Many valued algebraic structures as measures of comparison

This thesis studies the properties and usability of operators called t-norms, t-conorms, uninorms, as well as many valued implications and equivalences. Into these operators, weights and a generalized mean are embedded for aggregation, and they are used for comparison tasks and for this reason they are referred to as comparison measures. The thesis illustrates how these operators can be weighted with a differential evolution and aggregated with a generalized mean, and the kinds of measures of comparison that can be achieved from this procedure. New operators suitable for comparison measures are suggested. These operators are combination measures based on the use of t-norms and t-conorms, the generalized 3_-uninorm and pseudo equivalence measures based on S-type implications. The empirical part of this thesis demonstrates how these new comparison measures work in the field of classification, for example, in the classification of medical data. The second application area is from the field of sports medicine and it represents an expert system for defining an athlete's aerobic and anaerobic thresholds. The core of this thesis offers definitions for comparison measures and illustrates that there is no actual difference in the results achieved in comparison tasks, by the use of comparison measures based on distance, versus comparison measures based on many valued logical structures. The approach has been highly practical in this thesis and all usage of the measures has been validated mainly by practical testing. In general, many different types of operators suitable for comparison tasks have been presented in fuzzy logic literature and there has been little or no experimental work with these operators.

Qualitative Characteristics and Quantitative Measures of Solution's Reliability in Discrete Optimization: Traditional Analytical Approaches, Innovative Computational Methods and Applicability

The purpose of this thesis is twofold. The first and major part is devoted to sensitivity analysis of various discrete optimization problems while the second part addresses methods applied for calculating measures of solution stability and solving multicriteria discrete optimization problems. Despite numerous approaches to stability analysis of discrete optimization problems two major directions can be single out: quantitative and qualitative. Qualitative sensitivity analysis is conducted for multicriteria discrete optimization problems with minisum, minimax and minimin partial criteria. The main results obtained here are necessary and sufficient conditions for different stability types of optimal solutions (or a set of optimal solutions) of the considered problems. Within the framework of quantitative direction various measures of solution stability are investigated. A formula for a quantitative characteristic called stability radius is obtained for the generalized equilibrium situation invariant to changes of game parameters in the case of the H¨older metric. Quality of the problem solution can also be described in terms of robustness analysis. In this work the concepts of accuracy and robustness tolerances are presented for a strategic game with a finite number of players where initial coefficients (costs) of linear payoff functions are subject to perturbations. Investigation of stability radius also aims to devise methods for its calculation. A new metaheuristic approach is derived for calculation of stability radius of an optimal solution to the shortest path problem. The main advantage of the developed method is that it can be potentially applicable for calculating stability radii of NP-hard problems. The last chapter of the thesis focuses on deriving innovative methods based on interactive optimization approach for solving multicriteria combinatorial optimization problems. The key idea of the proposed approach is to utilize a parameterized achievement scalarizing function for solution calculation and to direct interactive procedure by changing weighting coefficients of this function. In order to illustrate the introduced ideas a decision making process is simulated for three objective median location problem. The concepts, models, and ideas collected and analyzed in this thesis create a good and relevant grounds for developing more complicated and integrated models of postoptimal analysis and solving the most computationally challenging problems related to it.

R&D Performance Analysis: Case Studies on the Challenges and Promotion of the Evaluation and Measurement of R&D

