Monetary Policy, Stock Price Misalignments and Macroeconomic Instability

Perhaps the most fundamental prediction of financial theory is that the expected returns on financial assets are determined by the amount of risk contained in their payoffs. Assets with a riskier payoff pattern should provide higher expected returns than assets that are otherwise similar but provide payoffs that contain less risk. Financial theory also predicts that not all types of risks should be compensated with higher expected returns. It is well-known that the asset-specific risk can be diversified away, whereas the systematic component of risk that affects all assets remains even in large portfolios. Thus, the asset-specific risk that the investor can easily get rid of by diversification should not lead to higher expected returns, and only the shared movement of individual asset returns – the sensitivity of these assets to a set of systematic risk factors – should matter for asset pricing. It is within this framework that this thesis is situated. The first essay proposes a new systematic risk factor, hypothesized to be correlated with changes in investor risk aversion, which manages to explain a large fraction of the return variation in the cross-section of stock returns. The second and third essays investigate the pricing of asset-specific risk, uncorrelated with commonly used risk factors, in the cross-section of stock returns. The three essays mentioned above use stock market data from the U.S. The fourth essay presents a new total return stock market index for the Finnish stock market beginning from the opening of the Helsinki Stock Exchange in 1912 and ending in 1969 when other total return indices become available. Because a total return stock market index for the period prior to 1970 has not been available before, academics and stock market participants have not known the historical return that stock market investors in Finland could have achieved on their investments. The new stock market index presented in essay 4 makes it possible, for the first time, to calculate the historical average return on the Finnish stock market and to conduct further studies that require long time-series of data.

Carbon dioxide and methane exchange between a boreal pristine lake and the atmosphere

Lakes serve as sites for terrestrially fixed carbon to be remineralized and transferred back to the atmosphere. Their role in regional carbon cycling is especially important in the Boreal Zone, where lakes can cover up to 20% of the land area. Boreal lakes are often characterized by the presence of a brown water colour, which implies high levels of dissolved organic carbon from the surrounding terrestrial ecosystem, but the load of inorganic carbon from the catchment is largely unknown. Organic carbon is transformed to methane (CH4) and carbon dioxide (CO2) in biological processes that result in lake water gas concentrations that increase above atmospheric equilibrium, thus making boreal lakes as sources of these important greenhouse gases. However, flux estimates are often based on sporadic sampling and modelling and actual flux measurements are scarce. Thus, the detailed temporal flux dynamics of greenhouse gases are still largely unknown. ----- One aim here was to reveal the natural dynamics of CH4 and CO2 concentrations and fluxes in a small boreal lake. The other aim was to test the applicability of a measuring technique for CO2 flux, i.e. the eddy covariance (EC) technique, and a computational method for estimation of primary production and community respiration, both commonly used in terrestrial research, in this lake. Continuous surface water CO2 concentration measurements, also needed in free-water applications to estimate primary production and community respiration, were used over two open water periods in a study of CO2 concentration dynamics. Traditional methods were also used to measure gas concentration and fluxes. The study lake, Valkea-Kotinen, is a small, humic, headwater lake within an old-growth forest catchment with no local anthropogenic disturbance and thus possible changes in gas dynamics reflect the natural variability in lake ecosystems. CH4 accumulated under the ice and in the hypolimnion during summer stratification. The surface water CH4 concentration was always above atmospheric equilibrium and thus the lake was a continuous source of CH4 to the atmosphere. However, the annual CH4 fluxes were small, i.e. 0.11 mol m-2 yr-1, and the timing of fluxes differed from that of other published estimates. The highest fluxes are usually measured in spring after ice melt but in Lake Valkea-Kotinen CH4 was effectively oxidised in spring and highest effluxes occurred in autumn after summer stratification period. CO2 also accumulated under the ice and the hypolimnetic CO2 concentration increased steadily during stratification period. The surface water CO2 concentration was highest in spring and in autumn, whereas during the stable stratification it was sometimes under atmospheric equilibrium. It showed diel, daily and seasonal variation; the diel cycle was clearly driven by light and thus reflected the metabolism of the lacustrine ecosystem. However, the diel cycle was sometimes blurred by injection of hypolimnetic water rich in CO2 and the surface water CO2 concentration was thus controlled by stratification dynamics. The highest CO2 fluxes were measured in spring, autumn and during those hypolimnetic injections causing bursts of CO2 comparable with the spring and autumn fluxes. The annual fluxes averaged 77 (±11 SD) g C m-2 yr-1. In estimating the importance of the lake in recycling terrestrial carbon, the flux was normalized to the catchment area and this normalized flux was compared with net ecosystem production estimates of -50 to 200 g C m-2 yr-1 from unmanaged forests in corresponding temperature and precipitation regimes in the literature. Within this range the flux of Lake Valkea-Kotinen yielded from the increase in source of the surrounding forest by 20% to decrease in sink by 5%. The free water approach gave primary production and community respiration estimates of 5- and 16-fold, respectively, compared with traditional bottle incubations during a 5-day testing period in autumn. The results are in parallel with findings in the literature. Both methods adopted from the terrestrial community also proved useful in lake studies. A large percentage of the EC data was rejected, due to the unfulfilled prerequisites of the method. However, the amount of data accepted remained large compared with what would be feasible with traditional methods. Use of the EC method revealed underestimation of the widely used gas exchange model and suggests simultaneous measurements of actual turbulence at the water surface with comparison of the different gas flux methods to revise the parameterization of the gas transfer velocity used in the models.

