Acceleration of the Cosmological Expansion as an Effect of Inhomogeneities

The cosmological observations of light from type Ia supernovae, the cosmic microwave background and the galaxy distribution seem to indicate that the expansion of the universe has accelerated during the latter half of its age. Within standard cosmology, this is ascribed to dark energy, a uniform fluid with large negative pressure that gives rise to repulsive gravity but also entails serious theoretical problems. Understanding the physical origin of the perceived accelerated expansion has been described as one of the greatest challenges in theoretical physics today. In this thesis, we discuss the possibility that, instead of dark energy, the acceleration would be caused by an effect of the nonlinear structure formation on light, ignored in the standard cosmology. A physical interpretation of the effect goes as follows: due to the clustering of the initially smooth matter with time as filaments of opaque galaxies, the regions where the detectable light travels get emptier and emptier relative to the average. As the developing voids begin to expand the faster the lower their matter density becomes, the expansion can then accelerate along our line of sight without local acceleration, potentially obviating the need for the mysterious dark energy. In addition to offering a natural physical interpretation to the acceleration, we have further shown that an inhomogeneous model is able to match the main cosmological observations without dark energy, resulting in a concordant picture of the universe with 90% dark matter, 10% baryonic matter and 15 billion years as the age of the universe. The model also provides a smart solution to the coincidence problem: if induced by the voids, the onset of the perceived acceleration naturally coincides with the formation of the voids. Additional future tests include quantitative predictions for angular deviations and a theoretical derivation of the model to reduce the required phenomenology. A spin-off of the research is a physical classification of the cosmic inhomogeneities according to how they could induce accelerated expansion along our line of sight. We have identified three physically distinct mechanisms: global acceleration due to spatial variations in the expansion rate, faster local expansion rate due to a large local void and biased light propagation through voids that expand faster than the average. A general conclusion is that the physical properties crucial to account for the perceived acceleration are the growth of the inhomogeneities and the inhomogeneities in the expansion rate. The existence of these properties in the real universe is supported by both observational data and theoretical calculations. However, better data and more sophisticated theoretical models are required to vindicate or disprove the conjecture that the inhomogeneities are responsible for the acceleration.

Shock acceleration in the solar corona

In this thesis acceleration of energetic particles at collisionless shock waves in space plasmas is studied using numerical simulations, with an emphasis on physical conditions applicable to the solar corona. The thesis consists of four research articles and an introductory part that summarises the main findings reached in the articles and discusses them with respect to theory of diffusive shock acceleration and observations. This thesis gives a brief review of observational properties of solar energetic particles and discusses a few open questions that are currently under active research. For example, in a few large gradual solar energetic particle events the heavy ion abundance ratios and average charge states show characteristics at high energies that are typically associated with flare-accelerated particles, i.e. impulsive events. The role of flare-accelerated particles in these and other gradual events has been discussed a lot in the scientific community, and it has been questioned if and how the observed features can be explained in terms of diffusive shock acceleration at shock waves driven by coronal mass ejections. The most extreme solar energetic particle events are the so-called ground level enhancements where particle receive so high energies that they can penetrate all the way through Earth's atmosphere and increase radiation levels at the surface. It is not known what conditions are required for acceleration into GeV/nuc energies, and the presence of both very fast coronal mass ejections and X-class solar flares makes it difficult to determine what is the role of these two accelerators in ground level enhancements. The theory of diffusive shock acceleration is reviewed and its predictions discussed with respect to the observed particle characteristics. We discuss how shock waves can be modeled and describe in detail the numerical model developed by the author. The main part of this thesis consists of the four scientific articles that are based on results of the numerical shock acceleration model developed by the author. The novel feature of this model is that it can handle complex magnetic geometries which are found, for example, near active regions in the solar corona. We show that, according to our simulations, diffusive shock acceleration can explain the observed variations in abundance ratios and average charge states, provided that suitable seed particles and magnetic geometry are available for the acceleration process in the solar corona. We also derive an injection threshold for diffusive shock acceleration that agrees with our simulation results very well, and which is valid under weakly turbulent conditions. Finally, we show that diffusive shock acceleration can produce GeV/nuc energies under suitable coronal conditions, which include the presence of energetic seed particles, a favourable magnetic geometry, and an enhanced level of ambient turbulence.

