Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

Device-specific weighted T-score for two quantitative ultrasounds: operational propositions for the management of osteoporosis for 65 years and older women in Switzerland.

The World Health Organization (WHO) criteria for the diagnosis of osteoporosis are mainly applicable for dual X-ray absorptiometry (DXA) measurements at the spine and hip levels. There is a growing demand for cheaper devices, free of ionizing radiation such as promising quantitative ultrasound (QUS). In common with many other countries, QUS measurements are increasingly used in Switzerland without adequate clinical guidelines. The T-score approach developed for DXA cannot be applied to QUS, although well-conducted prospective studies have shown that ultrasound could be a valuable predictor of fracture risk. As a consequence, an expert committee named the Swiss Quality Assurance Project (SQAP, for which the main mission is the establishment of quality assurance procedures for DXA and QUS in Switzerland) was mandated by the Swiss Association Against Osteoporosis (ASCO) in 2000 to propose operational clinical recommendations for the use of QUS in the management of osteoporosis for two QUS devices sold in Switzerland. Device-specific weighted "T-score" based on the risk of osteoporotic hip fractures as well as on the prediction of DXA osteoporosis at the hip, according to the WHO definition of osteoporosis, were calculated for the Achilles (Lunar, General Electric, Madison, Wis.) and Sahara (Hologic, Waltham, Mass.) ultrasound devices. Several studies (totaling a few thousand subjects) were used to calculate age-adjusted odd ratios (OR) and area under the receiver operating curve (AUC) for the prediction of osteoporotic fracture (taking into account a weighting score depending on the design of the study involved in the calculation). The ORs were 2.4 (1.9-3.2) and AUC 0.72 (0.66-0.77), respectively, for the Achilles, and 2.3 (1.7-3.1) and 0.75 (0.68-0.82), respectively, for the Sahara device. To translate risk estimates into thresholds for clinical application, 90% sensitivity was used to define low fracture and low osteoporosis risk, and a specificity of 80% was used to define subjects as being at high risk of fracture or having osteoporosis at the hip. From the combination of the fracture model with the hip DXA osteoporotic model, we found a T-score threshold of -1.2 and -2.5 for the stiffness (Achilles) determining, respectively, the low- and high-risk subjects. Similarly, we found a T-score at -1.0 and -2.2 for the QUI index (Sahara). Then a screening strategy combining QUS, DXA, and clinical factors for the identification of women needing treatment was proposed. The application of this approach will help to minimize the inappropriate use of QUS from which the whole field currently suffers.

Prognostic importance of hyponatremia in patients with acute pulmonary embolism

Rapport de synthèse Enjeux et contexte: L'hyponatrémie est un trouble électrolytique fréquent et associé à un pronostic défavorable dans de nombreuses affections card iovascu lai res (1-5), pour lesquelles il est un marqueur de l'activation neurohumorale (6). Sa valeur pronostique chez les patients se présentant avec une emboîie pulmonaire était jusque là inconnue ; elle fait l'objet de la présente étude.Objectifs: Examiner chez les patients hospitalisés pour une embolie pulmonaire, les associations entre hyponatrémie et mortalité ainsi qu'avec le taux de réhospitalisation. Méthodes: Nous avons étudié les données de 13728 patients avec un diagnostic principal d'embolie pulmonaire provenant de 185 hôpitaux en Pennsylvanie (janvier 2000 à novembre 2002.) Nous avons utilisé un modèle de régression logistique afin d'établir l'association indépendante entre le niveau de sodium lors de la présentation aux urgences et la mortalité ainsi que le taux de ^hospitalisation durant 30 jours. Nous avons ajusté pour les caractéristiques du patient (race, assurance, sévérité de la maladie, usage de la thrombolyse) et de l'hôpital (région, taille, avec ou sans médecins en formation.)Résultats principaux: Une hyponatrémie (sodium £ 135 mmol/l) était présente chez 2907 patients (21.1%). Les patients avec un sodium >135, 130-135, et <130 mmol/l avaient une mortalité cumulée à 30 jours de 8.0%, 13.6%, et 28.5% (P <0.001), et un taux de réadmission de 11.8%, 15.6%, et 19.3% (P <0.001), respectivement. Comparés aux patients avec un sodium >135 mmol/l, les odd ratios ajustés concernant la mortalité étaient significativement plus important pour les patients avec un sodium compris entre 130 et 135 mmol/l (OR 1.53, 95% Cl: 1.33-1.76) ou <130 mmol/l (OR 3.26, 95% Cl: 2.48-4.29). Les odd ratios ajustés concernant la réhospitalisation étaient également augmentés pour les patients présentant un sodium entre 130 et 135 mmol/l (OR 1.28, 95% Cl: 1.12-1.46) ou <130 mmol/l (OR 1.44, 95% Cl: 1.02-2.02). Conclusions et perspectives: L'hyponatrémie est fréquente chez les patients se présentant avec une embolie pulmonaire, de plus elle est un prédicateur indépendant de la mortalité à court terme, ainsi que du taux de réhospitalisation. La natrémie est une information généralement disponible lors de l'établissement d'un pronostic. Bien que cette association soit compatible avec une activation neurohumorale, nous ne pouvons pas attester des mécanismes impliqués, du fait que notre étude ne donne pas d'informations sur d'autres étapes de la physiologie de cette association.

