Informational efficiency of the European Union emission allowance market

This thesis studies the informational efficiency of the European Union emission allowance (EUA) market. In an efficient market, the market price is unpredictable and profits above average are impossible in the long run. The main research problem is does the EUA price follow a random walk. The method is an econometric analysis of the price series, which includes an autocorrelation coefficient test and a variance ratio test. The results reveal that the price series is autocorrelated and therefore a nonrandom walk. In order to find out the extent of predictability, the price series is modelled with an autoregressive model. The conclusion is that the EUA price is autocorrelated only to a small degree and that the predictability cannot be used to make extra profits. The EUA market is therefore considered informationally efficient, although the price series does not fulfill the requirements of a random walk. A market review supports the conclusion, but it is clear that the maturing of the market is still in process.

Finnish Short-Term Stock Returns

Functioning capital markets are a crucial part of a competitive economy since they provide the mechanisms to allocate resources. In order to be well functioning a capital market has to be efficient. Market efficiency is defined as a market where prices at any time fully reflect all available information. Basically, this means that abnormal returns cannot be predicted since they are dependent on future, presently unknown, information. The debate of market efficiency has been going on for several decades. Most academics today would probably agree that financial markets are reasonably efficient since virtually nobody has been able to achieve continuous abnormal positive returns. However, it is clear that a set of return anomalies exists, although they are apparently to small to enable substantial economic profit. Moreover, these anomalies can often be attributed to market design. The motivation for this work is to expand the knowledge of short-term trading patterns and to offer some explanations for these patterns. In the first essay the return pattern during the day is examined. On average stock prices move during two time periods of the day, namely, immediately after the opening and around the formal close of the market. Since stock prices, on average, move upwards these abnormal returns are generally positive and cause the distinct U-shape of intraday returns. In the second essay the results in the first essay are examined further. The return pattern around the former close is shown to partly be the result of manipulative action by market participants. In the third essay the focus is shifted towards trading patterns of the underlying stocks on days when index options and index futures on the stocks expire. Generally no expiration day effect was found. However, some indication of an expiration day effect was found when a large amount of open in- or at-the-money contracts existed. Also, the effects were likelier to be found for shares with high index-weight but fairly low trading volume. Last, in the forth essay the attention is turned to the behaviour of different tax clienteles around the dividend ex-day. Two groups of investors showed abnormal trading behaviour. Domestic non-financial investors, especially domestic companies, showed a dividend capturing behaviour, i.e. buying cum-dividend and selling ex-dividend shares. The opposite behaviour was found for foreign investors and domestic financial institutions. The effect was more notable for high yield, high volume stocks.

Essays on Market Microstructure: Price Discovery and Informed Trading

Market microstructure is “the study of the trading mechanisms used for financial securities” (Hasbrouck (2007)). It seeks to understand the sources of value and reasons for trade, in a setting with different types of traders, and different private and public information sets. The actual mechanisms of trade are a continually changing object of study. These include continuous markets, auctions, limit order books, dealer markets, or combinations of these operating as a hybrid market. Microstructure also has to allow for the possibility of multiple prices. At any given time an investor may be faced with a multitude of different prices, depending on whether he or she is buying or selling, the quantity he or she wishes to trade, and the required speed for the trade. The price may also depend on the relationship that the trader has with potential counterparties. In this research, I touch upon all of the above issues. I do this by studying three specific areas, all of which have both practical and policy implications. First, I study the role of information in trading and pricing securities in markets with a heterogeneous population of traders, some of whom are informed and some not, and who trade for different private or public reasons. Second, I study the price discovery of stocks in a setting where they are simultaneously traded in more than one market. Third, I make a contribution to the ongoing discussion about market design, i.e. the question of which trading systems and ways of organizing trading are most efficient. A common characteristic throughout my thesis is the use of high frequency datasets, i.e. tick data. These datasets include all trades and quotes in a given security, rather than just the daily closing prices, as in traditional asset pricing literature. This thesis consists of four separate essays. In the first essay I study price discovery for European companies cross-listed in the United States. I also study explanatory variables for differences in price discovery. In my second essay I contribute to earlier research on two issues of broad interest in market microstructure: market transparency and informed trading. I examine the effects of a change to an anonymous market at the OMX Helsinki Stock Exchange. I broaden my focus slightly in the third essay, to include releases of macroeconomic data in the United States. I analyze the effect of these releases on European cross-listed stocks. The fourth and last essay examines the uses of standard methodologies of price discovery analysis in a novel way. Specifically, I study price discovery within one market, between local and foreign traders.

