Intraday Dynamics of International Equity Markets

The increased availability of high frequency data sets have led to important new insights in understanding of financial markets. The use of high frequency data is interesting and persuasive, since it can reveal new information that cannot be seen in lower data aggregation. This dissertation explores some of the many important issues connected with the use, analysis and application of high frequency data. These include the effects of intraday seasonal, the behaviour of time varying volatility, the information content of various market data, and the issue of inter market linkages utilizing high frequency 5 minute observations from major European and the U.S stock indices, namely DAX30 of Germany, CAC40 of France, SMI of Switzerland, FTSE100 of the UK and SP500 of the U.S. The first essay in the dissertation shows that there are remarkable similarities in the intraday behaviour of conditional volatility across European equity markets. Moreover, the U.S macroeconomic news announcements have significant cross border effect on both, European equity returns and volatilities. The second essay reports substantial intraday return and volatility linkages across European stock indices of the UK and Germany. This relationship appears virtually unchanged by the presence or absence of the U.S stock market. However, the return correlation among the U.K and German markets rises significantly following the U.S stock market opening, which could largely be described as a contemporaneous effect. The third essay sheds light on market microstructure issues in which traders and market makers learn from watching market data, and it is this learning process that leads to price adjustments. This study concludes that trading volume plays an important role in explaining international return and volatility transmissions. The examination concerning asymmetry reveals that the impact of the positive volume changes is larger on foreign stock market volatility than the negative changes. The fourth and the final essay documents number of regularities in the pattern of intraday return volatility, trading volume and bid-ask spreads. This study also reports a contemporaneous and positive relationship between the intraday return volatility, bid ask spread and unexpected trading volume. These results verify the role of trading volume and bid ask quotes as proxies for information arrival in producing contemporaneous and subsequent intraday return volatility. Moreover, asymmetric effect of trading volume on conditional volatility is also confirmed. Overall, this dissertation explores the role of information in explaining the intraday return and volatility dynamics in international stock markets. The process through which the information is incorporated in stock prices is central to all information-based models. The intraday data facilitates the investigation that how information gets incorporated into security prices as a result of the trading behavior of informed and uninformed traders. Thus high frequency data appears critical in enhancing our understanding of intraday behavior of various stock markets’ variables as it has important implications for market participants, regulators and academic researchers.