The Negative News Threshold - an Explanation for Negative Skewness in Stock Returns

A vast literature documents negative skewness and excess kurtosis in stock return distributions on several markets. We approach the issue of negative skewness from a different angle than in previous studies by suggesting a model, which we denote the “negative news threshold” hypothesis, that builds on asymmetrically distributed information and symmetric market responses. Our empirical tests reveal that returns for days when non-scheduled news are disclosed are the source of negative skewness in stock returns. This finding lends solid support to our model and suggests that negative skewness in stock returns is induced by asymmetries in the news disclosure policies of firm management.

Measurement of acceleration while walking as an automated method for gait assessment in dairy cattle

The aims were to determine whether measures of acceleration of the legs and back of dairy cows while they walk could help detect changes in gait or locomotion associated with lameness and differences in the walking surface. In 2 experiments, 12 or 24 multiparous dairy cows were fitted with five 3-dimensional accelerometers, 1 attached to each leg and 1 to the back, and acceleration data were collected while cows walked in a straight line on concrete (experiment 1) or on both concrete and rubber (experiment 2). Cows were video-recorded while walking to assess overall gait, asymmetry of the steps, and walking speed. In experiment 1, cows were selected to maximize the range of gait scores, whereas no clinically lame cows were enrolled in experiment 2. For each accelerometer location, overall acceleration was calculated as the magnitude of the 3-dimensional acceleration vector and the variance of overall acceleration, as well as the asymmetry of variance of acceleration within the front and rear pair of legs. In experiment 1, the asymmetry of variance of acceleration in the front and rear legs was positively correlated with overall gait and the visually assessed asymmetry of the steps (r ≥0.6). Walking speed was negatively correlated with the asymmetry of variance of the rear legs (r=−0.8) and positively correlated with the acceleration and the variance of acceleration of each leg and back (r ≥0.7). In experiment 2, cows had lower gait scores [2.3 vs. 2.6; standard error of the difference (SED)=0.1, measured on a 5-point scale] and lower scores for asymmetry of the steps (18.0 vs. 23.1; SED=2.2, measured on a continuous 100-unit scale) when they walked on rubber compared with concrete, and their walking speed increased (1.28 vs. 1.22m/s; SED=0.02). The acceleration of the front (1.67 vs. 1.72g; SED=0.02) and rear (1.62 vs. 1.67g; SED=0.02) legs and the variance of acceleration of the rear legs (0.88 vs. 0.94g; SED=0.03) were lower when cows walked on rubber compared with concrete. Despite the improvements in gait score that occurred when cows walked on rubber, the asymmetry of variance of acceleration of the front leg was higher (15.2 vs. 10.4%; SED=2.0). The difference in walking speed between concrete and rubber correlated with the difference in the mean acceleration and the difference in the variance of acceleration of the legs and back (r ≥0.6). Three-dimensional accelerometers seem to be a promising tool for lameness detection on farm and to study walking surfaces, especially when attached to a leg.