Corporate Brand Repositioning with CSR as the Differentiating Factor: A Study on Consumer Perceptions

Purpose – This research paper studies how the strategy of repositioning enables marketers to communicate CSR as their brand’s differentiating factor. It aims at understanding how consumer perceptions can be managed to generate brand value through corporate brand repositioning when CSR is the differentiating factor. The purpose of this paper is to answer the following research question: How can consumer perceptions be managed to generate brand value through corporate brand repositioning when CSR is the differentiating factor? The two research objectives were: 1. to build a model, which describes the different components of consumer perceptions involved in generation of brand value through repositioning when CSR is the differentiating factor, 2. to identify the most critical components in the context of the case company, IKEA for generation of brand value during the process of corporate brand repositioning Design/methodology/approach – This paper is based on the literature review covering the logic of brand value generation, repositioning strategy and consumer perceptions connected to CSR activities. A key concept of the positioning theory, the brand’s differentiating factor, was explored. Previous studies have concluded that desirability of the differentiating factor largely determines the level of brand value-creation for the target customers. The criterion of desirability is based on three dimensions: relevance, distinctiveness and believability. A model was built in terms of these desirability dimensions. This paper takes a case study approach where the predefined theoretical framework is tested using IKEA as the case company. When developing insights on the multifaceted nature of brand perceptions, personal interviews and individual probing are vital. They enable the interviewees to reflect on their feelings and perceptions with their own words. This is why the data collection was based on means-end type of questioning. Qualitative interviews were conducted with 12 consumers. Findings – The paper highlights five critical components that may determine whether IKEA will fail in its repositioning efforts. The majority of the critical components involved believability perceptions. Hence, according to the findings, establishing credibility and trustworthiness for the brand in the context of CSR seems primary. The most critical components identified of the believability aspect were: providing proof of responsible codes of conduct via conducting specific and concrete CSR actions, connecting the company’s products and the social cause, and building a linkage between the initial and new positioning while also weakening the old positioning. Originality/value – Marketers’ obligation is to prepare the company for future demands. Companies all over the globe have recognized the durable trend of responsibility and sustainability. Consumer´s worry about the environmental and social impact of modern lifestyles is growing. This is why Corporate Social Responsibility (CSR) provides brands an important source of differentiation and strength in the future. The strategy of repositioning enables marketers to communicate CSR as their brand’s differentiating factor. This study aimed at understanding how consumer perceptions can be managed to generate brand value through corporate brand repositioning when CSR is the differentiating factor.

Dynamic Factor Models and Forecasting Finnish Macroeconomic Variables

In recent years, thanks to developments in information technology, large-dimensional datasets have been increasingly available. Researchers now have access to thousands of economic series and the information contained in them can be used to create accurate forecasts and to test economic theories. To exploit this large amount of information, researchers and policymakers need an appropriate econometric model.Usual time series models, vector autoregression for example, cannot incorporate more than a few variables. There are two ways to solve this problem: use variable selection procedures or gather the information contained in the series to create an index model. This thesis focuses on one of the most widespread index model, the dynamic factor model (the theory behind this model, based on previous literature, is the core of the first part of this study), and its use in forecasting Finnish macroeconomic indicators (which is the focus of the second part of the thesis). In particular, I forecast economic activity indicators (e.g. GDP) and price indicators (e.g. consumer price index), from 3 large Finnish datasets. The first dataset contains a large series of aggregated data obtained from the Statistics Finland database. The second dataset is composed by economic indicators from Bank of Finland. The last dataset is formed by disaggregated data from Statistic Finland, which I call micro dataset. The forecasts are computed following a two steps procedure: in the first step I estimate a set of common factors from the original dataset. The second step consists in formulating forecasting equations including the factors extracted previously. The predictions are evaluated using relative mean squared forecast error, where the benchmark model is a univariate autoregressive model. The results are dataset-dependent. The forecasts based on factor models are very accurate for the first dataset (the Statistics Finland one), while they are considerably worse for the Bank of Finland dataset. The forecasts derived from the micro dataset are still good, but less accurate than the ones obtained in the first case. This work leads to multiple research developments. The results here obtained can be replicated for longer datasets. The non-aggregated data can be represented in an even more disaggregated form (firm level). Finally, the use of the micro data, one of the major contributions of this thesis, can be useful in the imputation of missing values and the creation of flash estimates of macroeconomic indicator (nowcasting).

