Essays in general equilibrium asset pricing

ABSTRACT : Research in empirical asset pricing has pointed out several anomalies both in the cross section and time series of asset prices, as well as in investors' portfolio choice. This dissertation aims to discover the forces driving some of these "puzzling" asset pricing dynamics and portfolio decisions observed in the financial market. Through the dissertation I construct and study dynamic general equilibrium models of heterogeneous investors in the presence of frictions and evaluate quantitatively their implications for financial-market asset prices and portfolio choice. I also explore the potential roots of puzzles in international finance. Chapter 1 shows that, by introducing jointly endogenous no-default type of borrowing constraints and heterogeneous beliefs in a dynamic general-equilibrium economy, many empirical features of stock return volatility can be reproduced. While most of the research on stock return volatility is empirical, this paper provides a theoretical framework that is able to reproduce simultaneously the cross section and time series stylized facts concerning stock returns and their volatility. In contrast to the existing theoretical literature related to stock return volatility, I don't impose persistence or regimes in any of the exogenous state variables or in preferences. Volatility clustering, asymmetry in the stock return-volatility relationship, and pricing of multi-factor volatility components in the cross section all arise endogenously as a consequence of the feedback between the binding of no-default constraints and heterogeneous beliefs. Chapters 2 and 3 explore the implications of differences of opinion across investors in different countries for international asset pricing anomalies. Chapter 2 demonstrates that several international finance "puzzles" can be reproduced by a single risk factor which captures heterogeneous beliefs across international investors. These puzzles include: (i) home equity preference; (ii) the dependence of firm returns on local and foreign factors; (iii) the co-movement of returns and international capital flows; and (iv) abnormal returns around foreign firm cross-listing events in the local market. These are reproduced in a setup with symmetric information and in a perfectly integrated world with multiple countries and independent processes producing the same good. Chapter 3 shows that by extending this framework to multiple goods and correlated production processes; the "forward premium puzzle" arises naturally as a compensation for the heterogeneous expectations about the depreciation of the exchange rate held by international investors. Chapters 2 and 3 propose differences of opinion across international investors as the potential resolution of several international finance `puzzles'. In a globalized world where both capital and information flow freely across countries, this explanation seems more appealing than existing asymmetric information or segmented markets theories aiming to explain international finance puzzles.

Chondrodysplasia and Abnormal Joint Development Associated with Mutations in IMPAD1, Encoding the Golgi-Resident Nucleotide Phosphatase, gPAPP.

We used whole-exome sequencing to study three individuals with a distinct condition characterized by short stature, chondrodysplasia with brachydactyly, congenital joint dislocations, cleft palate, and facial dysmorphism. Affected individuals carried homozygous missense mutations in IMPAD1, the gene coding for gPAPP, a Golgi-resident nucleotide phosphatase that hydrolyzes phosphoadenosine phosphate (PAP), the byproduct of sulfotransferase reactions, to AMP. The mutations affected residues in or adjacent to the phosphatase active site and are predicted to impair enzyme activity. A fourth unrelated patient was subsequently found to be homozygous for a premature termination codon in IMPAD1. Impad1 inactivation in mice has previously been shown to produce chondrodysplasia with abnormal joint formation and impaired proteoglycan sulfation. The human chondrodysplasia associated with gPAPP deficiency joins a growing number of skeletoarticular conditions associated with defective synthesis of sulfated proteoglycans, highlighting the importance of proteoglycans in the development of skeletal elements and joints.

Abnormal sensitivity to negative feedback in late-life depression.

AIMS: The purpose of the present study was to probe sensitivity to potentially misleading negative feedback on cognitive tasks as a possible mechanism of cognitive impairment in elderly patients with mild depression. METHODS: A total of 22 mildly depressed elderly subjects were compared to 22 healthy controls, using a computerized Tower-of-London task. RESULTS: Failure and magnitude of failure were significantly worse after negative but not positive feedback. Depression predicted failure after negative feedback but not the magnitude of failure. Neither failure nor magnitude of failure increased as a consequence of repeated negative feedback. CONCLUSIONS: Altered sensitivity to negative feedback occurs in mild late-life unipolar depression and may represent a subtle context-specific phenomenon.

