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Stress testing pension funds—researchers present technique based on hidden Markov regime switching model

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Stress testing pension funds—researchers present technique based on hidden Markov regime switching model


Stress testing pension funds: Lithuanian researchers lead global innovation
Distribution of returns of IInd pillar PFs. Manager is given in the legend, while the participant’s birth-year is attributed to the title of image panel. The special case “T” stands for the asset preservation PFs. Credit: Annals of Operations Research (2024). DOI: 10.1007/s10479-024-06041-1

“We wanted to investigate how second pillar pension funds react to financial crises and how to protect them from the crises,” says Kaunas University of Technology (KTU) professor Dr. Audrius KabaÅ¡inskas, who, together with his team, discovered a way to achieve this goal. The discovery in question is the development of stress tests for pension funds. Lithuanian researchers were the first in the world to come up with such an adaptation of the stress tests.

Stress tests are usually carried out on banks or other financial institutions to allow market regulators to determine and assess their ability to withstand adverse economic conditions.

According to the professor at KTU Faculty of Mathematics and Natural Sciences, this innovative pension fund stress testing approach will benefit both regulators and pension fund managers.

“Making sure your pension fund is resilient to harsh financial market conditions will help you sleep better, save more, and have increased trust in your funds and the pension system itself,” KabaÅ¡inskas adds.

Results based on two major crises

First, the study needed to collect data from previous periods. “Two major events that shocked the whole world—COVID-19 and the first year of Russian invasion of Ukraine—just happened to occur during the project. This allowed us to gather a lot of relevant information and data on changes in the performance of pension funds,” says KabaÅ¡inskas.

The Hidden Markov Model (HMM), which, according to a professor at KTU Department of Mathematical Modelling, is quite simple in its principle of operation, helped to forecast future market conditions in this study.

The paper is published in the journal Annals of Operations Research.

“The observation of air temperature could be an analogy for it. All year round, without looking at the calendar, we observe the temperature outside and, based on the temperature level, we decide what time of the year it is. Of course, 15 degrees can occur in winter and sometimes it snows in May but these are random events. The state of the next day depends only on today,” he explains vividly.

According to the KTU researcher, this describes the idea of the Hidden Markov Model: by observing the changes in value, one can judge the state of global markets and try to forecast the future.

“In our study, we observed two well-known investment funds from 2019 to 2022. Collected information helped us identify that global markets at any given moment are in one of four states: no shock regime, a state of shock in stock markets, a state of shock in bond markets, and a state of global financial shock—a global crisis,” says KabaÅ¡inskas.

Using certain methods, the research team led by a professor MiloÅ¡ Kopa representing KTU and Charles University in Prague found that these periods were aligned with the global events in question. Once the transition probabilities between the states were identified, it was possible to link the data of pension funds to these periods and simulate the future evolution of the pension funds’ value.

That’s where the innovation of stress testing came in. The purpose of this test is to determine whether a particular pension fund can deliver positive growth in the future when faced with a shock in the financial markets.

“In our study, we applied several scenarios, extending financial crises and modeling the evolution of fund values over the next 5 years,” says a KTU researcher.

This methodology can be applied not only to pension funds but also to other investments.

Example of Lithuanian pension funds

The research and the new stress tests were carried out on Lithuanian pension funds.

Kabašinskas says that the study revealed several interesting things. Firstly, on average, Lithuanian second pillar pension funds can withstand crises that are twice as long.

“However, the results show that some Lithuanian funds struggle to cope with inflation, while others, the most conservative funds for citizens who are likely to retire within next few years or who have already retired, are very slow in recovering after negative shocks,” adds the KTU expert.

This can be explained by regulatory aspects and the related investment strategy, as stock markets recover several times faster than bond markets, and the above-mentioned funds invest more than 90% in bonds and other less risky instruments.

A complementary study has also been carried out to show how pension funds should change their investment strategy to avoid the drastic negative consequences of various financial crises and shocks.