Factor V Leiden as risk factor for pregnancy complications : Epidemiological study of Finnish women

Factor V Leiden (FV Leiden) is the most common inherited thrombophilia in Caucasians increasing the risk for venous thrombosis. Its prevalence in Finland is 2-3%. FV Leiden has also been associated with several pregnancy complications. However, the importance of FV Leiden as their risk factor is unclear. The aim of the study was to assess FV Leiden as a risk factor for pregnancy complications in which prothrombotic mechanisms may play a part. Specifically, the study aimed to assess the magnitude of the risk, if any, associated with FV Leiden for pregnancy-associated venous thrombosis, pre-eclampsia, unexplained stillbirth, and preterm birth. The study was conducted as a nested case-control study within a fixed cohort of 100,000 consecutive pregnant women in Finland. The study was approved by the ethics committee of the Finnish Red Cross Blood Service and by the Ministry of Social Affairs and Health. All participants gave written informed consent. Cases and controls were identified by using national registers. The diagnoses of the 100,000 women identified from the National Register of Blood Group and Blood Group Antibodies of Pregnant Women were obtained from the National Hospital Discharge Register. Participants gave blood samples for DNA tests and filled in questionnaires. The medical records of the participants were reviewed in 49 maternity hospitals in Finland. Genotyping was performed in the Finnish Genome Center. When evaluating pregnancy-associated venous thrombosis (34 cases, 641 controls), FV Leiden was associated with 11-fold risk (OR 11.6, 95% CI 3.6-33.6). When only analyzing women with first venous thrombosis, the risk was 6-fold (OR 5.8, 95% CI 1.6-21.8). The risk was increased by common risk factors, the risk being highest in women with FV Leiden and pre-pregnancy BMI over 30 kg/m2 (75-fold), and in women with FV Leiden and age over 35 years (60-fold). When evaluating pre-eclampsia (248 cases, 679 controls), FV Leiden was associated with a trend of increased risk (OR 1.7, 95% CI 0.8-3.9), but the association was not statistically significant. When evaluating unexplained stillbirth (44 cases, 776 controls), FV Leiden was associated with over 3-fold risk (OR 3.8, 95% CI 1.2-11.6). When evaluating preterm birth (324 cases, 752 controls), FV Leiden was associated with over 2-fold risk (OR 2.4, 95% CI 1.3-4.6). FV Leiden was especially associated with late preterm birth (32-36 weeks of gestation), but not with early preterm birth (< 32 weeks of gestation). The results of this large population-based study can be generalized to Finnish women with pregnancies continuing beyond first trimester, and may be applied to Caucasian women in populations with similar prevalence of FV Leiden and high standard prenatal care.

Mammalian Mat1 subunit of Transcription Factor IIH in gene-specific and general transcription

All protein-encoding genes in eukaryotes are transcribed into messenger RNA (mRNA) by RNA Polymerase II (RNAP II), whose activity therefore needs to be tightly controlled. An important and only partially understood level of regulation is the multiple phosphorylations of RNAP II large subunit C-terminal domain (CTD). Sequential phosphorylations regulate transcription initiation and elongation, and recruit factors involved in co-transcriptional processing of mRNA. Based largely on studies in yeast models and in vitro, the kinase activity responsible for the phosphorylation of the serine-5 (Ser5) residues of RNAP II CTD has been attributed to the Mat1/Cdk7/CycH trimer as part of Transcription Factor IIH. However, due to the lack of good mammalian genetic models, the roles of both RNAP II Ser5 phosphorylation as well as TFIIH kinase in transcription have provided ambiguous results and the in vivo kinase of Ser5 has remained elusive. The primary objective of this study was to elucidate the role of mammalian TFIIH, and specifically the Mat1 subunit in CTD phosphorylation and general RNAP II-mediated transcription. The approach utilized the Cre-LoxP system to conditionally delete murine Mat1 in cardiomyocytes and hepatocytes in vivo and and in cell culture models. The results identify the TFIIH kinase as the major mammalian Ser5 kinase and demonstrate its requirement for general transcription, noted by the use of nascent mRNA labeling. Also a role for Mat1 in regulating general mRNA turnover was identified, providing a possible rationale for earlier negative findings. A secondary objective was to identify potential gene- and tissue-specific roles of Mat1 and the TFIIH kinase through the use of tissue-specific Mat1 deletion. Mat1 was found to be required for the transcriptional function of PGC-1 in cardiomyocytes. Transriptional activation of lipogenic SREBP1 target genes following Mat1 deletion in hepatocytes revealed a repressive role for Mat1apparently mediated via co-repressor DMAP1 and the DNA methyltransferase Dnmt1. Finally, Mat1 and Cdk7 were also identified as a negative regulators of adipocyte differentiation through the inhibitory phosphorylation of Peroxisome proliferator-activated receptor (PPAR) γ. Together, these results demonstrate gene- and tissue-specific roles for the Mat1 subunit of TFIIH and open up new therapeutic possibilities in the treatment of diseases such as type II diabetes, hepatosteatosis and obesity.

