Flexible Budgeting under Uncertainty: A Real Options Perspective

This paper examines the relationships between uncertainty and the perceived usefulness of traditional annual budgets versus flexible budgets in 95 Swedish companies. We form hypotheses that the perceived usefulness of the annual budgets as well as the attitudes to more flexible budget alternatives are influenced by the uncertainty that the companies face. Our study distinguishes between two separate kinds of uncertainty: exogenous stochastic uncertainty (deriving from the firm’s environment) and endogenous deterministic uncertainty (caused by the strategic choices made by the firm itself). Based on a structural equations modelling analysis of data from a mail survey we found that the more accentuated exogenous uncertainty a company faces, the more accentuated is the expected trend towards flexibility in the budget system, and vice versa; the more endogenous uncertainty they face, the more negative are their attitudes towards budget flexibility. We also found that these relationships were not present with regard to the attitudes towards the usefulness of the annual budget. Noteworthy is, however, that there was a significant negative relationship between the perceived usefulness of the annual budget and budget flexibility. Thus, our results seem to indicate that the degree of flexibility in the budget system is influenced by both general attitudes towards the usefulness of traditional budgets and by the actual degree of exogenous uncertainty a company faces and by the strategy that it executes.

Local numerical modelling of magnetoconvection and turbulence - implications for mean-field theories

During the last decades mean-field models, in which large-scale magnetic fields and differential rotation arise due to the interaction of rotation and small-scale turbulence, have been enormously successful in reproducing many of the observed features of the Sun. In the meantime, new observational techniques, most prominently helioseismology, have yielded invaluable information about the interior of the Sun. This new information, however, imposes strict conditions on mean-field models. Moreover, most of the present mean-field models depend on knowledge of the small-scale turbulent effects that give rise to the large-scale phenomena. In many mean-field models these effects are prescribed in ad hoc fashion due to the lack of this knowledge. With large enough computers it would be possible to solve the MHD equations numerically under stellar conditions. However, the problem is too large by several orders of magnitude for the present day and any foreseeable computers. In our view, a combination of mean-field modelling and local 3D calculations is a more fruitful approach. The large-scale structures are well described by global mean-field models, provided that the small-scale turbulent effects are adequately parameterized. The latter can be achieved by performing local calculations which allow a much higher spatial resolution than what can be achieved in direct global calculations. In the present dissertation three aspects of mean-field theories and models of stars are studied. Firstly, the basic assumptions of different mean-field theories are tested with calculations of isotropic turbulence and hydrodynamic, as well as magnetohydrodynamic, convection. Secondly, even if the mean-field theory is unable to give the required transport coefficients from first principles, it is in some cases possible to compute these coefficients from 3D numerical models in a parameter range that can be considered to describe the main physical effects in an adequately realistic manner. In the present study, the Reynolds stresses and turbulent heat transport, responsible for the generation of differential rotation, were determined along the mixing length relations describing convection in stellar structure models. Furthermore, the alpha-effect and magnetic pumping due to turbulent convection in the rapid rotation regime were studied. The third area of the present study is to apply the local results in mean-field models, which task we start to undertake by applying the results concerning the alpha-effect and turbulent pumping in mean-field models describing the solar dynamo.