Familial aggregation of type 1 diabetes and diabetic nephropathy in Finland

Type 1 diabetes (T1D) is a common, multifactorial disease with strong familial clustering. In Finland, the incidence of T1D among children aged 14 years or under is the highest in the world. The increase in incidence has been approximately 2.4% per year. Although most new T1D cases are sporadic the first-degree relatives are at an increased risk of developing the same disease. This study was designed to examine the familial aggregation of T1D and one of its serious complications, diabetic nephropathy (DN). More specifically the study aimed (1) to determine the concordance rates of T1D in monozygotic (MZ) and dizygotic (DZ) twins and to estimate the relative contributions of genetic and environmental factors to the variability in liability to T1D as well as to study the age at onset of diabetes in twins; (2) to obtain long-term empirical estimates of the risk of T1D among siblings of T1D patients and the factors related to this risk, especially the effect of age at onset of diabetes in the proband and the birth cohort effect; (3) to establish if DN is aggregating in a Finnish population-based cohort of families with multiple cases of T1D, and to assess its magnitude and particularly to find out whether the risk of DN in siblings is varying according to the severity of DN in the proband and/or the age at onset of T1D: (4) to assess the recurrence risk of T1D in the offspring of a Finnish population-based cohort of patients with childhood onset T1D, and to investigate potential sex-related effects in the transmission of T1D from the diabetic parents to their offspring as well as to study whether there is a temporal trend in the incidence. The study population comprised of the Finnish Young Twin Cohort (22,650 twin pairs), a population-based cohort of patients with T1D diagnosed at the age of 17 years or earlier between 1965 and 1979 (n=5,144) and all their siblings (n=10,168) and offspring (n=5,291). A polygenic, multifactorial liability model was fitted to the twin data. Kaplan-Meier analyses were used to provide the cumulative incidence for the development of T1D and DN. Cox s proportional hazards models were fitted to the data. Poisson regression analysis was used to evaluate temporal trends in incidence. Standardized incidence ratios (SIRs) between the first-degree relatives of T1D patients and background population were determined. The twin study showed that the vast majority of affected MZ twin pairs remained discordant. Pairwise concordance for T1D was 27.3% in MZ and 3.8% in DZ twins. The probandwise concordance estimates were 42.9% and 7.4%, respectively. The model with additive genetic and individual environmental effects was the best-fitting liability model to T1D, with 88% of the phenotypic variance due to genetic factors. The second paper showed that the 50-year cumulative incidence of T1D in the siblings of diabetic probands was 6.9%. A young age at diagnosis in the probands considerably increased the risk. If the proband was diagnosed at the age of 0-4, 5-9, 10-14, 15 or more, the corresponding 40-year cumulative risks were 13.2%, 7.8%, 4.7% and 3.4%. The cumulative incidence increased with increasing birth year. However, SIR among children aged 14 years or under was approximately 12 throughout the follow-up. The third paper showed that diabetic siblings of the probands with nephropathy had a 2.3 times higher risk of DN compared with siblings of probands free of nephropathy. The presence of end stage renal disease (ESRD) in the proband increases the risk three-fold for diabetic siblings. Being diagnosed with diabetes during puberty (10-14) or a few years before (5-9) increased the susceptibility for DN in the siblings. The fourth paper revealed that of the offspring of male probands, 7.8% were affected by the age of 20 compared with 5.3% of the offspring of female probands. Offspring of fathers with T1D have 1.7 times greater risk to be affected with T1D than the offspring of mothers with T1D. The excess risk in the offspring of male fathers manifested itself through the higher risk the younger the father was when diagnosed with T1D. Young age at onset of diabetes in fathers increased the risk of T1D greatly in the offspring, but no such pattern was seen in the offspring of diabetic mothers. The SIR among offspring aged 14 years or under remained fairly constant throughout the follow-up, approximately 10. The present study has provided new knowledge on T1D recurrence risk in the first-degree relatives and the risk factors modifying the risk. Twin data demonstrated high genetic liability for T1D and increased heritability. The vast majority of affected MZ twin pairs, however, remain discordant for T1D. This study confirmed the drastic impact of the young age at onset of diabetes in the probands on the increased risk of T1D in the first-degree relatives. The only exception was the absence of this pattern in the offspring of T1D mothers. Both the sibling and the offspring recurrence risk studies revealed dynamic changes in the cumulative incidence of T1D in the first-degree relatives. SIRs among the first-degree relatives of T1D patients seems to remain fairly constant. The study demonstrates that the penetrance of the susceptibility genes for T1D may be low, although strongly influenced by the environmental factors. Presence of familial aggregation of DN was confirmed for the first time in a population-based study. Although the majority of the sibling pairs with T1D were discordant for DN, its presence in one sibling doubles and presence of ESRD triples the risk of DN in the other diabetic sibling. An encouraging observation was that although the proportion of children to be diagnosed with T1D at the age of 4 or under is increasing, they seem to have a decreased risk of DN or at least delayed onset.

Statistical analysis of the associations of hereditary factors with the risk of Type 1 diabetes and Diabetic Nephropathy based on the familial data collected through ascertaiment from population-based registers

In genetic epidemiology, population-based disease registries are commonly used to collect genotype or other risk factor information concerning affected subjects and their relatives. This work presents two new approaches for the statistical inference of ascertained data: a conditional and full likelihood approaches for the disease with variable age at onset phenotype using familial data obtained from population-based registry of incident cases. The aim is to obtain statistically reliable estimates of the general population parameters. The statistical analysis of familial data with variable age at onset becomes more complicated when some of the study subjects are non-susceptible, that is to say these subjects never get the disease. A statistical model for a variable age at onset with long-term survivors is proposed for studies of familial aggregation, using latent variable approach, as well as for prospective studies of genetic association studies with candidate genes. In addition, we explore the possibility of a genetic explanation of the observed increase in the incidence of Type 1 diabetes (T1D) in Finland in recent decades and the hypothesis of non-Mendelian transmission of T1D associated genes. Both classical and Bayesian statistical inference were used in the modelling and estimation. Despite the fact that this work contains five studies with different statistical models, they all concern data obtained from nationwide registries of T1D and genetics of T1D. In the analyses of T1D data, non-Mendelian transmission of T1D susceptibility alleles was not observed. In addition, non-Mendelian transmission of T1D susceptibility genes did not make a plausible explanation for the increase in T1D incidence in Finland. Instead, the Human Leucocyte Antigen associations with T1D were confirmed in the population-based analysis, which combines T1D registry information, reference sample of healthy subjects and birth cohort information of the Finnish population. Finally, a substantial familial variation in the susceptibility of T1D nephropathy was observed. The presented studies show the benefits of sophisticated statistical modelling to explore risk factors for complex diseases.