Due to the intense international competition, demanding, and sophisticated customers, and diverse transforming technological change, organizations need to renew their products and services by allocating resources on research and development (R&D). Managing R&D is complex, but vital for many organizations to survive in the dynamic, turbulent environment. Thus, the increased interest among decision-makers towards finding the right performance measures for R&D is understandable. The measures or evaluation methods of R&D performance can be utilized for multiple purposes; for strategic control, for justifying the existence of R&D, for providing information and improving activities, as well as for the purposes of motivating and benchmarking. The earlier research in the field of R&D performance analysis has generally focused on either the activities and considerable factors and dimensions - e.g. strategic perspectives, purposes of measurement, levels of analysis, types of R&D or phases of R&D process - prior to the selection of R&Dperformance measures, or on proposed principles or actual implementation of theselection or design processes of R&D performance measures or measurement systems. This study aims at integrating the consideration of essential factors anddimensions of R&D performance analysis to developed selection processes of R&D measures, which have been applied in real-world organizations. The earlier models for corporate performance measurement that can be found in the literature, are to some extent adaptable also to the development of measurement systemsand selecting the measures in R&D activities. However, it is necessary to emphasize the special aspects related to the measurement of R&D performance in a way that make the development of new approaches for especially R&D performance measure selection necessary: First, the special characteristics of R&D - such as the long time lag between the inputs and outcomes, as well as the overall complexity and difficult coordination of activities - influence the R&D performance analysis problems, such as the need for more systematic, objective, balanced and multi-dimensional approaches for R&D measure selection, as well as the incompatibility of R&D measurement systems to other corporate measurement systems and vice versa. Secondly, the above-mentioned characteristics and challenges bring forth the significance of the influencing factors and dimensions that need to be recognized in order to derive the selection criteria for measures and choose the right R&D metrics, which is the most crucial step in the measurement system development process. The main purpose of this study is to support the management and control of the research and development activities of organizations by increasing the understanding of R&D performance analysis, clarifying the main factors related to the selection of R&D measures and by providing novel types of approaches and methods for systematizing the whole strategy- and business-based selection and development process of R&D indicators.The final aim of the research is to support the management in their decision making of R&D with suitable, systematically chosen measures or evaluation methods of R&D performance. Thus, the emphasis in most sub-areas of the present research has been on the promotion of the selection and development process of R&D indicators with the help of the different tools and decision support systems, i.e. the research has normative features through providing guidelines by novel types of approaches. The gathering of data and conducting case studies in metal and electronic industry companies, in the information and communications technology (ICT) sector, and in non-profit organizations helped us to formulate a comprehensive picture of the main challenges of R&D performance analysis in different organizations, which is essential, as recognition of the most importantproblem areas is a very crucial element in the constructive research approach utilized in this study. Multiple practical benefits regarding the defined problemareas could be found in the various constructed approaches presented in this dissertation: 1) the selection of R&D measures became more systematic when compared to the empirical analysis, as it was common that there were no systematic approaches utilized in the studied organizations earlier; 2) the evaluation methods or measures of R&D chosen with the help of the developed approaches can be more directly utilized in the decision-making, because of the thorough consideration of the purpose of measurement, as well as other dimensions of measurement; 3) more balance to the set of R&D measures was desired and gained throughthe holistic approaches to the selection processes; and 4) more objectivity wasgained through organizing the selection processes, as the earlier systems were considered subjective in many organizations. Scientifically, this dissertation aims to make a contribution to the present body of knowledge of R&D performance analysis by facilitating dealing with the versatility and challenges of R&D performance analysis, as well as the factors and dimensions influencing the selection of R&D performance measures, and by integrating these aspects to the developed novel types of approaches, methods and tools in the selection processes of R&D measures, applied in real-world organizations. In the whole research, facilitation of dealing with the versatility and challenges in R&D performance analysis, as well as the factors and dimensions influencing the R&D performance measure selection are strongly integrated with the constructed approaches. Thus, the research meets the above-mentioned purposes and objectives of the dissertation from the scientific as well as from the practical point of view.

Predictors and Correlates of Substance Use among Young Men. The Longitudinal “From a Boy to a Man” Birth Cohort Study.

