Essays on pricing of risk and international linkage of Russian stock market

Last two decades have seen a rapid change in the global economic and financial situation; the economic conditions in many small and large underdeveloped countries started to improve and they became recognized as emerging markets. This led to growth in the amounts of global investments in these countries, partly spurred by expectations of higher returns, favorable risk-return opportunities, and better diversification alternatives to global investors. This process, however, has not been without problems and it has emphasized the need for more information on these markets. In particular, the liberalization of financial markets around the world, globalization of trade and companies, recent formation of economic and regional blocks, and the rapid development of underdeveloped countries during the last two decades have brought a major challenge to the financial world and researchers alike. This doctoral dissertation studies one of the largest emerging markets, namely Russia. The motivation why the Russian equity market is worth investigating includes, among other factors, its sheer size, rapid and robust economic growth since the turn of the millennium, future prospect for international investors, and a number of important major financial reforms implemented since the early 1990s. Another interesting feature of the Russian economy, which gives motivation to study Russian market, is Russia’s 1998 financial crisis, considered as one of the worst crisis in recent times, affecting both developed and developing economies. Therefore, special attention has been paid to Russia’s 1998 financial crisis throughout this dissertation. This thesis covers the period from the birth of the modern Russian financial markets to the present day, Special attention is given to the international linkage and the 1998 financial crisis. This study first identifies the risks associated with Russian market and then deals with their pricing issues. Finally some insights about portfolio construction within Russian market are presented. The first research paper of this dissertation considers the linkage of the Russian equity market to the world equity market by examining the international transmission of the Russia’s 1998 financial crisis utilizing the GARCH-BEKK model proposed by Engle and Kroner. Empirical results shows evidence of direct linkage between the Russian equity market and the world market both in regards of returns and volatility. However, the weakness of the linkage suggests that the Russian equity market was only partially integrated into the world market, even though the contagion can be clearly seen during the time of the crisis period. The second and the third paper, co-authored with Mika Vaihekoski, investigate whether global, local and currency risks are priced in the Russian stock market from a US investors’ point of view. Furthermore, the dynamics of these sources of risk are studied, i.e., whether the prices of the global and local risk factors are constant or time-varying over time. We utilize the multivariate GARCH-M framework of De Santis and Gérard (1998). Similar to them we find price of global market risk to be time-varying. Currency risk also found to be priced and highly time varying in the Russian market. Moreover, our results suggest that the Russian market is partially segmented and local risk is also priced in the market. The model also implies that the biggest impact on the US market risk premium is coming from the world risk component whereas the Russian risk premium is on average caused mostly by the local and currency components. The purpose of the fourth paper is to look at the relationship between the stock and the bond market of Russia. The objective is to examine whether the correlations between two classes of assets are time varying by using multivariate conditional volatility models. The Constant Conditional Correlation model by Bollerslev (1990), the Dynamic Conditional Correlation model by Engle (2002), and an asymmetric version of the Dynamic Conditional Correlation model by Cappiello et al. (2006) are used in the analysis. The empirical results do not support the assumption of constant conditional correlation and there was clear evidence of time varying correlations between the Russian stocks and bond market and both asset markets exhibit positive asymmetries. The implications of the results in this dissertation are useful for both companies and international investors who are interested in investing in Russia. Our results give useful insights to those involved in minimising or managing financial risk exposures, such as, portfolio managers, international investors, risk analysts and financial researchers. When portfolio managers aim to optimize the risk-return relationship, the results indicate that at least in the case of Russia, one should account for the local market as well as currency risk when calculating the key inputs for the optimization. In addition, the pricing of exchange rate risk implies that exchange rate exposure is partly non-diversifiable and investors are compensated for bearing the risk. Likewise, international transmission of stock market volatility can profoundly influence corporate capital budgeting decisions, investors’ investment decisions, and other business cycle variables. Finally, the weak integration of the Russian market and low correlations between Russian stock and bond market offers good opportunities to the international investors to diversify their portfolios.