Liikkumisen ja kokemusten yhteys virtuaaliympäristöissä

The aim of this study was to build a model and analyze how users move in a virtual environment and to explore the experiential dimensions connected with different ways of moving. Due to the lack of previous research on this subject, this was an explorative study. This study also aimed to identify different ways how users move in virtual environments and the background variables connected to them. It was hypothesized that fluent movement in virtual environments is connected to high presence, skill and challenge assessments. Test participants (n = 68) were mostly highly educated young adults. A virtual environment was built using a CAVE -type virtual reality interface. The task was to search for objects that do not belong into a normal house. The participants movement in the virtual house was recorded on a computer. Movement was modelled using a cluster analysis of information entropy based movement measurements, acceleration, amount of stops and time spent being stationary. The experiential dimensions were measured using the EVEQ -questionnaire. We were able to identify four different ways of moving in virtual environments. In respect of background variables, the four groups differed only in the amount of weekly computer usage. However, fluent movement in virtual environments was connected to a high sense of presence. Furthermore, participants who moved fluently in the environment assessed their skills as being high and regarded the use of virtual environment as challenging. The results indicate that different ways of moving affects how people experience virtual environments. Consequently the participants assessment of their skills and level of challenge have an impact on the affective evaluation of the situation at hand. Entropy measures have not been previously applied when studying movement, and in addition the role of movement on the experiential dimensions of virtual environments is an unexplored subject. The movement analysis method introduced here is applicable to other research problems. Finally, this study expands on our knowledge of the special characteristics connected with the experiential dimensions of virtual environments.

Essays on Finnish Economic Growth and Productivity, 1860-2005

This study examines Finnish economic growth. The key driver of economic growth was productivity. And the major engine of productivity growth was technology, especially the general purpose technologies (GPTs) electricity and ICT. A new GPT builds on previous knowledge, yet often in an uncertain, punctuated, fashion. Economic history, as well as the Finnish data analyzed in this study, teaches that growth is not a smooth process but is subject to episodes of sharp acceleration and deceleration which are associated with the arrival, diffusion and exhaustion of new general purpose technologies. These are technologies that affect the whole economy by transforming both household life and the ways in which firms conduct business. The findings of previous research, that Finnish economic growth exhibited late industrialisation and significant structural changes were corroborated by this study. Yet, it was not solely a story of manufacturing and structural change was more the effect of than the cause for economic growth. We offered an empirical resolution to the Artto-Pohjola paradox as we showed that a high rate of return on capital was combined with low capital productivity growth. This result is important in understanding Finnish economic growth 1975-90. The main contribution of this thesis was the growth accounting results on the impact of ICT on growth and productivity, as well as the comparison of electricity and ICT. It was shown that ICT s contribution to GDP growth was almost twice as large as electricity s contribution over comparable periods of time. Finland has thus been far more successful as an ICT producer than a producer of electricity. Unfortunately in the use of ICT the results were still more modest than for electricity. During the end of the period considered in this thesis, Finland switched from resource-based to ICT-based growth. However, given the large dependency on the ICT-producing sector, the ongoing outsourcing of ICT production to low wage countries provides a threat to productivity performance in the future. For a developed country only change is constant and history teaches us that it is likely that Finland is obliged to reorganize its economy once again in the digital era.

Time to rest : Signals in shoot apex developmental transitions underlying dormancy