Frequency-dependent sexual selection with respect to offspring fitness returns is consistent with predictions from rock-paper-scissors dynamics in the European common lizard

Genetic polymorphism can be maintained over time by negative frequency-dependent (FD) selection induced by Rock-paper-scissors (RPS) social systems. RPS games produce cyclic dynamics, and have been suggested to exist in lizards, insects, isopods, plants, and bacteria. Sexual selection is predicted to accentuate the survival of the future progeny during negative FD survival selection. More specifically, females are predicted to select mates that produce progeny genotypes that exhibit highest survival during survival selection imposed by adult males. However, no empirical evidence demonstrates the existence of FD sexual selection with respect to fitness payoffs of genetic polymorphisms. Here we tested this prediction using the common lizard Zootoca vivipara, a species with three male color morphs (orange, white, yellow) that exhibit morph frequency cycles. In a first step we tested the congruence of the morph frequency change with the predicted change in three independent populations, differing in male color morph frequency and state of the FD morph cycle. Thereafter we ran standardized sexual selection assays in which we excluded alternative mechanisms that potentially induce negative FD selection, and we quantified inter-sexual behavior. The patterns of sexual selection and the observed behavior were in line with context-dependent female mate choice and male behavior played a minor role. Moreover, the strength of the sexual selection was within the magnitude of selection required to produce the observed 3-4-year and 6-8 year morph frequency cycles at low and high altitudes, respectively. In summary, the study provides the first experimental evidence that underpins the crucial assumption of the RPS games suggested to exist in lizards, insects, isopods, and plants; namely, that sexual selection produces negative-FD selection. This indicates that sexual selection, in our study exert by females, might be a crucial driver of the maintenance of genetic polymorphisms.

Early diabetes and abnormal postnatal pancreatic islet development in mice lacking Glut-2.

Glut-2 is a low-affinity transporter present in the plasma membrane of pancreatic beta-cells, hepatocytes and intestine and kidney absorptive epithelial cells of mice. In beta-cells, Glut-2 has been proposed to be active in the control of glucose-stimulated insulin secretion (GSIS; ref. 2), and its expression is strongly reduced in glucose-unresponsive islets from different animal models of diabetes. However, recent investigations have yielded conflicting data on the possible role of Glut-2 in GSIS. Whereas some reports have supported a specific role for Glut-2 (refs 5,6), others have suggested that GSIS could proceed normally even in the presence of low or almost undetectable levels of this transporter. Here we show that homozygous, but not heterozygous, mice deficient in Glut-2 are hyperglycaemic and relatively hypo-insulinaemic and have elevated plasma levels of glucagon, free fatty acids and beta-hydroxybutyrate. In vivo, their glucose tolerance is abnormal. In vitro, beta-cells display loss of control of insulin gene expression by glucose and impaired GSIS with a loss of first phase but preserved second phase of secretion, while the secretory response to non-glucidic nutrients or to D-glyceraldehyde is normal. This is accompanied by alterations in the postnatal development of pancreatic islets, evidenced by an inversion of the alpha- to beta-cell ratio. Glut-2 is thus required to maintain normal glucose homeostasis and normal function and development of the endocrine pancreas. Its absence leads to symptoms characteristic of non-insulin-dependent diabetes mellitus.

Isolation of genetic mutation leading to abnormal phenotype in human through ultra-high-throughput sequencing (UHTS)

The introduction of Next Generation Sequencing (NGS) facilitated the task of localizing DNA variation and identifying the genetic cause of yet unsolved Mendelian disorders. Using Whole Exome Capture method and NGS, we identified the causative genetic aberration responsible for a number of monogenic disorders previously undetermined. Due to the novelty of the NGS method we benchmarked different algorithms to assess their merits and defects. This allowed us to establish a pipeline that we successfully used to pinpoint genes responsible for a form of West's syndrome, a Complex Intellectual Disability syndrome associated with patellar dislocation and celiac disease, and correcting some erroneous molecular diagnosis of Alport's syndrome in a Saudi Arabian family.

Insulinoma associated with a case of multiple endocrine neoplasia type I: Functional somatostatin receptors and abnormal glucose-induced insulin secretion.

A sporadic case of multiple endocrine neoplasia type I with coexisting insulinoma and hyperparathyroidism was investigated in vivo and in vitro. The insulinoma was localized by somatostatin receptor scintigraphy and these receptors were functionally active. Octreotide administration decreased the basal insulin and glucagon secretion by 90 and 46%, respectively. Immunocytochemistry of the insulinoma tissue was positive for insulin, chromogranin A and neuropeptide Y. The insulinoma cells were also isolated and cultured in vitro. Incubation experiments revealed that a low glucose concentration (1 mmol/l) was sufficient to increase cytosolic free calcium and to produce a maximal glucose-induced insulin release. Northern blot analysis of RNA obtained from the tumor showed a high abundance of the low Km glucose transporter GLUT1 but no transcript for the high Km glucose transporter GLUT2. The abnormal distribution of glucose transporters probably relates to the abnormal glucose sensing of insulinoma cells, and explains their sustained insulin secretion at low glucose concentrations. Whether these abnormalities share a pathogenetic link with the presence of functionally active somatostatin receptors remains to be elucidated.

