Three Essays in Empirical Asset Pricing

The financial crisis of 2007-2008 led to extraordinary government intervention in firms and markets. The scope and depth of government action rivaled that of the Great Depression. Many traded markets experienced dramatic declines in liquidity leading to the existence of conditions normally assumed to be promptly removed via the actions of profit seeking arbitrageurs. These extreme events motivate the three essays in this work. The first essay seeks and fails to find evidence of investor behavior consistent with the broad 'Too Big To Fail' policies enacted during the crisis by government agents. Only in limited circumstances, where government guarantees such as deposit insurance or U.S. Treasury lending lines already existed, did investors impart a premium to the debt security prices of firms under stress. The second essay introduces the Inflation Indexed Swap Basis (IIS Basis) in examining the large differences between cash and derivative markets based upon future U.S. inflation as measured by the Consumer Price Index (CPI). It reports the consistent positive value of this measure as well as the very large positive values it reached in the fourth quarter of 2008 after Lehman Brothers went bankrupt. It concludes that the IIS Basis continues to exist due to limitations in market liquidity and hedging alternatives. The third essay explores the methodology of performing debt based event studies utilizing credit default swaps (CDS). It provides practical implementation advice to researchers to address limited source data and/or small target firm sample size.

Evaluating Water Temperature, Habitat and Fish Communities in Candidate Coolwater Streams in Illinois Annual Project Report 2010

Work during this reporting period focused on characterizing temperature, habitat, and biological communities at candidate coolwater sites. During the past year we have collected additional temperature data from 57 candidate streams and other locations and now have records from 232 stream reaches. Eighty-two sites in Illinois have been identified as cool- or coldwater based on these records. Physical habitat surveys have been conducted at 79 sites where temperature data were available. Fish and macroinvertebrate data were obtained from the cooperative basin survey program data managers for candidate sites whenever possible and added to collections made during previous project years. This report summarizes progress for the period beginning 1 October 2009 and ending 30 September 2010. Additional analyses are ongoing and will be presented in the final report upon completion of this project.