Production process of Scots pine.

The accompanying collective research report is the result of the research project in 1986­90 between The Finnish Academy and the former Soviet Academy of Sciences. The project was organized around common field work in Finland and in the former Soviet Union and theoretical analyses of tree growth determining processes. Based on theoretical analyses, dynamic stand growth models were made and their parameters were determined utilizing the field results. Annual cycle affects the tree growth. Our theoretical approach was based on adaptation to local climate conditions from Lapland to South Russia. The initiation of growth was described as a simple low and high temperature accumulation driven model. Linking the theoretical model with long term temperature data allowed us to analyze what type of temperature response produced favorable outcome in different climates. Initiation of growth consumes the carbohydrate reserves in plants. We measured the dynamics of insoluble and soluble sugars in the very northern and Karelian conditions. Clear cyclical pattern was observed but the differences between locations were surprisingly small. Analysis of field measurements of CO2 exchange showed that irradiance is the dominating factor causing variation in photosynthetic rate in natural conditions during summer. The effect of other factors is so small that they can be omitted without any considerable loss of accuracy. A special experiment carried out in Hyytiälä showed that the needle living space, defined as the ratio between the shoot cylindric volume and needle surface area, correlates with the shoot photosynthesis. The penetration of irradiance into Scots pine canopy is a complicated phenomenon because of the movement of the sun on the sky and the complicated structure of branches and needles. A moderately simple but balanced forest radiation regime submodel was constructed. It consists of the tree crown and forest structure, the gap probability calculation and the consideration of spatial and temporal variation of radiation inside the forest. The common field excursions in different geographical regions resulted in a lot of experimental data of regularities of woody structures. The water transport seems to be a good common factor to analyse these properties of tree structure. There are evident regressions between cross-sectional areas measured at different locations along the water pathway from fine roots to needles. The observed regressions have clear geographical trends. For example, the same cross-sectional area can support three times higher needle mass in South Russia than in Lapland. Geographical trends can also be seen in shoot and needle structure. Analysis of data published by several Russian authors show, that one ton of needles transpire 42 ton of water a year. This annual amount of transpiration seems to be independent of geographical location, year and site conditions. The produced theoretical and experimental material is utilised in the development of stand growth model that describes the growth and development of Scots pine stands in Finland and the former Soviet Union. The core of the model is carbon and nutrient balances. This means that carbon obtained in photosynthesis is consumed for growth and maintenance and nutrients are taken according to the metabolic needs. The annual photosynthetic production by trees in the stand is determined as a function of irradiance and shading during the active period. The utilisation of the annual photosynthetic production to the growth of different components of trees is based on structural regularities. Since the fundamental metabolic processes are the same in all locations the same growth model structure can be applied in the large range of Scots pine. The annual photosynthetic production and structural regularities determining the allocation of resources have geographical features. The common field measurements enable the application of the model to the analysis of growth and development of stands growing on the five locations of experiments. The model enables the analysis of geographical differences in the growth of Scots pine. For example, the annual photosynthetic production of a 100-year-old stand at Voronez is 3.5 times higher than in Lapland. The share consumed to needle growth (30 %) and to growth of branches (5 %) seems to be the same in all locations. In contrast, the share of fine roots is decreasing when moving from north to south. It is 20 % in Lapland, 15 % in Hyytiälä Central Finland and Kentjärvi Karelia and 15 % in Voronez South Russia. The stem masses (115­113 ton/ha) are rather similar in Hyytiälä, Kentjärvi and Voronez, but rather low (50 ton/ha) in Lapland. In Voronez the height of the trees reach 29 m being in Hyytiälä and Kentjärvi 22 m and in Lapland only 14 m. The present approach enables utilization of structural and functional knowledge, gained in places of intensive research, in the analysis of growth and development of any stand. This opens new possibilities for growth research and also for applications in forestry practice.