Substance use is one of our most important public health problems. Studying risk factors in a longitudinal study setting helps to identify subgroups of young people at greater risk for substance-use-related problems, and to facilitate targeted prevention efforts. The aim of this thesis was to study childhood predictors and correlates of substance-use-related outcomes among young men in a longitudinal, nationwide birth cohort study. The study population included 10% of all Finnish-speaking boys born in Finland in 1981 (n=2946, 97% of the target population). In 1989, at age eight, valid measures of psychiatric symptoms (Rutter questionnaires and Children’s Depression Inventory) were obtained from parents, teachers and the boys themselves. In 1999, at age 18, boys were reached at their obligatory military call-up (n=2348, 80% of the boys attending the study in 1989). Self-reports of substance use, psychopathology, adaptive functioning (Young Adult Self-Report), and mental health service use were obtained through questionnaires. Information about psychiatric diagnoses from the Military Register (age 18-23 years) and information about offending from the National Police Register (age 16-20 years) were collected in early adulthood (92% of the 1989sample). Boys with childhood conduct, hyperactive, and comorbid conduct-emotional problems had elevated rates of substance use and substance-use-related crime in early adulthood. Depressive symptoms predicted daily smoking, especially among boys of low-educated fathers. Emotional problems predicted lower occurrence of drunkenness-related alcohol use and smoking. Teacher reports on boys’ problem behaviour had the best predictive power for later substance use. At age 18, frequent drunkenness associated with delinquency, smoking and illicit drug use, and having friends. Occasional drunkenness associated with better psychosocial functioning in general compared to boys with frequent drunkenness or without drunkenness-related alcohol use. Illicit drug use without drug offending was not predicted by childhood psychiatric symptoms, but 22% of boys with illicit drug use had a psychiatric diagnosis in early adulthood. Drug offenders, in turn, had psychiatric problems both in childhood and in adulthood. Psychiatric disorders were common among young men with substance-use-related crime. Recidivist crime associated strongly with having a substance use disorder diagnosis according to the Military Register. At age 18, frequent drunkenness was common among boys entering mental health services, but entering substance use treatment was non-existent. According to the findings of this thesis, substance-use-related outcomes accumulate in boys having psychiatric problems both in childhood and in early adulthood. Targeted early interventions in school health care systems, particularly for boys with childhood hyperactive, conduct, and comorbid conduct-emotional problems are recommended. Psychiatric problems and risky behaviours, such as delinquency should always be assessed alongside substance use. Specialized and multidisciplinary care are required for young men who have multiple or complex needs, for instance, for young men with drug offending and recidivist crime. Integrating a substance use treatment perspective with other services where young men are encountered is emphasized.

Conventional and novel cardiovascular risk factors in young Finns and their associations with structural and functional vascular changes of subclinical atherosclerosis. The Cardiovascular Risk in Young Finns Study

Background: Atherosclerosis begins in early life progressing from asymptomatic to symptomatic as we age. Although substantial progress has been made in identifying the determinants of atherosclerosis in middle to older age adults at increased cardiovascular risk, there is lack of data examining determinants and prediction of atherosclerosis in young adults. Aims: The current study was designed to investigate levels of cardiovascular risk factors in young adults, subclinical measures of atherosclerosis, and prediction of subclinical arterial changes with conventional risk factor measures and novel metabolic profiling of serum samples. Subjects and Methods: This thesis utilised data from the follow-ups performed in 2001 and 2007 in the Cardiovascular Risk in Young Finns study, a Finnish population-based prospective cohort study that examined 2,204 subjects who were aged 30-45 years in 2007. Subclinical atherosclerosis was studied using noninvasive ultrasound measurements of carotid intima-media thickness (IMT), carotid arterial distensibility (CDist) and brachial flow-mediated dilation (FMD). Measurements included conventional risk factors and metabolic profiling using highthroughput nuclear magnetic resonance (NMR) methods that provided data on 42 lipid markers and 16 circulating metabolites. Results: Trends in lipids were favourable between 2001 and 2007, whereas waist circumference, fasting glucose, and blood pressure levels increased. To study the stability of noninvasive ultrasound markers, 6-year tracking (the likelihood to maintain the original fractile over time) in 6 years was examined. IMT tracked more strongly than CDist and FMD. Cardiovascular risk scores (Framingham, SCORE, Finrisk, Reynolds and PROCAM) predicted subclinical atherosclerosis equally. Lipoprotein subclass testing did not improve the prediction of subclinical atherosclerosis over and above conventional risk factors. However, circulating metabolites improved risk stratification. Tyrosine and docosahexaenoic acid were found to be novel biomarkers of high IMT. Conclusions: Prediction of cardiovascular risk in young Finnish adults can be performed with any of the existing risk scores. The addition of metabonomics to risk stratification improves prediction of subclinical changes and enables more accurate targeting of prevention at an early stage.

