Technology-related peso problems in stock returns

Although empirical evidence suggests the contrary, many asset pricing models assume stock returns to be symmetrically distributed. In this paper it is argued that the occurrence of negative jumps in a firm's future earnings and, consequently, in its stock price, is positively related to the level of network externalities in the firm's product market. If the ex post frequency of these negative jumps in a sample does not equal the ex ante assessed probability of occurrence, the sample is subject to a peso problem. The hypothesis is tested for by regressing the skewness coefficient of a firm’s realised stock return distribution on the firm’s R&D intensity, i.e. the ratio of the firm’s research and development expenditure to its net sales. The empirical results support the technology-related peso problem hypothesis. In samples subject to such a peso problem, the returns are biased up and the variance is biased down.

Bayesian fisheries stock assessment: integrating and updating knowledge

In this thesis the use of the Bayesian approach to statistical inference in fisheries stock assessment is studied. The work was conducted in collaboration of the Finnish Game and Fisheries Research Institute by using the problem of monitoring and prediction of the juvenile salmon population in the River Tornionjoki as an example application. The River Tornionjoki is the largest salmon river flowing into the Baltic Sea. This thesis tackles the issues of model formulation and model checking as well as computational problems related to Bayesian modelling in the context of fisheries stock assessment. Each article of the thesis provides a novel method either for extracting information from data obtained via a particular type of sampling system or for integrating the information about the fish stock from multiple sources in terms of a population dynamics model. Mark-recapture and removal sampling schemes and a random catch sampling method are covered for the estimation of the population size. In addition, a method for estimating the stock composition of a salmon catch based on DNA samples is also presented. For most of the articles, Markov chain Monte Carlo (MCMC) simulation has been used as a tool to approximate the posterior distribution. Problems arising from the sampling method are also briefly discussed and potential solutions for these problems are proposed. Special emphasis in the discussion is given to the philosophical foundation of the Bayesian approach in the context of fisheries stock assessment. It is argued that the role of subjective prior knowledge needed in practically all parts of a Bayesian model should be recognized and consequently fully utilised in the process of model formulation.

Problems and Algorithms for Sequence Segmentations

The analysis of sequential data is required in many diverse areas such as telecommunications, stock market analysis, and bioinformatics. A basic problem related to the analysis of sequential data is the sequence segmentation problem. A sequence segmentation is a partition of the sequence into a number of non-overlapping segments that cover all data points, such that each segment is as homogeneous as possible. This problem can be solved optimally using a standard dynamic programming algorithm. In the first part of the thesis, we present a new approximation algorithm for the sequence segmentation problem. This algorithm has smaller running time than the optimal dynamic programming algorithm, while it has bounded approximation ratio. The basic idea is to divide the input sequence into subsequences, solve the problem optimally in each subsequence, and then appropriately combine the solutions to the subproblems into one final solution. In the second part of the thesis, we study alternative segmentation models that are devised to better fit the data. More specifically, we focus on clustered segmentations and segmentations with rearrangements. While in the standard segmentation of a multidimensional sequence all dimensions share the same segment boundaries, in a clustered segmentation the multidimensional sequence is segmented in such a way that dimensions are allowed to form clusters. Each cluster of dimensions is then segmented separately. We formally define the problem of clustered segmentations and we experimentally show that segmenting sequences using this segmentation model, leads to solutions with smaller error for the same model cost. Segmentation with rearrangements is a novel variation to the segmentation problem: in addition to partitioning the sequence we also seek to apply a limited amount of reordering, so that the overall representation error is minimized. We formulate the problem of segmentation with rearrangements and we show that it is an NP-hard problem to solve or even to approximate. We devise effective algorithms for the proposed problem, combining ideas from dynamic programming and outlier detection algorithms in sequences. In the final part of the thesis, we discuss the problem of aggregating results of segmentation algorithms on the same set of data points. In this case, we are interested in producing a partitioning of the data that agrees as much as possible with the input partitions. We show that this problem can be solved optimally in polynomial time using dynamic programming. Furthermore, we show that not all data points are candidates for segment boundaries in the optimal solution.