“Funds that invest heavily in stocks and other risky instruments should increase the number of risk-free instruments slightly, up to 10%, before or after the financial crisis hits. Meanwhile, funds investing mainly in bonds should increase the number of stocks in their holdings. In both cases, the end of the crisis should be followed by a slow return to the typical strategy,” advises a mathematician.

Although the survey did not aim to increase people’s confidence in pension funds, the results showed that Lithuania’s second pillar pension funds are resilient to crisis and are worth trust. Historically they have delivered long-term growth, some have even outperformed inflation and price increases.

“Although short-term changes can be drastic, long-term growth is clearly visible,” says KTU professor Dr. KabaÅ¡inskas. “Lithuania, by the way, has a better system than many European countries,” he adds.

More information:
Audrius Kabašinskas et al, Stress testing for IInd pillar life-cycle pension funds using hidden Markov model, Annals of Operations Research (2024). DOI: 10.1007/s10479-024-06041-1

Citation:
Stress testing pension funds—researchers present technique based on hidden Markov regime switching model (2024, June 26)
retrieved 26 June 2024
from https://phys.org/news/2024-06-stress-pension-funds-technique-based.html

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Researchers find genetic stability in a long-term Panamanian hybrid zone of manakins

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Researchers find genetic stability in a long-term Panamanian hybrid zone of manakins


Researchers find genetic stability in a long-term Panamanian hybrid zone of manakins
Side by side comparison of the golden-collared manakin (left), the white-collared manakin (right), and a hybrid (middle) taken from the genomic center, where hybrids are most genetically mixed yet resemble golden-collared parents. Credit: Kira Long

We often think of species as separate and distinct, but sometimes they can interbreed and create hybrids. When this happens consistently in a specific area, it forms what’s known as a hybrid zone. These zones can be highly dynamic or remarkably stable, and studying them can reveal key insights into how species boundaries evolve—or sometimes blur.

In a new study published in Evolution, researchers at the University of Illinois Urbana-Champaign describe a hybrid zone between two manakin species in Panama that has overall remained relatively stable over the past 30 years.

Hybrids resulting from mixed-species breeding are not uncommon; consider, for example, the mule (horse-donkey) or the liger (lion-tiger). However, many of these classic examples of hybrids are typically infertile and exist only as first-generation crosses. In contrast, along the western edge of Panama, against the Caribbean Sea, a long-term hybrid zone exists between two species of birds, the golden-collared manakin and the white-collared manakin.

Previous research conducted nearly 30 years ago on this hybrid zone found that the genomic center—where the population’s genome is nearly 50% white-collared DNA and 50% golden-collared DNA—did not overlap with the phenotypic transition zone, the area where the population visually transitions from more golden-collared plumage to more white-collared. The previous study had found that these two areas were about 60 km apart, and until recently, it was unclear whether there had been any changes over the years.

Kira Long, a former graduate student in Jeff Brawn’s lab, now a postdoctoral researcher at the University of Idaho, and her team decided to compare the current population of manakins in the hybrid zone to those from the previous study approximately 30 years ago. Doing so would allow the researchers to see whether the genomic center or the phenotypic transition zone has moved over time, and how stable the genomic and phenotypic traits are across the population.

“Currently, hybrids at the genomic center look phenotypically almost identical to the golden-collared manakins,” explained Long. “They have the golden yellow collar and dark green belly of golden-collared manakins. What’s crazy is that these hybrids are the most genetically mixed between white and golden-collared manakins, yet they look almost identical to the golden-collared parents, whereas the birds that visually look the most mixed have genetically a majority of white-collared DNA.”

Long’s team includes Illinois researchers Jeff Brawn, a professor emeritus of natural resources and environmental sciences, Julian Catchen (CIS/GNDP), an associate professor of integrative biology, and his former graduate student Angel Rivera-Colón, as well as collaborators from the University of Maryland College Park and the Smithsonian Institution.