Test of the Clustering Hypothesis in the Helsinki Exchanges

This paper investigates the clustering pattern in the Finnish stock market. Using trading volume and time as factors capturing the clustering pattern in the market, the Keim and Madhavan (1996) and the Engle and Russell (1998) model provide the framework for the analysis. The descriptive and the parametric analysis provide evidences that an important determinant of the famous U-shape pattern in the market is the rate of information arrivals as measured by large trading volumes and durations at the market open and close. Precisely, 1) the larger the trading volume, the greater the impact on prices both in the short and the long run, thus prices will differ across quantities. 2) Large trading volume is a non-linear function of price changes in the long run. 3) Arrival times are positively autocorrelated, indicating a clustering pattern and 4) Information arrivals as approximated by durations are negatively related to trading flow.

The Influence of World Factors on Finnish Stock Market Volatility

This paper investigates to what extent the volatility of Finnish stock portfolios is transmitted through the "world volatility". We operationalize the volatility processes of Finnish leverage, industry, and size portfolio returns by asymmetric GARCH specifications according to Glosten et al. (1993). We use daily return data for January, 2, 1987 to December 30, 1998. We find that the world shock significantly enters the domestic models, and that the impact has increased over time. This applies also for the variance ratios, and the correlations to the world. The larger the firm, the larger is the world impact. The conditional variance is higher during recessions. The asymmetry parameter is surprisingly non-significant, and the leverage hypothesis cannot be verified. The return generating process of the domestic portfolio returns does usually not include the world information set, thus indicating that the returns are generated by a segmented conditional asset pricing model.

Impact of agricultural market liberalization on food security in developing countries : a comparative study of Kenya and Zambia

This research investigates the impacts of agricultural market liberalization on food security in developing countries and it evaluates the supply perspective of food security. This research theme is applied on the agricultural sector in Kenya and in Zambia by studying the role policies played in the maize sub-sector. An evaluation of selected policies introduced at the beginning of the 1980s is made, as well as an assessment of whether those policies influenced maize output. A theoretical model of agricultural production is then formulated to reflect cereal production in a developing country setting. This study begins with a review of the general framework and the aims of the structural adjustment programs and proceeds to their application in the maize sector in Kenya and Zambia. A literature review of the supply and demand synthesis of food security is presented with examples from various developing countries. Contrary to previous studies on food security, this study assesses two countries with divergent economic orientations. Agricultural sector response to economic and institutional policies in different settings is also evaluated. Finally, a dynamic time series econometric model is applied to assess the effects of policy on maize output. The empirical findings suggest a weak policy influence on maize output, but the precipitation and acreage variables stand out as core determinants of maize output. The policy dimension of acreage and how markets influence it is not discussed at length in this study. Due to weak land rights and tenure structures in these countries, the direct impact of policy change on land markets cannot be precisely measured. Recurring government intervention during the structural policy implementation period impeded efficient functioning of input and output markets, particularly in Zambia. Input and output prices of maize and fertilizer responded more strongly in Kenya than in Zambia, where the state often ceded to public pressure by revoking pertinent policy measures. These policy interpretations are based on the response of policy variables which are more responsive in Kenya than in Zambia. According the obtained regression results, agricultural markets in general, and the maize sub-sector in particular, responded more positively to implemented policies in Kenya, than in Zambia, which supported a more socialist economic system. It is observed in these results that in order for policies to be effective, sector and regional dimensions need to be considered. The regional and sector dimensions were not taken into account in the formulation and implementation of structural adjustment policies in the 1980s. It can be noted that countries with vibrant economic structures and institutions fared better than those which had a firm, socially founded system.

