Short-Horizon Asymmetric Mean-Reversion and Overreactions: Evidence from the Nordic Stock Markets

This paper examines the asymmetric behavior of conditional mean and variance. Short-horizon mean-reversion behavior in mean is modeled with an asymmetric nonlinear autoregressive model, and the variance is modeled with an Exponential GARCH in Mean model. The results of the empirical investigation of the Nordic stock markets indicates that negative returns revert faster to positive returns when positive returns generally persist longer. Asymmetry in both mean and variance can be seen on all included markets and are fairly similar. Volatility rises following negative returns more than following positive returns which is an indication of overreactions. Negative returns lead to increased variance and positive returns leads even to decreased variance.

Intraday Linkages across International Equity Markets

Utilizing concurrent 5-minute returns, the intraday dynamics and inter-market dependencies in international equity markets were investigated. A strong intraday cyclical autocorrelation structure in the volatility process was observed to be caused by the diurnal pattern. A major rise in contemporaneous cross correlation among European stock markets was also noticed to follow the opening of the New York Stock Exchange. Furthermore, the results indicated that the returns for UK and Germany responded to each other’s innovations, both in terms of the first and second moment dependencies. In contrast to earlier research, the US stock market did not cause significant volatility spillover to the European markets.

On the Importance of Mutual Fund Families in Emerging Markets

This study contributes to the mutual fund literature by looking at performance persistence on a fund family level, allowing for individual equity, bond and balanced funds to be included under single family umbrellas. The study is conducted on the emerging Finnish mutual fund market, an environment in which the importance of superior fund family teams is likely to be accentuated. Using both non–parametric and parametric tests we find robust evidence of performance persistence for the fund families. Persistence is particularly strong in the first half of the investigation period, which highlights the importance of fund families at early stages of market development.

Cross-Border Competence Management in Emerging Markets: Voices from China and Russia

This book is on cross-border competence management in Russia and China. Corporations are facing a number of problems and challenges in their international operations, to which there typically are no simple solutions. For instance, they need to understand and respond to cultural and institutional diversity and ascertain that their foreign units are integrated with the rest of the corporation. Throughout this report we will discuss a range of challenges confronting firms as they seek to develop their capabilities to operate internationally. Some of the challenges are clearly case specific, and although this book aims to offer research-based advice to practicing managers there is a potential danger in applying lessons from other companies to the own firm. Our hope is that our analyses of the challenges facing Finnish corporations in China and Russia reported together with extensive quotes from our interviews and insights from other recent studies will help readers draw their own conclusions as to how to deal with issues related to competence management across borders. With this book we also aspire to contribute to the academic literature by providing new insights into cross-border competence management in general and the operations of Finnish corporations in Russia and China in particular.

Urban ecosystem services at the plant-soil interface

Continuing urbanization is a crucial driver of land transformation, having widespread impacts on virtually all ecosystems. Terrestrial ecosystems, including disturbed ones, are dependent on soils, which provide a multitude of ecosystem services. As soils are always directly and/or indirectly impacted through land transformation, land cover change causes soil change. Knowledge of ecosystem properties and functions in soils is increasing in importance as humans continue to concentrate into already densely-populated areas. Urban soils often have hampered functioning due to various disturbances resulting from human activity. Innovative solutions are needed to bring the lacking ecosystem services and quality of life to these urban environments. For instance, the ecosystem services of the urban green infrastructure may be substantially improved through knowledge of their functional properties. In the research forming this thesis, the impacts of four plant species (Picea abies, Calluna vulgaris, Lotus corniculatus and Holcus lanatus) on belowground biota and regulatory ecosystem services were investigated in two different urban soil types. The retention of inorganic nitrogen and phosphorus in the plant-soil system, decomposition of plant litter, primary production, and the degradation of polycyclic aromatic hydrocarbons (PAHs) were examined in the field and under laboratory conditions. The main objective of the research was to determine whether the different plant species (representing traits with varying litter decomposability) will give rise to dissimilar urban belowground communities with differing ecological functions. Microbial activity as well as the abundance of nematodes and enchytraeid worm biomass was highest below the legume L. corniculatus. L. corniculatus and the grass H. lanatus, producing labile or intermediate quality litter, enhanced the proportion of bacteria in the soil rhizosphere, while the recalcitrant litter-producing shrub C. vulgaris and the conifer P. abies stimulated the growth of fungi. The loss of nitrogen from the plant-soil system was small for H. lanatus and the combination of C. vulgaris + P. abies, irrespective of their energy channel composition. These presumably nitrogen-conservative plant species effectively diminished the leaching losses from the plant-soil systems with all the plant traits present. The laboratory experiment revealed a difference in N allocation between the plant traits: C. vulgaris and P. abies sequestered significantly more N in aboveground shoots in comparison to L. corniculatus and H. Lanatus. Plant rhizosphere effects were less clear for phosphorus retention, litter decomposition and the degradation of PAH compounds. This may be due to the relatively short experimental durations, as the maturation of the plant-soil system is likely to take a considerably longer time. The empirical studies of this thesis demonstrated that the soil communities rapidly reflect changes in plant coverage, and this has consequences for the functionality of soils. The energy channel composition of soils can be manipulated through plants, which was also supported by the results of the separate meta-analysis conducted in this thesis. However, further research is needed to understand the linkages between the biological community properties and ecosystem services in strongly human-modified systems.