Vuodenajat rytmittävät monivuotisten kasvien elämää pohjoisella pallonpuoliskolla, jolla varmin merkki lähestyvästä talvikaudesta on asteittain lyhenevä päivänpituus. Kun päivänpituus on lyhentynyt tiettyyn raja-arvoon saakka, kasvu hiipuu ja kasvin kehityksessä tapahtuu suuria muutoksia. Väitöskirjatyössäni tutkittiin mekanismeja, jotka liittyvät pituuskasvun päättymiseen, silmujen lepotilan kehittymiseen ja kärkisilmun muodostumiseen hybridihaavan ja koivuntaimilla lyhyen päivänpituuden seurauksena kasvihuoneolosuhteissa. Vain lepotilaiset silmut selviytyvät luonnossa ankaran talvikauden yli, joten etenkin lepotilan kehittymisen tutkiminen on keskeistä pyrittäessä selvittämään monivuotisille kasveille tyypillisen kasvutavan mekanismeja. Jo pitkään on tiedetty, että täysikasvuiset lehdet vastaanottavat tiedon päivänpituudesta ja lähettävät signaaleja varren johtojänteissä ylöspäin kohti kasvin kärkiosaa. Sen sijaan varren kärjen ja kärkikasvupisteen roolia lepotilan kehittymisessä on selvitetty vain vähän. Kuitenkin juuri kärkikasvupisteen selviytyminen vuodesta toiseen on tärkeää, koska sen jakautumiskykyiset solukot tuottavat kasvin maanpäälliset osat. Tässä työssä tehdyissä varttamiskokeissa osoitettiin, että varren kärki ei ainoastaan vastaanota signaaleja lehdistä ja ajoita toimintaansa niiden mukaan, vaan myös kärjellä itsellään on aktiivinen rooli lepotilan kehittymisessä. Erityisesti kiinnitettiin huomiota kärkikasvupisteen eri alueiden, ns. apikaalimeristeemin ja rib-meristeemin erilaisiin tehtäviin ja pääteltiin, että molemmat vaikuttavat lepotilan kehittymiseen. Kokeissa käytettiin normaalien hybridihaapojen lisäksi siirtogeenisiä hybridihaapoja, jotka eivät lopeta kasvuaan lyhyt päivä –olosuhteissa. Siirtogeeniset hybridihaavat ilmensivät voimakkaasti fytokromi A -nimistä valon vastaanottajamolekyyliä rib-meristeemin alueella, mikä saattoi osaltaan vaikuttaa poikkeavaan pituuskasvukäyttäytymiseen. Myös useiden lepotilan kehittymiseen liittyvien geenien ilmenemisessä havaittiin poikkeavuuksia verrattuna ei-siirtogeenisiin kontrolleihin, joiden silmuissa kehittyi lepotila lyhyt päivä –altistuksen seurauksena. Väitöskirjatyössäni havaittiin, että myös kaasumainen kasvihormoni etyleeni toimii viestinvälittäjänä silmujen lepotilan kehittymisessä ja vaikuttaa etenkin lepotilan oikeaan ajoittumiseen. Etyleenillä huomattiin olevan määräävä rooli päätesilmun muodostumisessa: siirtogeeniset koivut, jotka eivät aisti etyleeniä, eivät muodostaneet päätesilmua. Silti siirtogeeniset koivut vaipuivat lepotilaan, joskin myöhemmin kuin ei-siirtogeeniset kontrollit. Tämän perusteella todettiin, että lepotilan ja päätesilmun kehittyminen ovat erillisiä kehitystapahtumia, vaikka ne saattavatkin ajoittua osaksi päällekkäin.

Evaluation of Vestibular Function with Visual Feedback Posturography and Motorized Head Impulse Test.

Objectives: To evaluate the applicability of visual feedback posturography (VFP) for quantification of postural control, and to characterize the horizontal angular vestibulo-ocular reflex (AVOR) by use of a novel motorized head impulse test (MHIT). Methods: In VFP, subjects standing on a platform were instructed to move their center of gravity to symmetrically placed peripheral targets as fast and accurately as possible. The active postural control movements were measured in healthy subjects (n = 23), and in patients with vestibular schwannoma (VS) before surgery (n = 49), one month (n = 17), and three months (n = 36) after surgery. In MHIT we recorded head and eye position during motorized head impulses (mean velocity of 170º/s and acceleration of 1 550º/s²) in healthy subjects (n = 22), in patients with VS before surgery (n = 38) and about four months afterwards (n = 27). The gain, asymmetry and latency in MHIT were calculated. Results: The intraclass correlation coefficient for VFP parameters during repeated tests was significant (r = 0.78-0.96; p < 0.01), although two of four VFP parameters improved slightly during five test sessions in controls. At least one VFP parameter was abnormal pre- and postoperatively in almost half the patients, and these abnormal preoperative VFP results correlated significantly with abnormal postoperative results. The mean accuracy in postural control in patients was reduced pre- and postoperatively. A significant side difference with VFP was evident in 10% of patients. In the MHIT, the normal gain was close to unity, the asymmetry in gain was within 10%, and the latency was a mean ± standard deviation 3.4 ± 6.3 milliseconds. Ipsilateral gain or asymmetry in gain was preoperatively abnormal in 71% of patients, whereas it was abnormal in every patient after surgery. Preoperative gain (mean ± 95% confidence interval) was significantly lowered to 0.83 ± 0.08 on the ipsilateral side compared to 0.98 ± 0.06 on the contralateral side. The ipsilateral postoperative mean gain of 0.53 ± 0.05 was significantly different from preoperative gain. Conclusion: The VFP is a repeatable, quantitative method to assess active postural control within individual subjects. The mean postural control in patients with VS was disturbed before and after surgery, although not severely. Side difference in postural control in the VFP was rare. The horizontal AVOR results in healthy subjects and in patients with VS, measured with MHIT, were in agreement with published data achieved using other techniques with head impulse stimuli. The MHIT is a non-invasive method which allows reliable clinical assessment of the horizontal AVOR.