Post-industrial Intervention : An Activity-Theoretical Expedition Tracing the Proximal Development of Forms of Conducting Interventions

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Kilpailukykyvaltion koululainsäädännön rakentuminen : Suomen eduskunta ja 1990-luvun koulutuspoliittinen käänne

Finnish education policy, educational legislation and the entire education system changed significantly during the 1990s as part of a general restructuring of public administration. There has been a clear divergence from the former tradition of a system of regulation, founded on detailed legislation and the principle of equality. The new governance, which is based more on individual choice, efficiency and evaluation, emphasizes that the development of a high standard of education is a necessity in the light of global competition. This study explores the legislative process regarding education policy in the Finnish Parliament during the 1990s, and highlights in particular how the international discourse on education policies was restructured in the context of Finnish legislation. The research material consists of all the public parliamentary documents relating to education, including government proposals, minutes from the discussions in the chamber and archive material (final protocols, reports and statements) for the Committee for Education and Culture. The discourse on the process of drafting and passing education legislation is modelled on three interrelated policy technologies (market, management and performance), which are understood here as mechanisms connecting general political ideas to normative legislation. The changes in the regulation of education were part of a general public administration reform instigated during the mid 1980s. The research results will prove that during the left-right coalition cabinet of PM Harri Holkeri, new policy technologies affected the parliamentary discourse on education policy. This was particularly influenced by a change in the preconditions for the management of education that was created as a result of the numerous demands to deregulate and delegate decision-making authority to the local and school levels while rendering the whole education system more effective. At the turn of the decade, market-type mechanisms were more indirectly manifested in the forms of individuality and freedom of choice, which were reflected, for example, in proposals to “lower the hurdles” by separating general from vocational secondary education with a view to encouraging students to select courses from other educational establishments, in addition to relaxing the requirements for establishing private schools and abolishing a hundred-year-old strict national catchment-area system. Later, in the course of the 1990s, after the subjects, players, and methods of evaluation had been more precisely defined, evaluation based on performance would result in the active measurement of the attainment of set objectives. In the spring of 1991, from the outset of PM Esko Aho's right-centre coalition cabinet, the education budget suffered cutbacks as a result of a global recession and this influenced the legislative work of, and discourses in, parliament. Representatives of the parties in power regarded the recession solely as an external factor that was remote from the political arena. In their view, the education system should rise to the challenge by ensuring the efficient and innovative use of the resources available and by developing new forms of indicators for evaluating results. Representatives of the opposition opposed the cabinet’s standpoint as a result of the recession, criticized the measures taken by pointing out the harmful effect of constantly cutting the budget and argued that the government had made political capital out of the recession by using it as an opportunity to give more room to market, management and performance technologies within the Finnish education system. Criticism of the new education policy became even stronger during PM Paavo Lipponen's first “rainbow” coalition cabinet with critical views being expressed not only from the opposition but also from representatives within the government. Representatives from the left demanded legislative restrictions and the instigation of measures to relieve the presumed negative effects of market, management and performance in the name of educational equality. The new management by results steering method within the university sector and the introduction of commercial education services in compulsory education were fiercely criticized. The argument over “setting outer limits” including, for example, the demands for more detailed legislation and earmarked state subsidies was characteristic of Parliament’s legislative discourse in the latter part of the 1990s. Keywords: education policy, education legislation, Parliament of Finland