Thinking Outside the Box: Enhancing Science Teaching by Combining (Instead of Contrasting) Laboratory and Simulation Activities

The focus of the present work was on 10- to 12-year-old elementary school students’ conceptual learning outcomes in science in two specific inquiry-learning environments, laboratory and simulation. The main aim was to examine if it would be more beneficial to combine than contrast simulation and laboratory activities in science teaching. It was argued that the status quo where laboratories and simulations are seen as alternative or competing methods in science teaching is hardly an optimal solution to promote students’ learning and understanding in various science domains. It was hypothesized that it would make more sense and be more productive to combine laboratories and simulations. Several explanations and examples were provided to back up the hypothesis. In order to test whether learning with the combination of laboratory and simulation activities can result in better conceptual understanding in science than learning with laboratory or simulation activities alone, two experiments were conducted in the domain of electricity. In these experiments students constructed and studied electrical circuits in three different learning environments: laboratory (real circuits), simulation (virtual circuits), and simulation-laboratory combination (real and virtual circuits were used simultaneously). In order to measure and compare how these environments affected students’ conceptual understanding of circuits, a subject knowledge assessment questionnaire was administered before and after the experimentation. The results of the experiments were presented in four empirical studies. Three of the studies focused on learning outcomes between the conditions and one on learning processes. Study I analyzed learning outcomes from experiment I. The aim of the study was to investigate if it would be more beneficial to combine simulation and laboratory activities than to use them separately in teaching the concepts of simple electricity. Matched-trios were created based on the pre-test results of 66 elementary school students and divided randomly into a laboratory (real circuits), simulation (virtual circuits) and simulation-laboratory combination (real and virtual circuits simultaneously) conditions. In each condition students had 90 minutes to construct and study various circuits. The results showed that studying electrical circuits in the simulation–laboratory combination environment improved students’ conceptual understanding more than studying circuits in simulation and laboratory environments alone. Although there were no statistical differences between simulation and laboratory environments, the learning effect was more pronounced in the simulation condition where the students made clear progress during the intervention, whereas in the laboratory condition students’ conceptual understanding remained at an elementary level after the intervention. Study II analyzed learning outcomes from experiment II. The aim of the study was to investigate if and how learning outcomes in simulation and simulation-laboratory combination environments are mediated by implicit (only procedural guidance) and explicit (more structure and guidance for the discovery process) instruction in the context of simple DC circuits. Matched-quartets were created based on the pre-test results of 50 elementary school students and divided randomly into a simulation implicit (SI), simulation explicit (SE), combination implicit (CI) and combination explicit (CE) conditions. The results showed that when the students were working with the simulation alone, they were able to gain significantly greater amount of subject knowledge when they received metacognitive support (explicit instruction; SE) for the discovery process than when they received only procedural guidance (implicit instruction: SI). However, this additional scaffolding was not enough to reach the level of the students in the combination environment (CI and CE). A surprising finding in Study II was that instructional support had a different effect in the combination environment than in the simulation environment. In the combination environment explicit instruction (CE) did not seem to elicit much additional gain for students’ understanding of electric circuits compared to implicit instruction (CI). Instead, explicit instruction slowed down the inquiry process substantially in the combination environment. Study III analyzed from video data learning processes of those 50 students that participated in experiment II (cf. Study II above). The focus was on three specific learning processes: cognitive conflicts, self-explanations, and analogical encodings. The aim of the study was to find out possible explanations for the success of the combination condition in Experiments I and II. The video data provided clear evidence about the benefits of studying with the real and virtual circuits simultaneously (the combination conditions). Mostly the representations complemented each other, that is, one representation helped students to interpret and understand the outcomes they received from the other representation. However, there were also instances in which analogical encoding took place, that is, situations in which the slightly discrepant results between the representations ‘forced’ students to focus on those features that could be generalised across the two representations. No statistical differences were found in the amount of experienced cognitive conflicts and self-explanations between simulation and combination conditions, though in self-explanations there was a nascent trend in favour of the combination. There was also a clear tendency suggesting that explicit guidance increased the amount of self-explanations. Overall, the amount of cognitive conflicts and self-explanations was very low. The aim of the Study IV was twofold: the main aim was to provide an aggregated overview of the learning outcomes of experiments I and II; the secondary aim was to explore the relationship between the learning environments and students’ prior domain knowledge (low and high) in the experiments. Aggregated results of experiments I & II showed that on average, 91% of the students in the combination environment scored above the average of the laboratory environment, and 76% of them scored also above the average of the simulation environment. Seventy percent of the students in the simulation environment scored above the average of the laboratory environment. The results further showed that overall students seemed to benefit from combining simulations and laboratories regardless of their level of prior knowledge, that is, students with either low or high prior knowledge who studied circuits in the combination environment outperformed their counterparts who studied in the laboratory or simulation environment alone. The effect seemed to be slightly bigger among the students with low prior knowledge. However, more detailed inspection of the results showed that there were considerable differences between the experiments regarding how students with low and high prior knowledge benefitted from the combination: in Experiment I, especially students with low prior knowledge benefitted from the combination as compared to those students that used only the simulation, whereas in Experiment II, only students with high prior knowledge seemed to benefit from the combination relative to the simulation group. Regarding the differences between simulation and laboratory groups, the benefits of using a simulation seemed to be slightly higher among students with high prior knowledge. The results of the four empirical studies support the hypothesis concerning the benefits of using simulation along with laboratory activities to promote students’ conceptual understanding of electricity. It can be concluded that when teaching students about electricity, the students can gain better understanding when they have an opportunity to use the simulation and the real circuits in parallel than if they have only the real circuits or only a computer simulation available, even when the use of the simulation is supported with the explicit instruction. The outcomes of the empirical studies can be considered as the first unambiguous evidence on the (additional) benefits of combining laboratory and simulation activities in science education as compared to learning with laboratories and simulations alone.

