Defoliation and patchy nutrient return drive grazing effects on plant and soil properties in a dairy cow pasture

Large herbivores can influence plant and soil properties in grassland ecosystems, but especially for belowground biota and processes, the mechanisms that explain these effects are not fully understood. Here, we examine the capability of three grazing mechanisms-plant defoliation, dung and urine return, and physical presence of animals (causing trampling and excreta return in patches)-to explain grazing effects in Phleum pratense-Festuca pratensis dairy cow pasture in Finland. Comparison of control plots and plots grazed by cows showed that grazing maintained original plant-community structure, decreased shoot mass and root N and P concentrations, increased shoot N and P concentrations, and had an inconsistent effect on root mass. Among soil fauna, grazing increased the abundance of fungivorous nematodes and Aporrectodea earthworms and decreased the abundance of detritivorous enchytraeids and Lumbricus earthworms. Grazing also increased soil density and pH but did not affect average soil inorganic-N concentration. To reveal the mechanisms behind these effects, we analyzed results from mowed plots and plots that were both mowed and treated with a dung and urine mixture. This comparison revealed that grazing effects on plant attributes were almost entirely explained by defoliation, with only one partly explained by excreta return. Among belowground attributes, however, the mechanisms were more mixed, with effects explained by defoliation, patchy excreta return, and cow trampling. Average soil inorganic-N concentration was not affected by grazing because it was simultaneously decreased by defoliation and increased by cow presence. Presence of cows created great spatial heterogeneity in soil N availability and abundance of fungivorous nematodes. A greenhouse trial revealed a grazing-induced soil feedback on plant growth, which was explained by patchiness in N availability rather than changes in soil biota. Our results show that grazing effects on plant attributes can be satisfactorily predicted using the effects of defoliation, whereas those on soil fauna and soil N availability need understanding of other mechanisms as well. The results indicate that defoliation-induced changes in plant ecophysiology and the great spatial variation in N availability created by grazers are the two key mechanisms through which large herbivores can control grassland ecosystems.

Essays on Risk and Return

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.

The Relationship Between Liquidity, Trading Activity and Return - Studies of the Finnish and Swedish Stock Markets

Liquidity, or how easy an investment is to buy or sell, is becoming increasingly important for financial market participants. The objective of this dissertation is to contribute to the understanding of how liquidity affects financial markets. The first essays analyze the actions taken by underwriters immediately after listing to improve liquidity of IPO stock. To estimate the impact of underwriter activity on the pricing of the IPOs, the order book during the first weeks of trading in the IPO stock is studied. Evidence of stabilization and liquidity enhancing activities by underwriters is found. The second half of the dissertation is concerned with the daily trading of stocks where liquidity may be impacted by policy issues such as changes in taxes or exchange fees and by opening the access to the markets for foreign investors. The desirability of a transaction tax on securities trading is addressed. An increase in transaction tax is found to cause lower prices and higher volatility. In the last essay the objective is to determine if the liquidity of a security has an impact on the return investors require. The results support the notion that returns are negatively correlated to liquidity.

Evaluating the Predictability of the Volatility Smile Using Return Distributions

In this paper, we examine the predictability of observed volatility smiles in three major European index options markets, utilising the historical return distributions of the respective underlying assets. The analysis involves an application of the Black (1976) pricing model adjusted in accordance with the Jarrow-Rudd methodology as proposed in 1982. Thereby we adjust the expected future returns for the third and fourth central moments as these represent deviations from normality in the distributions of observed returns. Thus, they are considered one possible explanation to the existence of the smile. The obtained results indicate that the inclusion of the higher moments in the pricing model to some extent reduces the volatility smile, compared with the unadjusted Black-76 model. However, as the smile is partly a function of supply, demand, and liquidity, and as such intricate to model, this modification does not appear sufficient to fully capture the characteristics of the smile.