Over four years, the team captured and took blood samples from over 600 manakins across different areas of the hybrid zone. The blood samples were sequenced using RADseq to examine thousands of genomic markers across the genome. These were then compared to samples taken from museum specimens housed at the Smithsonian Institution that were used in the original, older study. The team also measured phenotypic traits of the wild-caught and historical birds, known to differ between golden-collared and white-collared manakins, including feather coloration and length.

Researchers find genetic stability in a long-term Panamanian hybrid zone of manakins
Two hybrid morphs found at the phenotypic transition zone, where hybrids visually appear more mixed between the two parental species. Credit: Kira Long

After comparing the historical and wild-caught bird genomes, the researchers found that the genomic center of the population had not moved in approximately 30 years. Less than 3% of the genomic markers tested had changed over time. Furthermore, the phenotypic transition zone had also remained stable, with only one trait—belly color—having shifted in location over time by about 10 km.

“What this means is that if you went to the same location in the phenotypic transition of the hybrid zone 30 years ago, you would see birds with more yellow bellies, whereas if you went to that same spot now you would see birds with more olive-colored bellies,” said Long. “The hybrid bellies are essentially getting darker over time. This may mean that there is some sort of selection for the green bellies in these populations where it is spreading.”

Hybrids have varying success in the animal kingdom depending on the species that are mixed. There is a hybrid zone of cottonwood trees, for example, that is extremely stable, only moving slowly during interglacial periods, according to Long. Hybrids of many species often have less fitness than the parental species because they are too intermediate in their traits, but sometimes hybrids are able to capitalize on this and find success, by making use of environmental niches that are between the optimums for the parental species.

According to Long, the population of hybrid manakins seems to be doing just fine, which may explain why the hybrid zone is so stable. While there is evidence of decreased hatching success in the hybrids—which Long says will be published soon in her next article—she notes that this is essentially nature filtering out the genetic combinations between the white-collared and golden-collared manakins that do not work. Once they hatch, the hybrids’ survival appears similar to the parental species, and they do not seem to have issues finding mates, according to Long.

The next big steps for this system is to determine if female choice is affecting selection for specific hybrid phenotypes and determine the underlying genomic architecture of these traits, Long said. This may provide insight into why hybrids typically resemble the golden-collared species and why the transition zone for belly color is shifting while other phenotypic traits remain relatively stable among hybrids.

“It’s thought the females prefer golden-collared colors, and that might be why the more olive belly color, which is a trait of golden-collared manakins, is spreading in the hybrids,” said Long. “We have indirect evidence for this, but it’s never been formally tested, so it would be great to get that last piece of the puzzle.”

More information:
Kira M Long et al, Ongoing introgression of a secondary sexual plumage trait in a stable avian hybrid zone, Evolution (2024). DOI: 10.1093/evolut/qpae076

Citation:
Researchers find genetic stability in a long-term Panamanian hybrid zone of manakins (2024, June 26)
retrieved 26 June 2024
from https://phys.org/news/2024-06-genetic-stability-term-panamanian-hybrid.html

This document is subject to copyright. Apart from any fair dealing for the purpose of private study or research, no
part may be reproduced without the written permission. The content is provided for information purposes only.





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New work explores optimal circumstances for reaching a common goal with humanoid robots

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New work explores optimal circumstances for reaching a common goal with humanoid robots


Acting for a common goal with humanoid robots
Credit: IIT-Istituto Italiano di Tecnologia

Researchers at the Istituto Italiano di Tecnologia (IIT-Italian Institute of Technology) have demonstrated that under specific conditions, humans can treat robots as co-authors of the results of their actions. The condition that enables this phenomenon is that a robot behaves in a human-like, social manner. Engaging in gaze contact and participating in a common emotional experience, such as watching a movie, are the key.

The study was published in Science Robotics and paves the way for understanding and designing the optimal circumstances for humans and robots to collaborate in the same environment.

