal Achievement. Gollwitzer and Sheeran.

Major Depressive Disorder - MDD

Depression (Major Depressive Disorder – MDD)

Depression is the term commonly given to the mental illness with the medical name Major Depressive Disorders. Symptoms and diagnostic criteria are included in the DSM-5 (The Diagnostic and Statistical Manual – Fifth Version, published by the American Psychiatric Association or APA).

Seretonin deficiency has most often been attributed to depression in individuals, along with low self-esteem, external locus of control and negative and self-blaming ways of thinking. The class of drugs mainly used to treat depression are SSRIs (Selective Seretonin Reuptake Inhibitors). Perhaps the best known drug of this class is Prozac (the brand name for fluoxetine).

Cognitive-Behavioural Therapy or CBT also helps alleviate the disease’s symptoms. Psychological studies have shown that a pharmacological approach combined with CBT gives the best results.

Some patients cannot take antidepressants because it produces hypomania in them. Also, patients with Bipolar Disorder have to take mood stabilizers, such as Lamotrigine, for their depressive episodes because antidepressants could trigger a manic episode.

Depression is not weakness of character, as it was once considered. Numerous neuroimaging studies have shown brain differences in people with MDD as opposed to controls. Both neurochemical and structural differences were seen in the comparisons of the subjects’ brains.

Prolonged, untreated and severe MDD may lead to brain atrophy. For example, in one study mice who were depressed had damage to the hippocampus, the brain structure responsible for memory. However, mice who exercised exhibited neurogenesis or the birth of new neural cells.

Noir. Photo by Elena

Depression feels awful. Nothing that one loved or enjoyed before seems appealing anymore. One symptom is social isolation. When you are depressed, you do not feel like socializing with anyone. Nonetheless, psychiatrists and psychologists alike, recommend social support as a contributing factor to relieving the illness.

Depression is cyclical, in the sense that it comes and goes. Someone who has had one episode of depression is likely to have another one, while untreated depression sometimes goes away on its own. Nevertheless, depression is a very dangerous mental illness. Individuals with MDD may commit suicide.

Neurochemical imbalances in the brain almost always lead to some consequences. Take dopamine, for example. The illicit street drug cocaine produces a rush that releases an extreme amount of dopamine into the brain. Dopamine is a neurotransmitter involved in the reward circuitry. Thus, once the user becomes habituated to the high, nothing else can produce those emotions. Apparently, the euphoria felt during a cocaine high is only comparable to that felt after a huge accomplishment, if then.

Natural ways of battling depression or just depressed mood (two very different things!) include exercise, since it produces endorphins. Endorphins are the body’s own feel-good mechanisms. Other methods include eating pasta and turkey. Both foods contain tryptophan, a precursor to serotonin (the main neurotransmitter lacking in quantity in persons with Major Depressive Disorder).

Depression (the terms “depression”, “Major Depressive Disorder” and “MDD” are used interchangeably throughout the paper) presents selective attention. People with the condition tend to pay attention only to negative aspects of their lives. They focus on failures, on losses, on shortcomings, on bad luck. Indeed, this may be exactly why CBT has been documented as more effective in treating MDD than medication alone. CBT teaches healthy ways of thinking, because its premise lies that thoughts lead to feelings and emotions, which in turn lead to behaviour. By eliminating negativity and creating positivity, depressive symptoms may gradually be relieved.

Of course, the present paper is for informational purposes only and does not constitute medical advice. The following article about depression or Major Depressive Disorder (MDD) cannot be used for diagnosis. If you or someone you know has suicidal ideation, seek professional help immediately

Taking Shock Seriously

Taking Shock Seriously

When the body shuts down because of injury, immediate care is critical

Shock is the body's way of trying to deal with a bad situation. When a body experiences trauma from a serious injury, it often finds itself unable to maintain proper blood flow to all its organs. Shock is the mechanism that allows the body to ration blood flow so that the most important organs such as the brain, heart, lungs, and kidneys, get the blood they need, even when that means that less vital parts, such as arms, legs, and skin have to make do with less. This natural triage cannot be sustained for very long, however, without causing potentially life-threatening damage to the brain and heart.

Shock, says the red cross, ”can't be managed effectively by first aid alone. A victim of shock requires advanced medical care as soon as possible.”

The early signs of shock include:

• 
  
•     Restlessness or irritability.
•     Altered or confused consciousness.
•     Pale, cool, moist skin.
•     Rapid breathing.
•     Rapid pulse.

Taking Shock Seriously. Photo by Elena

The proper response to shock is to do the following:

•     Stretch the victim out on his or her back.
•     Treat any open bleeding.
•     Help the injured restore normal body temperature, covering him or her if there is chilling.
•     Talk to the victim reassuringly.
•     Prop the legs up about a foot unless there are possible head, neck, or back injuries, or broken bones in the hips or legs.
•     Don't offer food or drink, even though the victim probably feels thirsty,=.
•     Call the rescue service immediately.