Northern challanges for profitable production of quality naked oat

Naked oat (Avena sativa f.sp. nuda L.) is the highest quality cereal in northern growing conditions. However the cultivation area of naked oat is remarkably small. Major challenges for naked oat production are to observe its nakedness. The caryopsis of naked oat is sensitive to mechanical damage at harvest, especially at high grain moisture content. The greater the grain moisture content of naked oat at harvest, the more loses of germination capacity was caused by threshing. For producing high quality naked oat seed, it is recommended that harvesting be done at as low grain moisture content as possible. However, if this is not possible, better germination can be ensure with gentle harvest by reducing the cylinder speed. In spite of conventional oat s excellent fat and amino acid composition in animal feed use, as far as nutritional value is concerned, the total energy yield of oat is weaker than other cereals because of the hulls. Also with naked oat the dehulling is not complete, while hull content on different cultivars mostly varied between one to six percent. In addition to genotype, environmental conditions markedly control the expression of nakedness. Thresher settings had only limited effects on hull content. The function of hulls is to protect the groat, but this was confirmed only for Finnish, small grain, cultivar Lisbeth. The oat kernel is generally covered with fine silky hairs termed trichomes. The trichomes of naked oat are partly lost during threshing and handling of grains. Trichomes can cause itchiness in those handling the grains and also accumulate and form fine dust and can block-up machinery. The cultivars differed considerably in pubescence. Some thresher settings, including increased cylinder speed, slightly increased grain polishing such that grains had some areas completely free of trichomes. Adjusting thresher settings was generally not an efficient means of solving the problems associated with naked oat trichomes. The main differences in cultivation costs between naked and conventional oat lie in the amount of seeds required and the drying costs. The main differences affecting the economic result lie in market prices, yield level and feed value. The results indicate that naked oat is financially more profitable than conventional oat, when the crop is sold at a specific price at all yield levels and when the crop is used as feed at highest yield level. At lower yield levels, conventional oat is, in spite of its lower feed value, the more profitable option for feed use. Dehulled oat did not achieve the same economic result as naked oat, as the cost of dehulling, including the hull waste, was considerable. According to this study naked oat can be cultivated successfully under northern conditions, when taking into consideration the soft, naked grain through cultivation chain.

Biochemical and structural properties of Potato virus A VPg

The potato virus A (PVA) genome linked protein (VPg) is a multifunctional protein that takes part in vital infection cycle events such as replication and movement of the virus from cell to cell. VPg is attached to the 5´ end of the genome and is carried in the tip structure of the filamentous virus particle. VPg is also the last protein to be cleaved from the polyprotein. VPg interacts with several viral and host proteins and is phosphorylated at several positions. These features indicate a central role in virus epidemiology and a requirement for an efficient but flexible mechanism for switching between different functions. -- This study examines some of the key VPg functions in more detail. Mutations in the positively charged region from Ala38 to Lys44 affected the NTP binding, uridylylation, and in vitro translation inhibition activities of VPg, whereas in vivo translation inhibition was not affected. Some of the data generated in this study implicated the structural flexibility of the protein in functional activities. VPg lacks a rigid structure, which could allow it to adapt conformationally to different functions as needed. A major finding of this study is that PVA VPg belongs to the class of ´intrinsically disordered proteins´ (IDPs). IDPs are a novel protein class that has helped to explain the observed lack of structure. The existence of IDPs clearly shows that proteins can be functional and adapt a native fold without a rigid structure. Evidence for the intrinsic disorder of VPg was provided by CD spectroscopy, NMR, fluorescence spectroscopy, bioinformatic analysis, and limited proteolytic digestion. The structure of VPg resembles that of a molten globule-type protein and has a hydrophobic core domain. Approximately 50% of the protein is disordered and an α-helical stabilization of these regions has been hypothesized. Surprisingly, VPg structure was stabilized in the presence of anionic lipid vesicles. The stabilization was accompanied by a change in VPg structure and major morphological modifications of the vesicles, including a pronounced increase in the size and appearance of pore or plaque like formations on the vesicle surface. The most likely scenario seems to be an α-helical stabilization of VPg which induces formation of a pore or channel-like structure on the vesicle surface. The size increase is probably due to fusion or swelling of the vesicles. The latter hypothesis is supported by the evident disruption of the vesicles after prolonged incubation with VPg. A model describing the results is presented and discussed in relation to other known properties of the protein.