Discharge properties of single neurons in the dorsal nucleus of the lateral lemniscus of the rat.

The aim of the present study was to characterize the discharge properties of single neurons in the dorsal nucleus of the lateral lemniscus (DNLL) of the rat. In the absence of acoustic stimulation, two types of spontaneous discharge patterns were observed: units tended to fire in a bursting or in a nonbursting mode. The distribution of units in the DNLL based on spontaneous firing rate followed a rostrocaudal gradient: units with high spontaneous rates were most commonly located in the rostral part of the DNLL, whereas in the caudal part units had lower spontaneous discharge rates. The most common response pattern of DNLL units to 200 ms binaural noise bursts contained a prominent onset response followed by a lower but steady-state response and an inhibitory response in the early-off period. Thresholds of response to noise bursts were on average higher for DNLL units than for units recorded in the inferior colliculus under the same experimental conditions. The DNLL units were arranged according to a mediolateral sensitivity gradient with the lowest threshold units in the most lateral part of the nucleus. In the rat, as in other mammals, the most common DNLL binaural input type was an excitatory response to contralateral ear stimulation and inhibitory response to ipsilateral ear stimulation (EI type). Pure tone bursts were in general a more effective stimulus compared to noise bursts. Best frequency (BF) was established for 97 DNLL units and plotted according to their spatial location. The DNLL exhibits a loose tonotopic organization, where there is a concentric pattern with high BF units located in the most dorsal and ventral parts of the DNLL and lower BF units in the middle part of the nucleus.

Hypoglycemia-activated GLUT2 neurons of the nucleus tractus solitarius stimulate vagal activity and glucagon secretion.

Glucose-sensing neurons in the brainstem participate in the regulation of energy homeostasis but have been poorly characterized because of the lack of specific markers to identify them. Here we show that GLUT2-expressing neurons of the nucleus of the tractus solitarius form a distinct population of hypoglycemia-activated neurons. Their response to low glucose is mediated by reduced intracellular glucose metabolism, increased AMP-activated protein kinase activity, and closure of leak K(+) channels. These are GABAergic neurons that send projections to the vagal motor nucleus. Light-induced stimulation of channelrhodospin-expressing GLUT2 neurons in vivo led to increased parasympathetic nerve firing and glucagon secretion. Thus GLUT2 neurons of the nucleus tractus solitarius link hypoglycemia detection to counterregulatory response. These results may help identify the cause of hypoglycemia-associated autonomic failure, a major threat in the insulin treatment of diabetes.

Externalizing disorders and substance use: empirically derived subtypes in a population-based sample of adults.