Mental Well-being at Work. A Sign of a Healthy Organisation and a Necessary Precondition for Organisational Development

One of the aims of the study was to clarify the reliability and validity of the Job Diagnostic Survey (JDS) and the Eigenzustand (EZ) method as measures of the objective characteristics of work and short-term mental work load in the Finnish data. The reliability and validity were examined taking into consideration the theoretical backgrounds of the methods and the reliability of the measurements. The methods were used for finding out the preconditions for organisational development based on self-improvement and clarifying the impacts of working environment (organisational functioning and job characteristics) on a worker’s mental state and health. The influences were examined on a general level - regardless of individual personal or specific contextual factors. One aim was also to clarify how cognitions and emotions are intertwined and how they influence a person’s perception of the working environment. The data consisted of 15 blue-collar organisations in the public sector. The organisations were divided in target and comparison groups depending on the research frames. The data was collected by questionnaires by post. The exploratory and confirmatory factor analyses (Lisrel) were used as the main statistical methods in examining the structures of the methods and impacts between the variables. It was shown that it is possible for organisations to develop their working conditions themselves on specific preconditions. The advance of the development processes could be shown by the amount of the development activity as well as by the changes of the mental well-being (ability to act) and sick absenteeism of the personnel. It was found that the JDS and the EZ methods were reliable and valid measures in the Finnish data. It was shown that, in addition to the objective working environment (organisational functioning and job characteristics), also such a personal factor as selfesteem influences a person’s perception of mental work load. However, the influence did not seem to be direct. The importance of job satisfaction as a general indicator of perceived working conditions was emphasised. Emotional and cognitive factors were found to be functionally intertwined constituting a common factor. Organisational functioning and the characteristics of work had connections with a person’s health measured by sick absenteeism.

Disturbance and ecosystem functioning : the role of changes in benthic biological traits

Rapid changes in biodiversity are occurring globally, as a consequence of anthropogenic disturbance. This has raised concerns, since biodiversity is known to significantly contribute to ecosystem functions and services. Marine benthic communities participate in numerous functions provided by soft-sedimentary ecosystems. Eutrophication-induced oxygen deficiency is a growing threat against infaunal communities, both in open sea areas and in coastal zones. There is thus a need to understand how such disturbance affects benthic communities, and what is lost in terms of ecosystem functioning if benthic communities are harmed. In this thesis, the status of benthic biodiversity was assessed for the open Baltic Sea, a system severely affected by broad-scale hypoxia. Long-term monitoring data made it possible to establish quantitative biodiversity baselines against which change could be compared. The findings show that benthic biodiversity is currently severely impaired in large areas of the open Baltic Sea, from the Bornholm Basin to the Gulf of Finland. The observed reduction in biodiversity indicates that benthic communities are structurally and functionally impoverished in several of the sub-basins due to the hypoxic stress. A more detailed examination of disturbance impacts (through field studies and -experiments) on benthic communities in coastal areas showed that changes in benthic community structure and function took place well before species were lost from the system. The degradation of benthic community structure and function was directed by the type of disturbance, and its specific temporal and spatial characteristics. The observed shifts in benthic trait composition were primarily the result of reductions in species’ abundances, or of changes in demographic characteristics, such as the loss of large, adult bivalves. Reduction in community functions was expressed as declines in the benthic bioturbation potential and in secondary biomass production. The benthic communities and their degradation accounted for a substantial proportion of the changes observed in ecosystem multifunctionality. Individual ecosystem functions (i.e. measures of sediment ecosystem metabolism, elemental cycling, biomass production, organic matter transformation and physical structuring) were observed to differ in their response to increasing hypoxic disturbance. Interestingly, the results suggested that an impairment of ecosystem functioning could be detected at an earlier stage if multiple functions were considered. Importantly, the findings indicate that even small-scale hypoxic disturbance can reduce the buffering capacity of sedimentary ecosystem, and increase the susceptibility of the system towards further stress. Although the results of the individual papers are context-dependent, their combined outcome implies that healthy benthic communities are important for sustaining overall ecosystem functioning as well as ecosystem resilience in the Baltic Sea.