Topochemistry of physical and chemical pretreatments of biomass as investigated by FE-SEM, XPS and ToF-SIMS

Surface chemistry is of great importance in plant biomass engineering and applications. The surface chemical composition of biomass which includes lignin, carbohydrates and extractives influences its interactions with chemical agents, such as pulp processing/papermaking chemicals, or enzymes for different purposes. In this thesis, the changes in the surface chemical composition of lignocellulosic biomass after physical modification for the improvement of resulting paper properties and chemical treatment for the enhancement of enzymatic hydrolysis were investigated. Low consistency (LC) refining was used as physical treatment of bleached softwood and hardwood pulp samples, and the surface chemistry of refined samples was investigated. The refined pulp was analysed as whole pulp while the fines-free fibre samples were characterized separately. The fines produced in LCrefining contributed to an enlarged surface specific area as well as the change of surface coverage by lignin and extractives, as investigated by X-ray photoelectron spectroscopy (XPS). The surface coverage by lignin of the whole pulp decreased after refining while the surface coverage by extractives increased both for pine and eucalyptus. In the case of pine, the removal of fines resulted in reduction of the surface coverage by extractives, while the surface coverage by lignin increased on fibre sample (without fines). In the case of eucalyptus, the surface coverage by lignin of fibre samples decreased after the removal of fines. In addition, the surface distribution of carbohydrates, lignin and extractives of pine and eucalyptus samples was determined by Time-of-Flight Secondary Ion Mass Spectrometry (ToF-SIMS). LC-refining increased the amounts of pentose, hexose and extractives on the surface of pine samples. ToF-SIMS also gave clear evidence about xylan deposition and reduction of surface lignin distribution on the fibre of eucalyptus. However, the changes in the surface chemical composition during the physical treatment has led to an increase in the adsorption of fluorescent whitening agents (FWAs) on fibres due to a combination of electro-static forces, specific surface area of fibres and hydrophobic interactions. Various physicochemical pretreatments were conducted on wood and non-wood biomass for enhancing enzymatic hydrolysis of polysaccharides, and the surface chemistry of the pretreated and enzymatically hydrolysed samples was investigated by field emission scanning electron microscopy (FE-SEM), XPS and ToF-SIMS. A hydrotrope was used as a relatively novel pretreatment technology both in the case of wood and non-wood biomass. For comparison, ionic liquid and hydrothermal pretreatments were applied on softwood and hardwood as well. Thus, XPS analysis showed that the surface lignin was more efficiently removed by hydrotropic pretreatment compared to ionic liquid or hydrothermal pretreatments. SEM analysis also found that already at room temperature the ionic liquid pretreatments were more effective in swelling the fibres compared with hydrotropic pretreatment at elevated temperatures. The enzymatic hydrolysis yield of hardwood was enhanced due to the decrease in surface coverage of lignin, which was induced by hydrotropic treatment. However, hydrotropic pretreatment was not appropriate for softwood because of the predominance of guaiacyl lignin structure in this material. In addition, the reduction of surface lignin and xylan during pretreatment and subsequent increase in cellulose hydrolysis by enzyme could be observed from ToF-SIMS results. The characterisation of the non-wood biomass (e.g. sugarcane bagasse and common reed) treated by hydrotropic method, alkaline and alkaline hydrogen peroxide pretreatments were carried out by XPS and ToF-SIMS. According to the results, the action for the removal of the surface lignin of non-wood biomass by hydrotropic pretreatment was more significant compared to alkaline and alkaline hydrogen peroxide pretreatments, although a higher total amount of lignin could be removed by alkaline and alkaline hydrogen peroxide pretreatment. Furthermore, xylan could be remarkably more efficiently removed by hydrotropic method. Therefore, the glucan yield achieved from hydrotropic treated sample was higher than that from samples treated with alkaline or alkaline hydrogen peroxide. Through the use of ToF-SIMS, the distribution and localization of lignin and carbohydrates on the surface of ignocelluloses during pretreatment and enzymatic hydrolysis could be detected, and xylan degradation during enzymatic hydrolysis could also be assessed. Thus, based on the results from XPS and ToF-SIMS, the mechanism of the hydrotropic pretreatment in improving the accessibility of enzymes to fibre and further ameliorating of the enzymatic saccharification could be better elucidated.