PURPOSE: Attention-deficit/hyperactivity disorder (ADHD), conduct disorder (CD), and oppositional defiant disorder (ODD) are common externalizing disorders of childhood. The common effects of these disorders on substance abuse need further investigation. The current study investigated the joint clusters of childhood/adolescence ADHD, CD, and ODD, and their influence on substance abuse/dependence in a population-based sample of adults. METHODS: The data were drawn from the PsyCoLaus study (n = 3,720) conducted in Lausanne, Switzerland. The population-based sample included 238 subjects meeting criteria for ADHD/ODD/CD diagnoses before the age of 15. Latent class analyses (LCA) were performed to derive comorbidity subtypes, which were subsequently characterized with respect to psychosocial correlates and substance use. RESULTS: The best fit in LCAs was achieved with three latent classes: an ADHD subtype (35.7 %); an externalizing multimorbid subtype (33.6 %) involving ODD, ADHD, and CD; and a third subtype with CD (30.7 %). The CD subtype showed the highest association with substance use. Apart from this, the externalizing multimorbid subtype was also significantly linked to substance use. The ADHD subtype had only elevated frequencies for alcohol dependence in comparison with subjects that had no history of ADHD, ODD, and CD during childhood or adolescence. Finally, important interactions between subtypes and sex were observed with regard to substance use. CONCLUSIONS: This study provides evidence showing that subtyping the externalizing disorders, ADHD, ODD and CD, along their comorbidity patterns leads to important differences regarding substance use. This could have implications for the etiology, prevention, and treatment of substance use disorders.

Hypertension and intra-operative incidents: a multicentre study of 125,000 surgical procedures in Swiss hospitals.

It is debated whether chronic hypertension increases the risk of cardiovascular incidents during anaesthesia. We studied all elective surgical operations performed in adults under general or regional anaesthesia between 2000 and 2004, in 24 hospitals collecting computerised clinical data on all anaesthetics since 1996. The focus was on cardiovascular incidents, though other anaesthesia-related incidents were also evaluated. Among 124,939 interventions, 27,881 (22%) were performed in hypertensive patients. At least one cardiovascular incident occurred in 7549 interventions (6% (95% CI 5.9-6.2%)). The average adjusted odds ratio of cardiovascular risk for chronic hypertension was 1.38 (95% CI 1.27-1.49). However, across hospitals, adjusted odd ratios varied from 0.41 up to 2.25. Hypertension did not increase the risk of other incidents. Hypertensive patients are still at risk of intra-operative cardiovascular incidents, while risk heterogeneity across hospitals, despite taking account of casemix and hospital characteristics, suggests variations in anaesthetic practices.

Microautophagy of the nucleus coincides with a vacuolar diffusion barrier at nuclear-vacuolar junctions.

Nuclei bind yeast vacuoles via nucleus-vacuole (NV) junctions. Under nutrient restriction, NV junctions invaginate and release vesicles filled with nuclear material into vacuoles, resulting in piecemeal microautophagy of the nucleus (PMN). We show that the electrochemical gradient across the vacuolar membrane promotes invagination of NV junctions. Existing invaginations persist independently of the gradient, but final release of PMN vesicles requires again V-ATPase activity. We find that NV junctions form a diffusion barrier on the vacuolar membrane that excludes V-ATPase but is enriched in the VTC complex and accessible to other membrane-integral proteins. V-ATPase exclusion depends on the NV junction proteins Nvj1p,Vac8p, and the electrochemical gradient. It also depends on factors of lipid metabolism, such as the oxysterol binding protein Osh1p and the enoyl-CoA reductase Tsc13p, which are enriched in NV junctions, and on Lag1p and Fen1p. Our observations suggest that NV junctions form in two separable steps: Nvj1p and Vac8p suffice to establish contact between the two membranes. The electrochemical potential and lipid-modifying enzymes are needed to establish the vacuolar diffusion barrier, invaginate NV junctions, and form PMN vesicles.

Confirmation of functional zones within the human subthalamic nucleus: patterns of connectivity and sub-parcellation using diffusion weighted imaging.

The subthalamic nucleus (STN) is a small, glutamatergic nucleus situated in the diencephalon. A critical component of normal motor function, it has become a key target for deep brain stimulation in the treatment of Parkinson's disease. Animal studies have demonstrated the existence of three functional sub-zones but these have never been shown conclusively in humans. In this work, a data driven method with diffusion weighted imaging demonstrated that three distinct clusters exist within the human STN based on brain connectivity profiles. The STN was successfully sub-parcellated into these regions, demonstrating good correspondence with that described in the animal literature. The local connectivity of each sub-region supported the hypothesis of bilateral limbic, associative and motor regions occupying the anterior, mid and posterior portions of the nucleus respectively. This study is the first to achieve in-vivo, non-invasive anatomical parcellation of the human STN into three anatomical zones within normal diagnostic scan times, which has important future implications for deep brain stimulation surgery.