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.

Estimation of cutting volume with three inventory methods for harvest planning in Canadian boreal forests.

Two methods of pre-harvest inventory were designed and tested on three cutting sites containing a total of 197 500 m3 of wood. These sites were located on flat-ground boreal forests located in northwestern Quebec. Both methods studied involved scaling of trees harvested to clear the road path one year (or more) prior to harvest of adjacent cut-blocks. The first method (ROAD) considers the total road right-of-way volume divided by the total road area cleared. The resulting volume per hectare is then multiplied by the total cut-block area scheduled for harvest during the following year to obtain the total estimated cutting volume. The second method (STRATIFIED) also involves scaling of trees cleared from the road. However, in STRATIFIED, log scaling data are stratified by forest stand location. A volume per hectare is calculated for each stretch of road that crosses a single forest stand. This volume per hectare is then multiplied by the remaining area of the same forest stand scheduled for harvest one year later. The sum of all resulting estimated volumes per stand gives the total estimated cutting-volume for all cut-blocks adjacent to the studied road. A third method (MNR) was also used to estimate cut-volumes of the sites studied. This method represents the actual existing technique for estimating cutting volume in the province of Quebec. It involves summing the cut volume for all forest stands. The cut volume is estimated by multiplying the area of each stand by its estimated volume per hectare obtained from standard stock tables provided by the governement. The resulting total estimated volume per cut-block for all three methods was then compared with the actual measured cut-block volume (MEASURED). This analysis revealed a significant difference between MEASURED and MNR methods with the MNR volume estimate being 30 % higher than MEASURED. However, no significant difference from MEASURED was observed for volume estimates for the ROAD and STRATIFIED methods which respectively had estimated cutting volumes 19 % and 5 % lower than MEASURED. Thus the ROAD and STRATIFIED methods are good ways to estimate cut-block volumes after road right-of-way harvest for conditions similar to those examined in this study.

Problems of Proto-Slavic Historical Nominal Morphology : On the Basis of Old Church Slavic

In this study I offer a diachronic solution for a number of difficult inflectional endings in Old Church Slavic nominal declensions. In this context I address the perhaps most disputed and the most important question of the Slavic nominal inflectional morphology: whether there was in Proto-Slavic an Auslautgesetz (ALG), a law of final syllables, that narrowed the Proto-Indo-European vowel */o/ to */u/ in closed word-final syllables. In addition, the work contains an exhaustive morphological classification of the nouns and adjectives that occur in canonical Old Church Slavic. I argue that Proto-Indo-European */o/ became Proto-Slavic */u/ before word-final */s/ and */N/. This conclusion is based on the impossibility of finding credible analogical (as opposed to phonological) explanations for the forms supporting the ALG hypothesis, and on the survival of the neuter gender in Slavic. It is not likely that the */o/-stem nominative singular ending */-u/ was borrowed from the accusative singular, because the latter would have been the only paradigmatic form with the stem vowel */-u-/. It is equally unlikely that the ending */-u/ was borrowed from the */u/-stems, because the latter constituted a moribund class. The usually stated motivation for such an analogical borrowing, i.e. a need to prevent the merger of */o/-stem masculines with neuters of the same class, is not tenable. Extra-Slavic, as well as intra-Slavic evidence suggests that phonologically-triggered mergers between two semantically opaque genders do not tend to be prevented, but rather that such mergers lead to the loss of the gender opposition in question. On the other hand, if */-os/ had not become */-us/, most nouns and, most importantly, all adjectives and pronouns would have lost the formal distinction between masculines and neuters. This would have necessarily resulted in the loss of the neuter gender. A new explanation is given for the most apparent piece of evidence against the ALG hypothesis, the nominative-accusative singular of the */es/-stem neuters, e.g. nebo 'sky'. I argue that it arose in late Proto-Slavic dialects, replacing regular nebe, under the influence of the */o/- and */yo/-stems where a correlation had emerged between a hard root-final consonant and the termination -o, on the one hand, and a soft root-final consonant and the termination -e, on the other.