A modell of socially optimal hydro reservoir usage - yelding socially optimal outcomes in nordic electricity markets

An extensive electricity transmission network facilitates electricity trading between Finland, Sweden, Norway and Denmark. Currently most of the area's power generation is traded at NordPool, where the trading volumes have steadily increased since the early 1990's, when the exchange was founded. The Nordic electricity is expected to follow the current trend and further integrate with the other European electricity markets. Hydro power is the source for roughly a half of the supply in the Nordic electricity market and most of the hydro is generated in Norway. The dominating role of hydro power distinguishes the Nordic electricity market from most of the other market places. Production of hydro power varies mainly due to hydro reservoirs and demand for electricity. Hydro reservoirs are affected by water inflows that differ each year. The hydro reservoirs explain remarkably the behaviour of the Nordic electricity markets. Therefore among others, Kauppi and Liski (2008) have developed a model that analyzes the behaviour of the markets using hydro reservoirs as explanatory factors. Their model includes, for example, welfare loss due to socially suboptimal hydro reservoir usage, socially optimal electricity price, hydro reservoir storage and thermal reservoir storage; that are referred as outcomes. However, the model does not explain the real market condition but rather an ideal situation. In the model the market is controlled by one agent, i.e. one agent controls all the power generation reserves; it is referred to as a socially optimal strategy. Article by Kauppi and Liski (2008) includes an assumption where an individual agent has a certain fraction of market power, e.g. 20 % or 30 %. In order to maintain the focus of this thesis, this part of their paper is omitted. The goal of this thesis is two-fold. Firstly we expand the results from the socially optimal strategy for years 2006-08, as the earlier study finishes in 2005. The second objective is to improve on the methods from the previous study. This thesis results several outcomes (SPOT-price and welfare loss, etc.) due to socially optimal actions. Welfare loss is interesting as it describes the inefficiency of the market. SPOT-price is an important output for the market participants as it often has an effect on end users' electricity bills. Another function is to modify and try to improve the model by means of using more accurate input data, e.g. by considering pollution trade rights effect on input data. After modifications to the model, new welfare losses are calculated and compared with the same results before the modifications. The hydro reservoir has the higher explanatory significance in the model followed by thermal power. In Nordic markets, thermal power reserves are mostly nuclear power and other thermal sources (coal, natural gas, oil, peat). It can be argued that hydro and thermal reservoirs determine electricity supply. Roughly speaking, the model takes into account electricity demand and supply, and several parameters related to them (water inflow, oil price, etc.), yielding finally the socially optimal outcomes. The author of this thesis is not aware of any similar model being tested before. There have been some other studies that are close to the Kauppi and Liski (2008) model, but those have a somewhat different focus. For example, a specific feature in the model is the focus on long-run capacity usage that differs from the previous studies on short-run market power. The closest study to the model is from California's wholesale electricity markets that, however, uses different methodology. Work is constructed as follows.