Targetting of the ventro-intermediate nucleus using ultra-high field (7T) MRI for gamma knife surgery purposes: A pilot in vivo study on healthy subjects.

INTRODUCTION: Gamma Knife surgery (GKS) is a non-invasive neurosurgical stereotactic procedure, increasingly used as an alternative to open functional procedures. This includes targeting of the ventro-intermediate nucleus of the thalamus (e.g. Vim) for tremor. We currently perform an indirect targeting, as the Vim is not visible on current 3Tesla MRI acquisitions. Our objective was to enhance anatomic imaging (aiming at refining the precision of anatomic target selection by direct visualisation) in patients treated for tremor with Vim GKS, by using high field 7T MRI. MATERIALS AND METHODSH: Five young healthy subjects were scanned on 3 (T1-w and diffusion tensor imaging) and 7T (high-resolution susceptibility weighted images (SWI)) MRI in Lausanne. All images were further integrated for the first time into the Gamma Plan Software(®) (Elekta Instruments, AB, Sweden) and co-registered (with T1 was a reference). A simulation of targeting of the Vim was done using various methods on the 3T images. Furthermore, a correlation with the position of the found target with the 7T SWI was performed. The atlas of Morel et al. (Zurich, CH) was used to confirm the findings on a detailed analysis inside/outside the Gamma Plan. RESULTS: The use of SWI provided us with a superior resolution and an improved image contrast within the basal ganglia. This allowed visualization and direct delineation of some subgroups of thalamic nuclei in vivo, including the Vim. The position of the target, as assessed on 3T, perfectly matched with the supposed one of the Vim on the SWI. Furthermore, a 3-dimensional model of the Vim-target area was created on the basis of the obtained images. CONCLUSION: This is the first report of the integration of SWI high field MRI into the LGP, aiming at the improvement of targeting validation of the Vim in tremor. The anatomical correlation between the direct visualization on 7T and the current targeting methods on 3T (e.g. quadrilatere of Guyot, histological atlases) seems to show a very good anatomical matching. Further studies are needed to validate this technique, both by improving the accuracy of the targeting of the Vim (potentially also other thalamic nuclei) and to perform clinical assessment.

BlastR--fast and accurate database searches for non-coding RNAs.

We present and validate BlastR, a method for efficiently and accurately searching non-coding RNAs. Our approach relies on the comparison of di-nucleotides using BlosumR, a new log-odd substitution matrix. In order to use BlosumR for comparison, we recoded RNA sequences into protein-like sequences. We then showed that BlosumR can be used along with the BlastP algorithm in order to search non-coding RNA sequences. Using Rfam as a gold standard, we benchmarked this approach and show BlastR to be more sensitive than BlastN. We also show that BlastR is both faster and more sensitive than BlastP used with a single nucleotide log-odd substitution matrix. BlastR, when used in combination with WU-BlastP, is about 5% more accurate than WU-BlastN and about 50 times slower. The approach shown here is equally effective when combined with the NCBI-Blast package. The software is an open source freeware available from www.tcoffee.org/blastr.html.

Anterior ischemic optic neuropathy in eyes with optic disc drusen.