Cancer survivors at work : Work-related problems and factors associated with their employment, work ability and social support from the work community

Due to the improved prognosis of many forms of cancer, an increasing number of cancer survivors are willing to return to work after their treatment. It is generally believed, however, that people with cancer are either unemployed, stay at home, or retire more often than people without cancer. This study investigated the problems that cancer survivors experience on the labour market, as well as the disease-related, sociodemographic and psychosocial factors at work that are associated with the employment and work ability of cancer survivors. The impact of cancer on employment was studied combining the data of Finnish Cancer Registry and census data of the years 1985, 1990, 1995 or 1997 of Statistics Finland. There were two data sets containing 46 312 and 12 542 people with cancer. The results showed that cancer survivors were slightly less often employed than their referents. Two to three years after the diagnosis the employment rate of the cancer survivors was 9% lower than that of their referents (64% vs. 73%), whereas the employment rate was the same before the diagnosis (78%). The employment rate varied greatly according to the cancer type and education. The probability of being employed was greater in the lower than in the higher educational groups. People with cancer were less often employed than people without cancer mainly because of their higher retirement rate (34% vs. 27%). As well as employment, retirement varied by cancer type. The risk of retirement was twofold for people having cancer of the nervous system or people with leukaemia compared to their referents, whereas people with skin cancer, for example, did not have an increased risk of retirement. The aim of the questionnaire study was to investigate whether the work ability of cancer survivors differs from that of people without cancer and whether cancer had impaired their work ability. There were 591 cancer survivors and 757 referents in the data. Even though current work ability of cancer survivors did not differ between the survivors and their referents, 26% of cancer survivors reported that their physical work ability, and 19% that their mental work ability had deteriorated due to cancer. The survivors who had other diseases or had had chemotherapy, most often reported impaired work ability, whereas survivors with a strong commitment to their work organization, or a good social climate at work, reported impairment less frequently. The aim of the other questionnaire study containing 640 people with the history of cancer was to examine extent of social support that cancer survivors needed, and had received from their work community. The cancer survivors had received most support from their co-workers, and they hoped for more support especially from the occupational health care personnel (39% of women and 29% of men). More support was especially needed by men who had lymphoma, had received chemotherapy or had a low education level. The results of this study show that the majority of the survivors are able to return to work. There is, however, a group of cancer survivors who leave work life early, have impaired work ability due to their illness, and suffer from lack of support from their work place and the occupational health services. Treatment-related, as well as sociodemographic factors play an important role in survivors' work-related problems, and presumably their possibilities to continue working.

Econometric models of Finnish non-industrial private forest owners' timber supply and timber stock

This dissertation examines the short- and long-run impacts of timber prices and other factors affecting NIPF owners' timber harvesting and timber stocking decisions. The utility-based Faustmann model provides testable hypotheses of the exogenous variables retained in the timber supply analysis. The timber stock function, derived from a two-period biomass harvesting model, is estimated using a two-step GMM estimator based on balanced panel data from 1983 to 1991. Timber supply functions are estimated using a Tobit model adjusted for heteroscedasticity and nonnormality of errors based on panel data from 1994 to 1998. Results show that if specification analysis of the Tobit model is ignored, inconsistency and biasedness can have a marked effect on parameter estimates. The empirical results show that owner's age is the single most important factor determining timber stock; timber price is the single most important factor in harvesting decision. The results of the timber supply estimations can be interpreted using utility-based Faustmann model of a forest owner who values a growing timber in situ.

