Risk-return trade-off and autocorrelation

A trade-off between return and risk plays a central role in financial economics. The intertemporal capital asset pricing model (ICAPM) proposed by Merton (1973) provides a neoclassical theory for expected returns on risky assets. The model assumes that risk-averse investors (seeking to maximize their expected utility of lifetime consumption) demand compensation for bearing systematic market risk and the risk of unfavorable shifts in the investment opportunity set. Although the ICAPM postulates a positive relation between the conditional expected market return and its conditional variance, the empirical evidence on the sign of the risk-return trade-off is conflicting. In contrast, autocorrelation in stock returns is one of the most consistent and robust findings in empirical finance. While autocorrelation is often interpreted as a violation of market efficiency, it can also reflect factors such as market microstructure or time-varying risk premia. This doctoral thesis investigates a relation between the mixed risk-return trade-off results and autocorrelation in stock returns. The results suggest that, in the case of the US stock market, the relative contribution of the risk-return trade-off and autocorrelation in explaining the aggregate return fluctuates with volatility. This effect is then shown to be even more pronounced in the case of emerging stock markets. During high-volatility periods, expected returns can be described using rational (intertemporal) investors acting to maximize their expected utility. During lowvolatility periods, market-wide persistence in returns increases, leading to a failure of traditional equilibrium-model descriptions for expected returns. Consistent with this finding, traditional models yield conflicting evidence concerning the sign of the risk-return trade-off. The changing relevance of the risk-return trade-off and autocorrelation can be explained by heterogeneous agents or, more generally, by the inadequacy of the neoclassical view on asset pricing with unboundedly rational investors and perfect market efficiency. In the latter case, the empirical results imply that the neoclassical view is valid only under certain market conditions. This offers an economic explanation as to why it has been so difficult to detect a positive tradeoff between the conditional mean and variance of the aggregate stock return. The results highlight the importance, especially in the case of emerging stock markets, of noting both the risk-return trade-off and autocorrelation in applications that require estimates for expected returns.

Lymph node transfer in the treatment of postmastectomy lymphedema

Background: Lymphedema is a debilitating disorder with few treatment options. Clinical studies have shown that microvascular lymph node transfer may improve the lymphatic function of the affected limb. This study provides information about the clinical efficacy and safety of this procedure. Further, the biological background of this technique is clarified with an analysis of postoperative production of lymphatic growth factors and cytokines related to lymphangiogenesis. Patients and Methods: The effect of lymph node transfer to recipient and donor sites was analyzed with lymphoscintigraphy, limb circumference measurements, and appearance of clinical symptoms. Axillary seroma samples were analyzed from four patient groups: Axillary lymph node removal (ALND), Microvascular breast reconstruction (BR), lymph node transfer (LN) and combined lymph node transfer and breast reconstruction (LN-BR). Results: The postoperative lymphatic transport index was improved in 7/19 patients. Ten patients were able to reduce or discontinue compression therapy 6 - 24 months postoperatively. The donor lower limb lymphatic flow was slightly impaired (Ti >10) in 2 patients. No donor site lymphedema symptoms appeared during the 8 – 56-month follow-up. A high concentration of the VEGF-C protein was detected in the seroma fluid of all flap transfer groups. The concentration of the anti-inflammatory and anti-fibrotic cytokine IL-10 was increased in the LN-BR group samples when compared to the ALND or BR group. Conclusions: According to this preliminary study, the lymph node transfer seems to be beneficial for the lymphedema patients. However, a randomized study comparing the effect of BR and LN-BR is needed to evaluate the clinical efficacy of lymph node transfer. In addition, the effect of this surgery on the donor site needs to be studied further. The clinical effects of the lymph node transfer might be partly mediated by increased production of the lymphangiogenic growth factor (VEGF-C) as well as the anti-fibrotic cytokine (IL-10).