Blood in the AIDS Era

Some precautions from the American Red Cross

When the emergency that requires your assistance involves heavy bleeding, it's important that you take precautions to protect yourself against the risk of infection. That's especially true if you have a cut, scrape, or sore that could allow a bleeding person's blood to mix directly with yours. One of the easiest ways for an infectious disease such as the AIDS virus or hepatitis B to be transmitted is through direct blood-to-blood exchange. To minimize risk, the American Red Cross advises the following:

•     Avoid blood splashes.
•     Keep and use disposable latex gloves in emergencies involving bleeding.
•     If gloves are unavailable, cover the wound with a dressing or other available barrier such as plastic wrap.
•     Avoid any contact in which the victim's blood touches any cuts, scrapes, or skin irritations you may have.
•     Always wash your hands as soon as possible, whether or not you wore gloves.

Control Bleeding from a Major Open Wound

Pressure is the key to stopping blood loss from a serious injury. Bearing down on arterial pressure points may be necessary.

If a person is bleeding

1. Step 1. Do not waste time washing wound. Cover it with sterile dressing or clean cloth and press firmly against the wound with hand.
2. Step 2. Elevate the wound, if possible, above the level of the heart.
3. Step 3. Apply a roller bandage snugly over the dressing to keep pressure on the wound, If bleeding doesn't stop...
4. Step 4. Apply additional dressings. Find a pressure point where you can squeeze the artery against the bone. If bleeding is from the leg, press with the heel of your hand where the leg bends at the hip.

A Roller Bandage Used to Control Bleeding

To apply a pressure bandage, start by securing the bandage over the dressing. Use overlapping turns to cover the dressing completely.

Tie of tape the bandage in place. If blood soaks through, put on more dressings and bandages. Do not remove bloodsoaked ones.

Check fingers or toes for warmth, color and felling. If they are pale and cold, bandage is too tight. Loosen it.

Dubious Reported Earnings

The Creation of Dubious Reported Earnings through “Creative” Accounting Procedures

A firm's income statement may be linked to a bikini – what it reveals is interesting but what it conceals is vital. National Student Marketing, one of the concept stocks, led the beauty parade in this regard. Andrew Tobias described it all in the Funny Money Game.

In its fiscal 1969 report, National Student Marketing made generous use of terms such as “deferred new product development and start-up costs.” These were moneys actually spent during 1969 but not charged against earnings in that year. “Unamortized costs of prepared sales programs” carried the ploy even further. These were advertising expenses that were not charged against earnings on the flimsy excuse that they would produce sales in the future. Subsidiary losses were easily handled: The companies were simply sold, removing their unfavorable results from the consolidated accounting statement. Actually it wasn't quite that simple, because the sales were consummated after the close of the fiscal year – but the accountants had no difficulty in arranging for the sale retroactively.

Since expenses were uncounted, why not count unearnings? N sooner said than done. These were duly noted in the sales column as unbilled receivables, on the justification that the actual billing of the sales could be expected to materialize in the future. Finally came “the $3,754,103 footnote.” Almost 44 million was added to net income in the form of earnings from companies whose acquisitions were “agreed to in principle and closed subsequent” to the end of fiscal 1969.

Dubios reported earnings. Photo by Elena

It turned out that even accepting the rest of the creative accounting, if you didn't count the earnings of companies that were not legally part of the National Student Marketing in 1969, the company barely broke even. Of course, the imprimatur of a prestigious accounting firm was affixed to the bottom of a statement assuring the public that the accounts were prepared in accordance with “generally accepted accounting principles.” (In 1972 the Securities and Exchange Commission charged National Student Marketing Corp., its auditors, two law firms, and fifteen individuals with violations of federal securities laws. Included in the SEC suit was a charge that the company had issues “materially false and misleading” financial statements. Cortess Randell,, the company's chief executive officer, served a prison sentence. A partner of the accounting firm of Peat, Marwick, Mitchell & Co., was convicted of having made false and misleading statements.

Similarly, Barry Minkow's late 1980s carpet-cleaning empire ZZZZ Best, was built on a mosaic of phony credit card holdings and fictitious contracts. These two are admittedly extreme examples, but the general problem is not uncommon. Seeming miracles can be accomplished with depreciation; the peculiarities of conglomerate accounting; the franchise accounting game; and the special features of the reports of land-sales companies, computer-leasing companies, and insurance companies. It is small wander that security analysts have trouble estimating reported future earnings.

Burton G. Malkiel. A Random Walk Down Wall Street, including a life-cycle guide to personal investing. First edition, 1973, by W.W. Norton and company, Inc.