On gravitational fields of stars in f(R) gravity theories

Einstein's general relativity is a classical theory of gravitation: it is a postulate on the coupling between the four-dimensional, continuos spacetime and the matter fields in the universe, and it yields their dynamical evolution. It is believed that general relativity must be replaced by a quantum theory of gravity at least at extremely high energies of the early universe and at regions of strong curvature of spacetime, cf. black holes. Various attempts to quantize gravity, including conceptually new models such as string theory, have suggested that modification to general relativity might show up even at lower energy scales. On the other hand, also the late time acceleration of the expansion of the universe, known as the dark energy problem, might originate from new gravitational physics. Thus, although there has been no direct experimental evidence contradicting general relativity so far - on the contrary, it has passed a variety of observational tests - it is a question worth asking, why should the effective theory of gravity be of the exact form of general relativity? If general relativity is modified, how do the predictions of the theory change? Furthermore, how far can we go with the changes before we are face with contradictions with the experiments? Along with the changes, could there be new phenomena, which we could measure to find hints of the form of the quantum theory of gravity? This thesis is on a class of modified gravity theories called f(R) models, and in particular on the effects of changing the theory of gravity on stellar solutions. It is discussed how experimental constraints from the measurements in the Solar System restrict the form of f(R) theories. Moreover, it is shown that models, which do not differ from general relativity at the weak field scale of the Solar System, can produce very different predictions for dense stars like neutron stars. Due to the nature of f(R) models, the role of independent connection of the spacetime is emphasized throughout the thesis.

Formation of structure in dark energy cosmologies

Acceleration of the universe has been established but not explained. During the past few years precise cosmological experiments have confirmed the standard big bang scenario of a flat universe undergoing an inflationary expansion in its earliest stages, where the perturbations are generated that eventually form into galaxies and other structure in matter, most of which is non-baryonic dark matter. Curiously, the universe has presently entered into another period of acceleration. Such a result is inferred from observations of extra-galactic supernovae and is independently supported by the cosmic microwave background radiation and large scale structure data. It seems there is a positive cosmological constant speeding up the universal expansion of space. Then the vacuum energy density the constant describes should be about a dozen times the present energy density in visible matter, but particle physics scales are enormously larger than that. This is the cosmological constant problem, perhaps the greatest mystery of contemporary cosmology. In this thesis we will explore alternative agents of the acceleration. Generically, such are called dark energy. If some symmetry turns off vacuum energy, its value is not a problem but one needs some dark energy. Such could be a scalar field dynamically evolving in its potential, or some other exotic constituent exhibiting negative pressure. Another option is to assume that gravity at cosmological scales is not well described by general relativity. In a modified theory of gravity one might find the expansion rate increasing in a universe filled by just dark matter and baryons. Such possibilities are taken here under investigation. The main goal is to uncover observational consequences of different models of dark energy, the emphasis being on their implications for the formation of large-scale structure of the universe. Possible properties of dark energy are investigated using phenomenological paramaterizations, but several specific models are also considered in detail. Difficulties in unifying dark matter and dark energy into a single concept are pointed out. Considerable attention is on modifications of gravity resulting in second order field equations. It is shown that in a general class of such models the viable ones represent effectively the cosmological constant, while from another class one might find interesting modifications of the standard cosmological scenario yet allowed by observations. The thesis consists of seven research papers preceded by an introductory discussion.