The research study has been coordinated by Agnieszka Wykowska, head of IIT’s Social Cognition in Human-Robot Interaction lab in Genova, and a researcher on a project titled “Intentional Stance for Social Attunement,” which addresses the question of when and under what conditions people treat robots as intentional agents.

Uma Navare, the first author of the paper and a member of Wykowska’s team, ran the study using behavioral measures and neural responses registered by electroencephalography (EEG), to evaluate the emergence of a shared control mechanism between humans and the humanoid robot iCub.

“As humans, we do not act in a social vacuum and most of our actions require coordination with others in space and time to achieve a goal. A crucial aspect of interacting with others is the experience of what is called the sense of joint agency,” explains Agnieszka Wykowska. “In our research study, we discovered that humans experienced this sense of joint agency with the robot partner when it was presented as an intentional agent, but not when it was presented as a mechanical artifact.”






Credit: IIT-Istituto Italiano di Tecnologia

The sense of joint agency refers to the feeling of control that humans experience both in their own and their partner’s actions, thus underlying team building. IIT researchers investigated it by first identifying its mechanisms in human-human interactions and then testing whether similar responses would occur in human-robot interaction. The interaction task consisted of moving an onscreen cursor to a target location and then confirming the position of the cursor on the target, thereby triggering a tone.

In two experiments, researchers manipulated the attribution of intentionality, that is human-likeness, to the robot iCub. In the first experiment, iCub performed a task mechanically, leading participants to see it as a mechanical artifact. In the second experiment, participants first interacted with iCub in a way that increased the likelihood of attributing intentionality to it. This involved dialogue, gaze exchange and watching videos together, where iCub displayed human-like emotional responses. This aimed to make participants perceive iCub as more intentional and human-like.

Researchers found that only in the second experiment, humans felt jointly a sense of agency with the humanoid robot, evidenced by both behavioral and neuronal responses.

This result shows that proper teamwork with a robot is more likely to occur when the robot is perceived as an intentional and social agent, but not when it is seen as a mechanical device. It informs what the optimal circumstances are for humans and robots to collaborate towards shared goals in daily life.

More information:
Uma Navare et al, When performing actions with robots, attribution of intentionality affects the sense of joint agency, Science Robotics (2024). DOI: 10.1126/scirobotics.adj3665.

Citation:
New work explores optimal circumstances for reaching a common goal with humanoid robots (2024, June 26)
retrieved 26 June 2024
from https://techxplore.com/news/2024-06-explores-optimal-circumstances-common-goal.html

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part may be reproduced without the written permission. The content is provided for information purposes only.





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Scientists record Earth’s radio waves from the moon

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Scientists record Earth’s radio waves from the moon


moon
Credit: CC0 Public Domain

On Feb. 22, a lunar lander named Odysseus touched down near the moon’s South Pole and popped out four antennas to record radio waves around the surface—a moment University of Colorado Boulder astrophysicist Jack Burns hails as the “dawn of radio astronomy from the moon.”

It was a major achievement for the tenacious lander, which was built by the Houston-based company Intuitive Machines and had to overcome a series of technical difficulties to make it to the lunar surface. Burns is co-investigator on the radio experiment that flew aboard Odysseus called Radio wave Observations at the Lunar Surface of the photo Electron Sheath (ROLSES).

He’ll give an update on the ROLSES data, and will share what’s in store for future radio astronomy from the moon, this week at the 244th Meeting of the American Astronomical Society in Madison, Wisconsin.

“It was heroic for Intuitive Machines to land under these conditions, and to deploy our antennas, take some data and get that data back to Earth,” said Burns, professor emeritus in the Department of Astrophysical and Planetary Sciences at CU Boulder.

Natchimuthuk Gopalswamy at NASA’s Goddard Space Flight Center in Greenbelt, Maryland, led the ROLSES experiment. The instrument, which included the antennas and a device called a radio spectrometer, was designed to record a wide range of radio emissions near the moon and deep in space.

Despite the challenges of the mission, ROLSES managed to view Earth in a unique way.