Hybrid Modelling of Titan's Interaction with the Magnetosphere of Saturn

In this dissertation we study the interaction between Saturn's moon Titan and the magnetospheric plasma and magnetic field. The method of research is a three-dimensional computer simulation model, that is used to simulate this interaction. The simulation model used is a hybrid model. Hybrid models enable individual tracking or tracing of ions and also take into account the particle motion in the propagation of the electromagnetic fields. The hybrid model has been developed at the Finnish Meteorological Institute. This thesis gives a general description of the effects that the solar wind has on Earth and other planets of our solar system. Planetary satellites can also have similar interactions with the solar wind but also with the plasma flows of planetary magnetospheres. Titan is clearly the largest among the satellites of Saturn and also the only known satellite with a dense atmosphere. It is the atmosphere that makes Titan's plasma interaction with the magnetosphere of Saturn so unique. Nevertheless, comparisons with the plasma interactions of other solar system bodies are valuable. Detecting charged plasma particles requires in situ measurements obtainable through scientific spacecraft. The Cassini mission has been one of the most remarkable international efforts in space science. Since 2004 the measurements and images obtained from instruments onboard the Cassini spacecraft have increased the scientific knowledge of Saturn as well as its satellites and magnetosphere in a way no one was probably able to predict. The current level of science on Titan is practically unthinkable without the Cassini mission. Many of the observations by Cassini instrument teams have influenced this research both the direct measurements of Titan as well as observations of its plasma environment. The theoretical principles of the hybrid modelling approach are presented in connection to the broader context of plasma simulations. The developed hybrid model is described in detail: e.g. the way the equations of the hybrid model are solved is shown explicitly. Several simulation techniques, such as the grid structure and various boundary conditions, are discussed in detail as well. The testing and monitoring of simulation runs is presented as an essential routine when running sophisticated and complex models. Several significant improvements of the model, that are in preparation, are also discussed. A main part of this dissertation are four scientific articles based on the results of the Titan model. The Titan model developed during the course of the Ph.D. research has been shown to be an important tool to understand Titan's plasma interaction. One reason for this is that the structures of the magnetic field around Titan are very much three-dimensional. The simulation results give a general picture of the magnetic fields in the vicinity of Titan. The magnetic fine structure of Titan's wake as seen in the simulations seems connected to Alfvén waves an important wave mode in space plasmas. The particle escape from Titan is also a major part of these studies. Our simulations show a bending or turning of Titan's ionotail that we have shown to be a direct result of the basic principles in plasma physics. Furthermore, the ion flux from the magnetosphere of Saturn into Titan's upper atmosphere has been studied. The modelled ion flux has asymmetries that would likely have a large impact in the heating in different parts of Titan's upper atmosphere.

Modelling and Forecasting Property Rents and Returns (summary section only)

Recently, focus of real estate investment has expanded from the building-specific level to the aggregate portfolio level. The portfolio perspective requires investment analysis for real estate which is comparable with that of other asset classes, such as stocks and bonds. Thus, despite its distinctive features, such as heterogeneity, high unit value, illiquidity and the use of valuations to measure performance, real estate should not be considered in isolation. This means that techniques which are widely used for other assets classes can also be applied to real estate. An important part of investment strategies which support decisions on multi-asset portfolios is identifying the fundamentals of movements in property rents and returns, and predicting them on the basis of these fundamentals. The main objective of this thesis is to find the key drivers and the best methods for modelling and forecasting property rents and returns in markets which have experienced structural changes. The Finnish property market, which is a small European market with structural changes and limited property data, is used as a case study. The findings in the thesis show that is it possible to use modern econometric tools for modelling and forecasting property markets. The thesis consists of an introduction part and four essays. Essays 1 and 3 model Helsinki office rents and returns, and assess the suitability of alternative techniques for forecasting these series. Simple time series techniques are able to account for structural changes in the way markets operate, and thus provide the best forecasting tool. Theory-based econometric models, in particular error correction models, which are constrained by long-run information, are better for explaining past movements in rents and returns than for predicting their future movements. Essay 2 proceeds by examining the key drivers of rent movements for several property types in a number of Finnish property markets. The essay shows that commercial rents in local markets can be modelled using national macroeconomic variables and a panel approach. Finally, Essay 4 investigates whether forecasting models can be improved by accounting for asymmetric responses of office returns to the business cycle. The essay finds that the forecast performance of time series models can be improved by introducing asymmetries, and the improvement is sufficient to justify the extra computational time and effort associated with the application of these techniques.

Modelling initial survival and growth of radiata pine in New Zealand.

A sensitive framework has been developed for modelling young radiata pine survival, its growth and its size class distribution, from time of planting to age 5 or 6 years. The data and analysis refer to the Central North Island region of New Zealand. The survival function is derived from a Weibull probability density function, to reflect diminishing mortality with the passage of time in young stands. An anamorphic family of trends was used, as very little between-tree competition can be expected in young stands. An exponential height function was found to fit best the lower portion of its sigmoid form. The most appropriate basal area/ha exponential function included an allometric adjustment which resulted in compatible mean height and basal area/ha models. Each of these equations successfully represented the effects of several establishment practices by making coefficients linear functions of site factors, management activities and their interactions. Height and diameter distribution modelling techniques that ensured compatibility with stand values were employed to represent the effects of management practices on crop variation. Model parameters for this research were estimated using data from site preparation experiments in the region and were tested with some independent data sets.