The efficacy and potential risks of controlling sprouting in Finnish birches (Betula spp.) with the fungal decomposer Chondrostereum purpureum

Sprouting of fast-growing broad-leaved trees causes problems in young coniferous stands, under power transmission lines and along roads and railways. Public opinion and the Finnish Forest Certification System oppose the use of chemical herbicides to control sprouting, which means that most areas with problems rely on mechanical cutting. However, cutting is a poor control method for many broad-leaved species because the removal of leaders can stimulate the sprouting of side branches and cut stumps quickly re-sprout. In order to be effective, cutting must be carried out frequently but each cut increases the costs, making this control method increasingly difficult and expensive once begun. As such, alternative methods for sprout control that are both effective and environmentally sound represent a continuing challenge to managers and research biologists. Using biological control agents to prevent sprouting has been given serious consideration recently. Dutch and Canadian researchers have demonstrated the potential of the white-rot fungus Chondrostereum purpureum (Pers. ex Fr.) Pouzar as a control agent of stump sprouting in many hardwoods. These findings have focused the attention of the Finnish forestry community on the utilization of C. purpureum for biocontrol purposes. Primarily, this study sought determines the efficacy of native C. purpureum as an inhibitor of birch stump sprouting in Finland and to clarify its mode of action. Additionally, genotypic variation in Finnish C. purpureum was examined and the environmental risks posed by a biocontrol program using this fungus were assessed. Experimental results of the study demonstrated that C. purpureum clearly affects the sprouting of birch: both the frequency of living stumps and the number of living sprouts per stump were effectively reduced by the treatment. However, the treatment had no effect on the maximum height of new sprouts. There were clear differences among fungal isolates in preventing sprouting and those that possessed high oxidative activities as measured in the laboratory inhibited sprouting most efficiently in the field. The most effective treatment time during the growing season was in early and mid summer (May July). Genetic diversity in Nordic and Baltic populations of C. purpureum was found to be high at the regional scale but locally homogeneous. This natural distribution of diversity means that using local genotypes in biocontrol programs would effectively prevent the introduction of novel genes or genotypes. While a biocontrol program using local strains of C. purpureum would be environmentally neutral, pruned birches that are close to the treatment site would have a high susceptibility to infect by the fungus during the early spring.

Multiplication of hybrid aspen (Populus tremula L. x P. tremuloides Michx.) from cuttings

The primary aim of the present study was to find an efficient and simple method of vegetative propagation for producing large numbers of hybrid aspen (Populus tremuloides L. x P. tremula Michx.) plants for forest plantations. The key objectives were to investigate the main physiological factors that affect the ability of cuttings to regenerate and to determine whether these factors could be manipulated by different growth conditions. In addition, clonal variation in traits related to propagation success was examined. According to our results, with the stem cutting method, depending on the clone, it is possible to obtain only 1−8 plants from one stock plant per year. With the root cutting method the corresponding values for two-year-old stock plants are 81−207 plants. The difference in number of cuttings between one- and two-year-old stock plants is so pronounced that it is economically feasible to grow stock plants for two years. There is no reason to use much older stock plants as a source of cuttings, as it has been observed that rooting ability diminishes as root diameter increases. Clonal variation is the most important individual factor in propagation of hybrid aspen. The fact that the efficiently sprouted clones also rooted best facilitates the selection of clones for large-scale propagation. In practice, root cuttings taken from all parts of the root system of hybrid aspen were capable of producing new shoots and roots. However, for efficient rooting it is important to use roots smaller than one centimeter in diameter. Both rooting and sprouting, as well as sprouting rate, were increased by high soil temperature; in our studies the highest temperature tested (30ºC) was the best. Light accelerated the sprouting of root cuttings, but they rooted best in dark conditions. Rooting is essential because without roots the sprouted cutting cannot survive long. For aspen the criteria for clone selection are primarily fiber qualities and growth rate, but ability to regenerate efficiently is also essential. For large-scale propagation it is very important to find clones from which many cuttings per stock plant can be obtained. In light of production costs, however, it is even more important that the regeneration ability of the produced cuttings be high.