BACKGROUND: There have been anecdotal reports of anterior ischemic optic neuropathy (AION) occurring in eyes with optic disc drusen (ODD), but the clinical features of this condition have not been well characterized. OBJECTIVES: To better describe the clinical features of AION associated with ODD and to compare the clinical features of this condition with those of "garden variety" nonarteritic AION. METHODS: We reviewed the medical records of 20 patients who experienced an episode of AION in an eye with ODD. In 4 patients, both eyes were affected; thus, 24 eyes were studied. The diagnosis of ODD was made by ophthalmoscopic identification, orbital ultrasonography, or computed tomographic scanning. We recorded age, sex, vascular risk factors, symptoms, visual acuity, visual fields, and results of the follow-up examination in all patients. These findings were compared with data from previously reported series of patients with nonarteritic AION. RESULTS: Our 20 patients included 14 men and 6 women (age range, 18-69 years; mean, 49.4 years). Vascular risk factors were identified in 10 patients (50%). Three patients reported episodes of transient visual loss before their fixed deficit. The visual acuity at the initial examination was 20/60 or better in 15 (62%) of the 24 eyes; 8 had a visual acuity of 20/20. The predominant pattern of visual field loss was an altitudinal or arcuate defect in 19 (79%) and a centrocecal scotoma in 5 (21%) of the 24 eyes. There was subjective worsening of vision before the initial neuro-ophthalmic examination in 11 eyes (46%) and objective documentation of progression in 7 eyes (29%). The final visual acuity was 20/40 or better in 13 (62%) of 21 eyes and 20/200 or worse in 3 (14%) of 21 eyes. CONCLUSIONS: Our patients were strikingly similar to those with nonarteritic AION unassociated with drusen in regard to prevalence of vascular risk factors, pattern of visual field loss, and occurrence of a subsequent similar event in the fellow eye. In contrast, however, patients with ODD-AION were younger than those with nonarteritic AION, were more likely to report preceding episodes of transient visual obscuration, and enjoyed a more favorable visual outcome.

A topological invariant to predict the three-dimensional writhe of ideal configurations of knots and links.

We present herein a topological invariant of oriented alternating knots and links that predicts the three-dimensional (3D) writhe of the ideal geometrical configuration of the considered knot/link. The fact that we can correlate a geometrical property of a given configuration with a topological invariant supports the notion that the ideal configuration contains important information about knots and links. The importance of the concept of ideal configuration was already suggested by the good correlation between the 3D writhe of ideal knot configurations and the ensemble average of the 3D writhe of random configurations of the considered knots. The values of the new invariant are quantized: multiples of 4/7 for links with an odd number of components (including knots) and 2/7 plus multiples of 4/7 for links with an even number of components.

Prévalence des troubles de l'humeur dans la maladie de Parkinson traitée par stimulation cérébrale profonde [Prevalence of mood disorders in Parkinson's disease patients treated with subthalamic nucleus deep brain stimulation].

Subthalamic nucleus deep brain stimulation (STN-DBS) is a recognized treatment for advanced and severe forms of Parkinson's Disease. The procedure improves motor signs and often allows a reduction of the medication. The impact of the procedure on cognitive and neuropsychiatric signs of the disease is more debated and there is an international consensus for the need of a multidisciplinary evaluation of patients undergoing such programs, including a neuropsychiatric assessment. We present a review of the literature as well as the experience at our centre focused on the short and long term outcome on mood following STN-DBS.

Orexin/hypocretin (Orx/Hcrt) transmission and drug-seeking behavior: is the paraventricular nucleus of the thalamus (PVT) part of the drug seeking circuitry?

The orexin/hypocretin (Orx/Hcrt) system has long been considered to regulate a wide range of physiological processes, including feeding, energy metabolism, and arousal. More recently, concordant observations have demonstrated an important role for these peptides in the reinforcing properties of most drugs of abuse. Orx/Hcrt neurons arise in the lateral hypothalamus (LH) and project to all brain structures implicated in the regulation of arousal, stress, and reward. Although Orx/Hcrt neurons have been shown to massively project to the paraventricular nucleus of the thalamus (PVT), only recent evidence suggested that the PVT may be a key relay of Orx/Hcrt-coded reward-related communication between the LH and both the ventral and dorsal striatum. While this thalamic region was not thought to be part of the "drug addiction circuitry," an increasing amount of evidence demonstrated that the PVT-particularly PVT Orx/Hcrt transmission-was implicated in the modulation of reward function in general and several aspects of drug-directed behaviors in particular. The present review discusses recent findings that suggest that maladaptive recruitment of PVT Orx/Hcrt signaling by drugs of abuse may promote persistent compulsive drug-seeking behavior following a period of protracted abstinence and as such may represent a relevant target for understanding the long-term vulnerability to drug relapse after withdrawal.