Microbial life and deposits in paper machine circuits

Väitöskirjani käsittele mikrobien ja erilaisten kemikaalien rooleja saostumien ja biofilmien muodostumisessa paperi- ja kartonkikoneilla. "Saostuma" tässä työssä tarkoittaa kiinteän aineen kertymää konepinnoille tai rajapinnoille konekierroissa, jotka on tarkoitettu massasulppujen, lietteiden, vesien tai ilman kuljetukseen. Saostumasta tulee "biofilmi" silloin kun sen oleellinen rakennekomponentti on mikrobisolut tai niiden tuotteet. Väitöstyöni työhypoteesina oli, että i. tietämys saostumien koostumuksesta, sekä ii. niiden rakenteesta, biologisista, fysikaalis-kemiallisista ja teknisistä ominaisuuksista ohjaavat tutkijaa löytämään ympäristöä säästäviä keinoja estää epätoivottujen saostumien muodostus tai purkaa jo muodostuneita saostumia. Selvittääkseni saostumien koostumista ja rakennetta käytin monia erilaisia analytiikan työkaluja, kuten elektronimikroskopiaa, konfokaali-laser mikroskopiaa (CLSM), energiadispersiivistä röntgenanalyysiä (EDX), pyrolyysi kaasukromatografiaa yhdistettynä massaspektrometriaan (Py-GCMS), joninvaihtokromatografiaa, kaasukromatografiaa ja mikrobiologisia analyysejä. Osallistuin aktiivisesti innovatiivisen, valon takaisinsirontaan perustuvan sensorin kehittämistyöhön, käytettäväksi biofilmin kasvun mittaukseen suoraan koneen vesikierroista ja säiliöistä. Työni osoitti, että monet paperinvalmistuksessa käytetyistä kemikaaleista reagoivat keskenään tuottaen orgaanisia tahmakerroksia konekiertojen teräspinnoille. Löysin myös kerrostumia, jotka valomikroskooppisessa tarkastelussa oli tulkittu mikrobeiksi, mutta jotka elektronimikroskopia paljasti alunasta syntyneiksi, alumiinihydroksidiksi joka saostui pH:ssa 6,8 kiertokuitua käyttävän koneen viiravesistä. Monet paperintekijät käyttävät vieläkin alunaa kiinnitysaineena vaikka prosessiolot ovat muuttuneet happamista neutraaleiksi. Sitä pidetään paperitekijän "aspiriinina", mutta väitöstutkimukseni osoitti sen riskit. Löysin myös orgaanisia saostumia, joiden alkuperä oli aineiden, kuten pihkan, saippuoituminen (kalsium saippuat) niin että muodostui tahmankasvua ylläpitävä alusta monilla paperi- ja kartonkikoneilla. Näin solumuodoiltaan Deinococcus geothermalista muistuttavia bakteereita kasvamassa lujasti teräskoepalojen pintaan kiinnittyneinä pesäkkeinä, kun koepaloja upotettiin paperikoneiden vesikiertoihin. Nämä deinokokkimaiset pesäkkeet voivat toimia jalustana, tarttumisalustana muiden mikrobien massoille, joka selittäisi miksi saostumat yleisesti sisältävät deinokokkeja pienenä, muttei koskaan pääasiallisena rakenneosana. Kun paperikoneiden käyttämien vesien (raakavedet, lämminvesi, biologisesti puhdistettu jätevesi) laatua tutkitaan, mittausmenetelmällä on suuri merkitys. Koepalan upotusmenetelmällä todettu biofilmikasvu ja viljelmenetelmällä mitattu bakteerisaastuneisuus korreloivat toisiinsa huonosti etenkin silloin kun likaantumisessa oli mukana rihmamaiseti kasvavia bakteereja. Huoli ympäristöstä on pakottanut paperi- ja kartonkikoneiden vesikiertojen sulkemiseen. Vesien kierrätys ja prosessivesien uudelleenkäyttö nostavat prosessilämpötilaa ja lisäävät koneella kiertävien kolloidisten ja liuenneiden aineiden määriä. Tutkin kiertovesien pitoisuuksia kolmessa eriasteisesti suljetussa tehtaassa, joiden päästöt olivat 0 m3, 0,5 m3 ja 4 m3 jätevettä tuotetonnia kohden, perustuen puhdistetun jäteveden uudelleen käyttöön. Nollapäästöisellä tehtaalla kiertovesiin kertyi paljon orgaanisesti sidottua hiiltä (> 10 g L-1), etenkin haihtuvina happoina (maito-, etikka-, propioni- ja voi-). Myös sulfaatteja, klorideja, natriumia ja kalsiumia kertyi paljon, > 1 g L-1 kutakin. Pääosa (>40%) kaikista bakteereista oli 16S rRNA geenisekvenssianalyysien tulosten perusteella sukua, joskin etäistä (< 96%) ainoastaan Enterococcus cecorum bakteerille. 4 m3 päästävältä tehtaalta löytyi lisäksi Bacillus thermoamylovorans ja Bacillus coagulans. Tehtaiden saostumat sisälsivät arkkeja suurina pitoisuuksina, ≥ 108 g-1, mutta tunnistukseen riittävää sekvenssisamanlaisuutta löytyi vain yhteen arkkisukuun, Methanothrix. Tutkimustulokset osoittivat että tehtaan vesikiertojen sulkeminen vähensi rajusti mikrobiston monimuotoisuutta, muttei estänyt liuenneen aineen ja kiintoaineen mineralisoitumista.