Abnormal EEG Synchronization Correlates with Demyelination in Alzheimer's Disease

Introduction : The pathological processes caused by Alzheimer's disease (AD) supposedly disrupt communication between and within the distributed cortical networks due to the dysfunction/loss of synapses and myelination breakdown. Indeed, recently (Knyazeva et al. 2008), we have revealed the whole-head topography of EEG synchronization specific to AD. Here we analyze whether and how these abnormalities of synchronization are related to the demyelination of cortico-cortical fibers. Methods : Fifteen newly diagnosed AD patients (CDR 0.5-1) and 15 controls matched for age, participated in the study. Their multichannel (128) EEGs were recorded during 3-5 min at rest. They were submitted to the multivariate phase synchronization (MPS) analysis for mapping regional synchronization. To obtain individual whole-head maps, the MPS was computed for each sensor considering its 2nd nearest topographical neighbors. Separate calculations were performed for the delta, theta, alpha-1/−2, and beta-1/−2 EEG bands. The same subjects were scanned on a 3 Tesla Philips scanner. The protocol included a high-resolution T1-weighted sequence and a Magnetization Transfer Imaging (MTI) acquisition. For each subject, we defined a 3mm thick layer of white matter exactly below the cortical gray matter. The magnetization transfer ratio (MTR) - an estimator of myelination - was calculated for this layer in 39 Brodmann-defined ROIs per hemisphere. To assess the between-group differences, we used a permutation version of Hotelling's T2 test or two-sample T-test (Pcorrected <0.05). For correlation analysis, Spearman Rank Correlation was calculated. Results : In AD patients, we have found an abnormal landscape of synchronization characterized by a decrease in MPS over the fronto-temporal region of the left hemisphere and an increase over the temporo-parieto-occipital regions bilaterally. Also, we have shown a widespread decrease in regional MTR in the AD patients for all the areas excluding motor, premotor, and primary sensory ones. Assuming that AD-related changes in synchronization are associated with demyelination, we hypothesized a correlation between the regional MTR values and MPS values in the hypo- and hyper-synchronized clusters. We found that MPS in the left fronto-temporal hypo-synchronized cluster directly correlates with myelination in BA42-46 of the left hemisphere: the lower the myelination in individual patients, the lower the EEG synchronization. By contrast, in the posterior hyper-synchronized cluster, MPS inversely correlated with myelination, i.e., the lower the myelination, the higher the synchronization. This posterior hyper-synchronization, more characteristic for early-onset AD, probably, results from the initial effect of the disease on cortical inhibition, reducing cortical capacity for decoupling irrelevant connections. Remarkably, it showed different topography of correlations in early- vs. late-onset patients. In the early-onset patients, hyper-synchronization was mainly related to demyelination in posterior BAs, the effect being significant in all the EEG frequency bands. In the late-onset patients, widely distributed correlations were significant for the EEG delta band, suggesting an interaction between the cerebral manifestations of AD and the age of its onset, i.e., topographically selective impairment of cortical inhibition in early-onset AD vs. its wide-spread weakening in old age. Conclusions : Overall, our results document that the degradation of white matter is a significant factor of AD pathogenesis leading to functional dysconnection, the latter being reflected in EEG synchronization abnormalities.

Kenny syndrome: evidence for idiopathic hypoparathyroidism in two patients and for abnormal parathyroid hormone in one.

We report three unrelated patients with Kenny syndrome. Clinical symptoms included severe dwarfism, with internal cortical thickening and medullary stenosis of the tubular bones, normal bone age, macrocephaly, absent diploic space, delayed closure of the anterior fontanel, and normal intelligence; two of the patients had hyperopia and papillary edema. The patients also had episodic hypocalcemic tetany and low serum levels of magnesium. In two patients the diagnosis of idiopathic hypoparathyroidism was established on the basis of undetectable serum parathyroid hormone (PTH) levels (N- and C-terminal RIAs); one of these had normal urinary cyclic adenosine monophosphate (cAMP) response to exogenous PTH. Circulating calcitonin was undetectable in either patient. In a third patient, who had abnormal body proportions, serum levels of PTH were increased in an RIA detecting predominantly intact PTH (N-RIA) and undetectable in another RIA recognizing carboxy-terminal fragments (C-RIA). Administration of PTH promptly increased urinary cAMP excretion. In this patient, serum levels of calcitonin were increased, whereas values for 25-OHD and 1,25(OH)2D were normal.