Impact of cosmic inhomogeneities on SNe observations

We study the impact of cosmic inhomogeneities on the interpretation of SNe observations. We build an inhomogeneous universe model that can confront supernova data and yet is reasonably well compatible with the Copernican Principle. Our model combines a relatively small local void, that gives apparent acceleration at low redshifts, with a meatball model that gives sizeable lensing (dimming) at high redshifts. Together these two elements, which focus on different effects of voids on the data, allow the model to mimic the concordance model.

Essays on Stock Market Reactions to New Information

A functioning stock market is an essential component of a competitive economy, since it provides a mechanism for allocating the economy’s capital stock. In an ideal situation, the stock market will steer capital in a manner that maximizes the total utility of the economy. As prices of traded stocks depend on and vary with information available to investors, it is apparent that information plays a crucial role in a functioning stock market. However, even though information indisputably matters, several issues regarding how stock markets process and react to new information still remain unanswered. The purpose of this thesis is to explore the link between new information and stock market reactions. The first essay utilizes new methodological tools in order to investigate the average reaction of investors to new financial statement information. The second essay explores the behavior of different types of investors when new financial statement information is disclosed to the market. The third essay looks into the interrelation between investor size, behavior and overconfidence. The fourth essay approaches the puzzle of negative skewness in stock returns from an altogether different angle than previous studies. The first essay presents evidence of the second derivatives of some financial statement signals containing more information than the first derivatives. Further, empirical evidence also indicates that some of the investigated signals proxy risk while others contain information priced with a delay. The second essay documents different categories of investors demonstrating systematical differences in their behavior when new financial statement information arrives to the market. In addition, a theoretical model building on differences in investor overconfidence is put forward in order to explain the observed behavior. The third essay shows that investor size describes investor behavior very well. This finding is predicted by the model proposed in the second essay, and hence strengthens the model. The behavioral differences between investors of different size furthermore have significant economic implications. Finally, the fourth essay finds strong evidence of management news disclosure practices causing negative skewness in stock returns.

Essays on the Modeling and Prediction of Volatility and Higher Moments of Stock Returns (summary section only)

One of the most fundamental and widely accepted ideas in finance is that investors are compensated through higher returns for taking on non-diversifiable risk. Hence the quantification, modeling and prediction of risk have been, and still are one of the most prolific research areas in financial economics. It was recognized early on that there are predictable patterns in the variance of speculative prices. Later research has shown that there may also be systematic variation in the skewness and kurtosis of financial returns. Lacking in the literature so far, is an out-of-sample forecast evaluation of the potential benefits of these new more complicated models with time-varying higher moments. Such an evaluation is the topic of this dissertation. Essay 1 investigates the forecast performance of the GARCH (1,1) model when estimated with 9 different error distributions on Standard and Poor’s 500 Index Future returns. By utilizing the theory of realized variance to construct an appropriate ex post measure of variance from intra-day data it is shown that allowing for a leptokurtic error distribution leads to significant improvements in variance forecasts compared to using the normal distribution. This result holds for daily, weekly as well as monthly forecast horizons. It is also found that allowing for skewness and time variation in the higher moments of the distribution does not further improve forecasts. In Essay 2, by using 20 years of daily Standard and Poor 500 index returns, it is found that density forecasts are much improved by allowing for constant excess kurtosis but not improved by allowing for skewness. By allowing the kurtosis and skewness to be time varying the density forecasts are not further improved but on the contrary made slightly worse. In Essay 3 a new model incorporating conditional variance, skewness and kurtosis based on the Normal Inverse Gaussian (NIG) distribution is proposed. The new model and two previously used NIG models are evaluated by their Value at Risk (VaR) forecasts on a long series of daily Standard and Poor’s 500 returns. The results show that only the new model produces satisfactory VaR forecasts for both 1% and 5% VaR Taken together the results of the thesis show that kurtosis appears not to exhibit predictable time variation, whereas there is found some predictability in the skewness. However, the dynamic properties of the skewness are not completely captured by any of the models.