Adherence to Treatment in Psychotic Disorders - Development of user-centered mobile health intervention

The aim of this study was to explore adherence to treatment among people with psychotic disorders through the development of user-centered mobile technology (mHealth) intervention. More specifically, this study investigates treatment adherence as well as mHealth intervention and the factors related to its possible usability. The data were collected from 2010 to 2013. First, patients’ and professionals’ perceptions of adherence management and restrictive factors of adherence were described (n = 61). Second, objectives and methods of the intervention were defined based on focus group interviews and previously used methods. Third, views of patients and professionals about barriers and requirements of the intervention were described (n = 61). Fourth, mHealth intervention was evaluated based on a literature review (n = 2) and patients preferences regarding the intervention (n = 562). Adherence management required support in everyday activities, social networks and maintaining a positive outlook. The factors restricting adherence were related to illness, behavior and the environment. The objective of the intervention was to support the intention to follow the treatment guidelines and recommendations with mHealth technology. The barriers and requirements for the use of the mHealth were related to technology, organizational issues and the users themselves. During the course of the intervention, 33 (6%) out of 562 participants wanted to edit the content, timing or amount of the mHealth tool, and 23 (4%) quit the intervention or study before its conclusion. According to the review, mHealth interventions were ineffective in promoting adherence. Prior to the intervention, participants perceived that adherence could be supported, and the use of mHealth as a part of treatment was seen as an acceptable and efficient method for doing so. In conclusion, the use of mHealth may be feasible among people with psychotic disorders. However, clear evidence for its effectiveness in regards to adherence is still currently inconclusive.

Abnormal Returns of Dividend Announcements during a Boom and a Recession. Empirical Evidence from U.S. from the years of 2000 - 2002 and 2005 - 2007, including Finnish Extra Dividends

This study examines the short time price effect of dividend announcements during a boom and a recession. The data being used here is gathered from the years of 2000 - 2002 when it was a recession after the techno bubble burst and from the years 2005 - 2007 when investors experienced large capital gains all around the world. The data consists of dividend increases and intact observations. The aim is to find out differences in abnormal returns between a boom and a recession. Second, the study examines differences between different dividend yield brackets. Third, Finnish extra dividends, mainly being delivered to shareholders in 2004 are included to the empirical test. Generally stated, the aim is to find out do investors respect dividends more during a recession than a boom and can this be proved by using dividend yield brackets. The empirical results from U.S shows that the abnormal returns of dividend increase announcements during the recession in the beginning of this decade were larger than during the boom. Thus, investors seem to respect dividend increases more when stock prices are falling. Substantial abnormal returns of dividend increases during the time period of 2005 - 2007 could not be found. The results from the overall samples state that the abnormal returns during the recession were positively slightly higher than during the boom. No clear and strong evidence was found between different dividend yield brackets. In Finland, there were substantial abnormal returns on the announcement day of the extra dividends. Thus, indicating that investors saw the extra dividends as a good thing for shareholders' value. This paper is mostly in line with the theory that investors respect dividends more during bad times than good times.

Abnormal Return of Dividend Announcements during a Boom and a Recession. Empirical evidence from the years of 2002 - 2002 and 2005 - 2007, including the Finnish extra dividends