Factors affecting farmland prices in Finland

The purpose of the study was to analyse factors affecting the differences in land prices between regions. The key issue was to find out the policy effects on farmland prices. In addition to comprehensive literature review, a theoretical analysis as well as modern panel and spatial econometric techniques were utilized. The study clearly pointed out the importance of taking into account the possible spatial dependence. The data were exceptionally large, comprising more than 6 000 observations. Thus, it allowed a thorough econometric estimation including the possibility to take into account the spatial nature of the data. This study supports the view that there are many other factors that affect farmland prices besides pure agricultural returns. It was also found that the support clearly affects land prices. However, rather than assuming the discount rates for support and market returns to be similar, the rough analysis refers to the discount rate for support being a little lower. If this were true it would indicate that farmers rely more on support income than market returns. The results support the view presented in literature that land values are more responsive to government payments when these payments are perceived to be permanent. An important result of this study is that the structural differences between regions and the structural change in agriculture seemed to have a considerable role in affecting land prices. Firstly, the present structure affects the competition in the land market: the more dense farms are in the region the more there are potential buyers, and the land price increases. Secondly, the change in farm structure (especially in animal husbandry) connected to the policy changes that increase area-based support affects land prices. The effect comes from two sources. Growing farms need more land for the manure, and the proportion of retiring farmers may be lower. The introduction of the manure density variable proved to be an efficient way to aggregate the otherwise very difficult task of taking into account the environmental pressure caused by structural change in animal husbandry. Finally, infrastructure also has a very important role in determining the price level of agricultural land. If other industries are prospering in the surrounding area, agricultural viability also seems to improve. The non-farm opportunities offered to farm families make continuing and developing farming more tempting.

The Impact of Emissions Trading on the Price of Electricity in Nord Pool : Market Power and Price Determination in the Nordic Electricity Market

The objective of this thesis is to find out how dominant firms in a liberalised electricity market will react when they face an increase in the level of costs due to emissions trading, and how this will effect the price of electricity. The Nordic electricity market is chosen as the setting in which to examine the question, since recent studies on the subject suggest that interaction between electricity markets and emissions trading is very much dependent on conditions specific to each market area. There is reason to believe that imperfect competition prevails in the Nordic market, thus the issue is approached through the theory of oligopolistic competition. The generation capacity available at the market, marginal cost of electricity production and seasonal levels of demand form the data based on which the dominant firms are modelled using the Cournot model of competition. The calculations are made for two levels of demand, high and low, and with several values of demand elasticity. The producers are first modelled under no carbon costs and then by adding the cost of carbon dioxide at 20€/t to those technologies subject to carbon regulation. In all cases the situation under perfect competition is determined as a comparison point for the results of the Cournot game. The results imply that the potential for market power does exist on the Nordic market, but the possibility for exercising market power depends on the demand level. In season of high demand the dominant firms may raise the price significantly above competitive levels, and the situation is aggravated when the cost of carbon dioixide is accounted for. Under low demand leves there is no difference between perfect and imperfect competition. The results are highly dependent on the price elasticity of demand.