Methodology for wind turbine blade geometry optimization

Nowadays, the upwind three bladed horizontal axis wind turbine is the leading player on the market. It has been found to be the best industrial compromise in the range of different turbine constructions. The current wind industry innovation is conducted in the development of individual turbine components. The blade constitutes 20-25% of the overall turbine budget. Its optimal operation in particular local economic and wind conditions is worth investigating. The blade geometry, namely the chord, twist and airfoil type distributions along the span, responds to the output measures of the blade performance. Therefore, the optimal wind blade geometry can improve the overall turbine performance. The objectives of the dissertation are focused on the development of a methodology and specific tool for the investigation of possible existing wind blade geometry adjustments. The novelty of the methodology presented in the thesis is the multiobjective perspective on wind blade geometry optimization, particularly taking simultaneously into account the local wind conditions and the issue of aerodynamic noise emissions. The presented optimization objective approach has not been investigated previously for the implementation in wind blade design. The possibilities to use different theories for the analysis and search procedures are investigated and sufficient arguments derived for the usage of proposed theories. The tool is used for the test optimization of a particular wind turbine blade. The sensitivity analysis shows the dependence of the outputs on the provided inputs, as well as its relative and absolute divergences and instabilities. The pros and cons of the proposed technique are seen from the practical implementation, which is documented in the results, analysis and conclusion sections.

Maanpuolustustahto asevelvollisen koulutuksen ja palveluksen onnistumista selittävänä tekijänä