Essays on Stock Options, Incentives, and Managerial Action

Executive compensation and managerial behavior have received an increasing amount of attention in the financial economics literature since the mid 1970s. The purpose of this thesis is to extend our understanding of managerial compensation, especially how stock option compensation is linked to the actions undertaken by the management. Furthermore, managerial compensation is continuously and heatedly debated in the media and an emerging consensus from this discussion seems to be that there still exists gaps in our knowledge of optimal contracting. In Finland, the first executive stock options were introduced in the 1980s and throughout the last 15 years it has become increasingly popular for Finnish listed firms to use this type of managerial compensation. The empirical work in the thesis is conducted using data from Finland, in contrast to most previous studies that predominantly use U.S. data. Using Finnish data provides insight of how market conditions affect compensation and managerial action and provides an opportunity to explore what parts of the U.S. evidence can be generalized to other markets. The thesis consists of four essays. The first essay investigates the exercise policy of the executive stock option holders in Finland. In summary, Essay 1 contributes to our understanding of the exercise policies by examining both the determinants of the exercise decision and the markets reaction to the actual exercises. The second essay analyzes the factors driving stock option grants using data for Finnish publicly listed firms. Several agency theory based variables are found to have have explanatory power on the likelihood of a stock option grant. Essay 2 also contributes to our understanding of behavioral factors, such as prior stock return, as determinants of stock option compensation. The third essay investigates the tax and stock option motives for share repurchases and dividend distributions. We document strong support for the tax motive for share repurchases. Furthermore, we also analyze the dividend distribution decision in companies with stock options and find a significant difference between companies with and without dividend protected options. We thus document that the cutting of dividends found in previous U.S. studies can be avoided by dividend protection. In the fourth essay we approach the puzzle of negative skewness in stock returns from an altogether different angle than in previous studies. We suggest that negative skewness in stock returns is generated by management disclosure practices and find proof for this. More specifically, we find that negative skewness in daily returns is induced by returns for days when non-scheduled firm specific news is disclosed.

Conditional Moments in Asset Pricing

A better understanding of stock price changes is important in guiding many economic activities. Since prices often do not change without good reasons, searching for related explanatory variables has involved many enthusiasts. This book seeks answers from prices per se by relating price changes to their conditional moments. This is based on the belief that prices are the products of a complex psychological and economic process and their conditional moments derive ultimately from these psychological and economic shocks. Utilizing information about conditional moments hence makes it an attractive alternative to using other selective financial variables in explaining price changes. The first paper examines the relation between the conditional mean and the conditional variance using information about moments in three types of conditional distributions; it finds that the significance of the estimated mean and variance ratio can be affected by the assumed distributions and the time variations in skewness. The second paper decomposes the conditional industry volatility into a concurrent market component and an industry specific component; it finds that market volatility is on average responsible for a rather small share of total industry volatility — 6 to 9 percent in UK and 2 to 3 percent in Germany. The third paper looks at the heteroskedasticity in stock returns through an ARCH process supplemented with a set of conditioning information variables; it finds that the heteroskedasticity in stock returns allows for several forms of heteroskedasticity that include deterministic changes in variances due to seasonal factors, random adjustments in variances due to market and macro factors, and ARCH processes with past information. The fourth paper examines the role of higher moments — especially skewness and kurtosis — in determining the expected returns; it finds that total skewness and total kurtosis are more relevant non-beta risk measures and that they are costly to be diversified due either to the possible eliminations of their desirable parts or to the unsustainability of diversification strategies based on them.