“We viewed Earth as an exoplanet, or a planet orbiting another star,” Burns said. “That enables us to ask: What would our radio emissions from Earth look like if they came from an extraterrestrial civilization on a nearby exoplanet?”

Earth selfie

Odysseus traveled to the moon as part of NASA’s Commercial Lunar Payload Services (CLPS) program, an ambitious effort to land spacecraft built by private companies on the lunar surface. It was the first such mission to achieve what NASA calls a “soft landing,” although it tipped onto its side in the process.

But it almost didn’t happen. Among other challenges, Odysseus wasn’t able to use its laser-guided navigation system to land on the moon’s craggy surface. Instead, operators at Intuitive Machines relied entirely on the lander’s optical camera system—an impressive feat of maneuvering.

As Odysseus was traveling to the moon, one of the ROLSES antennas slightly overheated and popped out of its housing on the lander. (A selfie from the spacecraft shows the antenna sticking out in space). It turned out to be a stroke of good luck, Burns said.

The team used the accident to look back at Earth and record radio waves emanating from the planet for nearly an hour-and-a-half. Human technologies, including cell phones and broadcast towers, churn out radio radiation on a near constant basis. Astronomer Carl Sagan spearheaded a similar experiment from NASA’s Galileo spacecraft in the 1990s, but the ROLSES data were more exhaustive.

Burns noted that scientists may be able to look for similar fingerprints coming from planets far away from our own—a potential sign of intelligent life.

Moonrise

He and his colleagues are just getting started. NASA has already greenlit a second ROLSES experiment, which will fly on another CLPS lander, likely in 2026.

The astrophysicist is also part of a third CLPS experiment, known as the Lunar Surface Electromagnetics Experiment-Night (LuSEE-Night), scheduled to arrive at the moon in 2026. The instrument will land on the far side of the moon, a quiet spot that human radio emissions can’t reach. From there, it will gaze at radio emissions coming not from Earth but from the earliest days of the universe before the first stars formed called the Dark Ages—shedding more light on how the cosmos evolved during this crucial junction in its history.

“Because NASA is going to send two or three landers to the moon every year, we have a way to upgrade our instruments and learn from what goes wrong in a way we haven’t been able to do since the early days of the space program,” Burns said.

Citation:
Scientists record Earth’s radio waves from the moon (2024, June 7)
retrieved 26 June 2024
from https://phys.org/news/2024-06-scientists-earth-radio-moon.html

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Amazon crosses $2 trillion in stock market value for the first time

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Amazon crosses  trillion in stock market value for the first time


Amazon crosses $2 trillion in stock market value for the first time
An Amazon Prime truck is seen on April 5, 2024, in Portland, Ore. Amazon hits a stock market valuation of $2 trillion for the first time on Wednesday, June 26, 2024.Credit: AP Photo/Jenny Kane, File

Amazon.com Inc. surpassed $2 trillion in market value for the first time in afternoon trading on Wednesday.

The push higher for Amazon’s stock market valuation comes a little more than a week after Nvidia hit $3 trillion and briefly became the most valuable company on Wall Street. Nvidia’s chips are used to power many AI application and its valuation has soared as a result.

Amazon has also been making big investments in AI as global interest has grown in the technology. Most of the company’s focus has been on business-focused products, including AI models and a chatbot called Q, which Amazon makes available to businesses that use its cloud computing unit AWS.

In April, Amazon CEO Andy Jassy said that AI capabilities have reaccelerated AWS’ growth and that it was on pace for $100 billion in annual revenue. The unit had slowed down in growth last year as companies cut down on costs amid high inflation.

The tech giant has also invested $4 billion in the San Francisco-based AI company Anthropic to develop so-called foundation models that underpin the generative AI systems. Amazon also makes and designs its own AI chips.

© 2024 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.

Citation:
Amazon crosses $2 trillion in stock market value for the first time (2024, June 26)
retrieved 26 June 2024
from https://techxplore.com/news/2024-06-amazon-trillion-stock.html

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