Lähtökohta tälle tutkimukselle oli havainto siitä, että varusmiehillä maanpuolustustahto ja taisteluluottamus korreloivat. Tämä huomio oli mahdollista tehdä aikaisemmissa varusmiesaineistoilla tehdyissä tutkimuksissa, joissa olin ollut mukana. Tutkimuksen aineistoina olivat useat puolustusvoimissa kerätyt varusmiesten kyselytutkimusaineistot. Vertailuaineistoina käytin reserviläisille kertausharjoituksissa tehtyjen kyselyiden aineistoja. Olennaista oli selvittää, säilyikö havaittu riippuvuus kun muita mahdollisia tekijöitä otettiin huomioon. Tutkimus oli aikaisemmin kerättyjen aineistojen sekundaarianalyysi ja tutkijana en ollut voinut vaikuttaa kyselyjen sisältöön tai käytettyjen muuttujien ja mittareiden valintaan. Aineistot on kerätty kuvaileviin tarkoituksiin ja tästä syystä tämä tutkimus oli tilastollisesti kuvaileva. Keskeiset käytetyt aineistot olivat varusmiesten kotiuttamiskyselyiden eli loppukyselyiden aineistot kaikista varuskunnista vuosilta 2000 – 2008 sekä vuonna 2010 Siilasmaan työryhmää varten kerätty aineisto kolmesta varuskunnasta. Vuoden 2010 varusmiestutkimus oli toteutettu siten, että kysely tehtiin sekä palveluksen alussa että lopussa. Tässä aineistossa käytettiin monipuolisesti varusmiesten psykososiaalisen toimintakyvyn erilaisia mittareita. Maanpuolustustahto on käsitteellisesti laaja kokonaisuus, kuitenkin tässä tutkimuksessa se oli operationalisoitava käytettävissä olleiden osioiden avulla. Maanpuolustustahtoa tarkasteltiin sekä henkilökohtaisena että yleisenä maanpuolustustahtona sekä niiden yhdistelmänä, josta käytettiin myös nimitystä maanpuolustusajattelu. Käsitteellisesti suppeampi taisteluluottamus operationalisoitiin siten, että muuttujana se kuvasi varusmiehen luottamusta aseisiinsa, saamaansa koulutukseen sekä lähiryhmäänsä. Taisteluluottamuksen mittaamisen taustalla oli ajatus siitä, että tämän yksilökohtaisen mittarin keskiarvo on joukon koulutuksen onnistuneisuuden estimaatti. Taisteluluottamus oli tutkimuksessa varsinainen tulosmuuttuja. Tulosten perusteella yksittäisten varusmiesten psykososiaalisessa toimintakyvyssä on eroja. Erityisesti erottui yksittäisenä tekijänä sosiaalisuus, joka summamuuttujana oli muodostettu varusmiestutkimus 2010:n aineistossa Maanpuolustuskorkeakoulun Käyttäytymistieteen laitoksen laatimista osioista. Sosiaalisuus ennusti voimakkaasti varusmiehen etenemistä koulutuksessa aina johtajakoulutukseen saakka. Sosiaalisuuden kontrollointi tilastollisesti ei poistanut maanpuolustusajattelun ja taisteluluottamuksen välistä riippuvuutta. Varusmiestutkimus 2010 aineistossa oli mahdollista tarkastella maanpuolustusajattelun muutosta palvelusaikana ja muutoksen yhteyttä psykososiaalisen toimintakyvyn kuvaajiin. Stressaantumistaipumus ja neuroottisuus olivat yhteydessä maanpuolustustahdon laskuun. Tunteiden hallinnan kyky tuki varusmiehen maanpuolustustahdon ja taisteluluottamuksen kehittymistä. Tilastollinen kuvaus toteutettiin Mplus-ohjelmistolla lasketulla rakenneyhtälömallilla. Aineistoon sopiva malli oli mahdollista löytää. Mallin mukaan sosiaalinen pääoman yksilökohtaisena resurssina antaa mahdollisuuden kehittää ja säilyttää maanpuolustusajattelua, joka on yhteydessä itseluottamuksen luontoiseen taisteluluottamukseen varusmieskoulutuksen päättyessä. Koulutuksen aikana joukkoon kehittynyt kiinteys ja luottamus tukevat tätä kehitystä. Joukkotuotantomallilla saadaan aikaan joukkoja, joissa taisteluluottamus on yleensä tarvittavalla tasolla ja niitä voidaan käyttää osoitettuihin tehtäviin. Kertausharjoitukset ylläpitävät kiinteyttä, taisteluluottamusta ja sitä kautta joukon suorituskykyä. Tutkimuksessa havaittiin myös, että pysyvissä miehistön ryhmissä, joissa ryhmänjohtaja ja/tai jäseniä ei vaihtunut, koulutuksen tulokset olivat parempia kuin muuttuneissa ryhmissä. Edelleen havaittiin, että 12 kuukautta palvelleiden miehistön jäsenten joukossa palvelusmotivaatio laski enemmän kuin muissa varusmiesryhmissä. Yhdestätoista koulutuksen ja tutkimuksen asiantuntijasta koottu ryhmä arvioi tutkimuksen tuloksia sovelletulla Q-menetelmällä Facilitate Pro -ohjelmistoa käyttäen. Menettely tuotti lisänäkökohtia tulosten arviointiin sekä niiden soveltamiseen.