Tutkimuksen tavoitteena on tutkia epänormaalien tuottojen esiintymistä nousu- ja laskusuhdanteen aikana osingonilmoituspäivän ympärillä. Osinkoilmoitukset ovat kerätty Yhdysvaltojen markkinalta (NYSE) ajanjaksoilta 2000 - 2002, jolloin pörssit laskivat teknokuplan jälkeen ja 2005 - 2007, jolloin sijoittajat kokivat suuria kurssivoittoja. Osinkoilmoitushavainnot koostuvat yhtiöistä, jotka nostivat tai pitivät osinko per osake paikallaan. Tavoitteena on tutkia eroja epänormaaleissa tuotoissa näiden kahden ajanjakson välillä. Toiseksi, tavoitteena on tutkia miten epänormaalit tuotot poikkeavat toisistaan eri osinkotuottoluokissa. Kolmanneksi, tavoitteena on tutkia esiintyikö markkinoilla epänormaaleja tuottoja kun suomalaiset yritykset ilmoittivat ylimääräisistä osingoista, pääasiassa vuonna 2004. Yksinkertaisesti ja lyhyesti sanottuna tavoitteena on tutkia arvostavatko sijoittajat osinkoja enemmän laskukauden vai nousukauden aikana. Rahoitusteorian mukaan sijoittajien tulisi arvostaa laskukauden aikana enemmän yhtiöitä, jotka pystyvät maksamaan huonosta taloustilanteesta huolimatta hyvää osinkoa. Empiiriset testit Yhdysvalloista osoittavat, että osingon nostamisesta johtuvat epänormaalit tuotot olivat suuremmat laskusuhdanteen aikana kuin noususuhdanteen aikana. Tämä on linjassa teorian kanssa. Osingon-nostot aiheuttivat nousukauden aikana vähäisiä epänormaaleja tuottoja. Selviä eroja eri osingontuottoluokkien välillä ei pystytty havaitsemaan. Tulokset yhdistetystä aineistosta osoittavat, että sijoittajat kokivat vähäisiä positiivisia epänormaaleja tuottoja laskukauden aikana. Nousukautena tuotot olivat lähellä nollaa. Suomen markkinoilla havaittiin selvä epänormaalituotto osingonilmoituspäivänä. Tulokset ovat pääpiirteittäin linjassa teorian kanssa. Sijoittajat arvostavat osinkoja hieman enemmän lasku- kuin noususuhdanteen aikana.

Marketers’ perception of the implementation of social media marketing: Evidence from large Finnish companies’ marketing campaigns

Social media is a multidimensional marketing and communications channel which can support and enhance a business’ reputation, sales and even longevity. Social media as a business tool encourages an interaction between customers and companies which gives opportunities for a company to better understand their customers, to target them more effectively and to collaborate and create dialogues with them which is not possible through traditional media channels. The aim of a social media strategy is to increase brand awareness, image, loyalty and recognition. The peer networks that social media creates allows a company to disseminate information through loyal customers to new and prospective customers to ultimately increase reach. The purpose of the study is to understand the marketer’s perspective of social media marketing use and how it is currently utilized in marketing and communications activities in Finland. Three companies were interviewed covering fourteen different implementations of social media marketing campaigns. These were then analysed to ascertain the utilization methods and experience gained on recent campaigns in the Finnish market The utilization of social media marketing was analysed using the methods of thematic analysis and inductive and abductive reasoning. Elements and themes were drawn out of the separate interviews to create a framework with which to explore, evaluate and match theories that define social media usage by companies. It became clear from all of the interviews that social media as a tool is most effective when it captures the viewer’s interest through rich and entertaining content. This directed the theoretical research towards Engagement Theory and Content Marketing which look to emphasize the importance of communities, collaboration, interaction, and peer-sharing as the key drivers of a social media marketing campaign.

Do retail investors use technical analysis? Evidence from Stuttgart stock exchange.

Tutkielma käyttää automaattista kuviontunnistusalgoritmia ja yleisiä kahden liukuvan keskiarvon leikkauspiste –sääntöjä selittääkseen Stuttgartin pörssissä toimivien yksityissijoittajien myynti-osto –epätasapainoa ja siten vastatakseen kysymykseen ”käyttävätkö yksityissijoittajat teknisen analyysin menetelmiä kaupankäyntipäätöstensä perustana?” Perusolettama sijoittajien käyttäytymisestä ja teknisen analyysin tuottavuudesta tehtyjen tutkimusten perusteella oli, että yksityissijoittajat käyttäisivät teknisen analyysin metodeja. Empiirinen tutkimus, jonka aineistona on DAX30 yhtiöiden data vuosilta 2009 – 2013, ei tuottanut riittävän selkeää vastausta tutkimuskysymykseen. Heikko todistusaineisto näyttää kuitenkin osoittavan, että yksityissijoittajat muuttavat kaupankäyntikäyttäytymistänsä eräiden kuvioiden ja leikkauspistesääntöjen ohjastamaan suuntaan.