Economic capital allocation

For my Licentiate thesis, I conducted research on risk measures. Continuing with this research, I now focus on capital allocation. In the proportional capital allocation principle, the choice of risk measure plays a very important part. In the chapters Introduction and Basic concepts, we introduce three definitions of economic capital, discuss the purpose of capital allocation, give different viewpoints of capital allocation and present an overview of relevant literature. Risk measures are defined and the concept of coherent risk measure is introduced. Examples of important risk measures are given, e. g., Value at Risk (VaR), Tail Value at Risk (TVaR). We also discuss the implications of dependence and review some important distributions. In the following chapter on Capital allocation we introduce different principles for allocating capital. We prefer to work with the proportional allocation method. In the following chapter, Capital allocation based on tails, we focus on insurance business lines with heavy-tailed loss distribution. To emphasize capital allocation based on tails, we define the following risk measures: Conditional Expectation, Upper Tail Covariance and Tail Covariance Premium Adjusted (TCPA). In the final chapter, called Illustrative case study, we simulate two sets of data with five insurance business lines using Normal copulas and Cauchy copulas. The proportional capital allocation is calculated using TCPA as risk measure. It is compared with the result when VaR is used as risk measure and with covariance capital allocation. In this thesis, it is emphasized that no single allocation principle is perfect for all purposes. When focusing on the tail of losses, the allocation based on TCPA is a good one, since TCPA in a sense includes features of TVaR and Tail covariance.

The effects of derivative use on equity fund performance

Investing in mutual funds has become more popular than ever and the amount of money invested in mutual funds registered in Finland has hit its all-time high. Mutual funds provide a relatively low-cost method for private investors to invest in stock market and achieve diversified portfolios. In finance there is always a tradeoff between risk and return, where higher expected returns can usually be achieved only by taking higher risks. Diversifying the portfolio gets rid some of the risk but systematic risk cannot be diversified away. These risks can be managed by hedging the investments with derivatives. The use of derivatives should improve the performance of the portfolios using them compared to the funds that don’t. However, previous studies have shown that the risk exposure and return performance of derivative users does not considerably differ from nonusers. The purpose of this study is to examine how the use of derivatives affects the performance of equity funds. The funds studied were 155 equity funds registered in Finland in 2013. Empirical research was done by studying the derivative use of the funds during a 6-year period between 2008–2013. The performance of the funds was studied quantitatively by using several different performance measures used in mutual fund industry; Sharpe Ratio, Treynor Ratio, Jensen's alpha, Sortino Ratio, M2 and Omega Ratio. The effect of derivative use on funds' performance was studied by using a dummy variable and comparing performance measures of derivative-users and nonusers. The differences in performance measures between the two groups were analyzed with statistical tests. The hypothesis was that funds' derivative use should improve their performance relative to the funds that don't use them. The results of this study are in line with previous studies that state that the use of derivatives does not improve mutual funds' performance. When performance was measured with Jensen's alpha, funds that did not use derivatives performed better than the ones that used them. When measured with other performance measures, the results didn’t differ between two groups.

Pricing of Liquidity Risks in London Stock Exchange

This thesis aims to investigate pricing of liquidity risks in London Stock Exchange. Liquidity Adjusted Capital Asset Pricing Model i.e. LCAPM developed by Acharya and Pedersen (2005) is being applied to test the influence of various liquidity risks on stock returns in London Stock Exchange. The Liquidity Adjusted Capital Asset Pricing model provides a unified framework for the testing of liquidity risks. All the common stocks listed and delisted for the period of 2000 to 2014 are included in the data sample. The study has incorporated three different measures of liquidity – Percent Quoted Spread, Amihud (2002) and Turnover. The reason behind the application of three different liquidity measures is the multi-dimensional nature of liquidity. Firm fixed effects panel regression is applied for the estimation of LCAPM. However, the results are robust according to Fama-Macbeth regressions. The results of the study indicates that liquidity risks in the form of (i) level of liquidity, (ii) commonality in liquidity (iii) flight to liquidity, (iv) depressed wealth effect and market return as well as aggregate liquidity risk are priced at London Stock Exchange. However, the results are sensitive to the choice of liquidity measures.