Discrete time models of the term structure of interest rates and interest rate contingent claims

In this study, discrete time one-factor models of the term structure of interest rates and their application to the pricing of interest rate contingent claims are examined theoretically and empirically. The first chapter provides a discussion of the issues involved in the pricing of interest rate contingent claims and a description of the Ho and Lee (1986), Maloney and Byrne (1989), and Black, Derman, and Toy (1990) discrete time models. In the second chapter, a general discrete time model of the term structure from which the Ho and Lee, Maloney and Byrne, and Black, Derman, and Toy models can all be obtained is presented. The general model also provides for the specification of an additional model, the ExtendedMB model. The third chapter illustrates the application of the discrete time models to the pricing of a variety of interest rate contingent claims. In the final chapter, the performance of the Ho and Lee, Black, Derman, and Toy, and ExtendedMB models in the pricing of Eurodollar futures options is investigated empirically. The results indicate that the Black, Derman, and Toy and ExtendedMB models outperform the Ho and Lee model. Little difference in the performance of the Black, Derman, and Toy and ExtendedMB models is detected. ^

On arterial contractility, energetic requirements of the cardiovascular system, and the formation of arterial sclerosis

The aorta has been viewed as a passive distribution manifold for blood whose elasticity allows it to store blood during cardiac ejection (systole), and release it during relaxation (diastole). This capacitance, or compliance, lowers peak cardiac work input and maintains peripheral sanguine irrigation throughout the cardiac cycle. The compliance of the human and canine circulatory systems have been described either as constant throughout the cycle (Toy et al. 1985) or as some inverse function of pressure (Li et al. 1990, Cappelo et al. 1995). This work shows that a compliance value that is higher during systole than diastole (equivalent to a direct function of pressure) leads to a reduction in the energetic input to the cardiovascular system (CV), even when accounting for the energy required to change compliance. This conclusion is obtained numerically, based on a 3-element lumped-parameter model of the CV, then demonstrated in a physical model built for the purpose. It is then shown, based on the numerical and physical models, on analytical considerations of elastic tubes, and on the analysis of arterial volume as a function of pressure measured in vivo (Armentano et al. 1995), that the mechanical effects of a presupposed arterial contraction are consistent with those of energetically beneficial changes in compliance during the cardiac cycle. Although the amount of energy potentially saved with rhythmically contracting arteries is small (mean 0.55% for the cases studied) the importance of the phenomenon lies in its possible relation to another function of the arterial smooth muscle (ASM): synthesis of wall matrix macromolecules. It is speculated that a reduction in the rate of collagen synthesis by the ASM is implicated in the formation of arteriosclerosis. ^

Three essays on entrepreneurial motivation, entry, exit and monetary rewards

This dissertation analyzes rewards and motivations of self-employment. In light of recent research contributions of Barton Hamilton (2000), which find entrepreneurship not as financially rewarding as wage work, my dissertation attempts to both verify and explain this claim. The first essay proposes a theoretical model of evolution of erroneous earnings expectations on part of a nascent entrepreneur. Inability to observe, survey, and take into account all of the returns to entrepreneurship prior to business entry creates a biased set of beliefs on part of the potential entrants. Using Bayesian learning, a nascent entrepreneur starting out with correct perception of profit distribution arrives at erroneous beliefs by incorporating limited information collected from existing businesses. An observed distribution of surviving businesses would exhibit higher earnings because of previous, unobserved, business failure entrepreneur get an overly positive view of her profit potential. Hence, the chapter offers a unique method of modeling overconfidence. The second essay undertakes dynamic empirical comparison of earnings received by business owners and their wage counterparts. Using Survey of Income and Program Participation (SIPP) I examine both short and long run returns to entrepreneurship comparing theses rewards to wage earners returns. I pay particular attention to transitions into and out of business ownership. I estimate entire earnings distribution. To characterize dynamic aspect of changes to individuals’ earnings I split the income distribution into five income quintiles and follow survey participants over the period of seven years. I find that period-to-period transitions to be Markovian. I find business tenure to be short, business ownership is costly in the short and rewarding in the long run. The third essay considered different reporting schemes applied to the self-employed. It is another empirical investigation of entrepreneurial earning uses Panel Study of Income Dynamics (PSID). I find entrepreneurs while reporting lower than wage workers earnings enjoy significant consumption premiums. I observe evidence of income underreporting by entrepreneurs. This finding suggests a need for better earning comparison metrics and proposes to use consumption rather than income metrics for future comparisons.

The role of contingency and gaze direction in the emergence of social referencing

The current study assessed the importance of infant detection of contingency and head and eye gaze direction in the emergence of social referencing. Five- to six-month-old infants' detection of affect-object relations and subsequent manual preferences for objects paired with positive expressions were assessed. In particular, the role of contingency between toys' movements and an actress's emotional expressions as well as the role of gaze direction toward the toys' location were examined. Infants were habituated to alternating films of two toys each paired with an actress's affective expression (happy and fearful) under contingent or noncontingent and gaze congruent or gaze incongruent conditions. Results indicated that gaze congruence and contingency between toys' movements and a person's affective expressions were important for infant perception of affect-object relations. Furthermore, infant perception of the relation between affective expressions and toys translated to their manual preferences for the 3-dimensional toys. Infants who received contingent affective responses to the movements of the toys spent more time touching the toy that was previously paired with the positive expression. These findings demonstrate the role of contingency and gaze direction in the emergence of social referencing in the first half year of life.^

Gaining insight into teaching: A phenomenological exploration of the lived experience of Teachers of the Year

What qualities, skills, and knowledge produce quality teachers? Many stake-holders in education argue that teacher quality should be measured by student achievement. This qualitative study shows that good teachers are multi-dimensional; their effectiveness cannot be represented by students' test scores alone. The purpose of this phenomenological study was to gain a deeper understanding of quality in teaching by examining the lived experiences of 10 winners or finalists of the Teacher of the Year (ToY) Award. Phenomenology describes individuals' daily experiences of phenomena, examines how these experiences are structured, and focuses analysis on the perspectives of the persons having the experience (Moustakas, 1994). This inquiry asked two questions: (a) How is teaching experienced by recognized as outstanding Teachers of the Year? and (b) How do ToYs feelings and perceptions about being good teachers provide insight, if any, about concepts such as pedagogical tact, teacher selfhood, and professional dispositions? Ten participants formed the purposive sample; the major data collection tool was semi-structured interviews (Patton, 1990; Seidman, 2006). Sixty to 90-minute interviews were conducted with each participant. Data also included the participants' ToY application essays. Data analysis included a three-phase process: description, reduction, interpretation. Findings revealed that the ToYs are dedicated, hard-working individuals. They exhibit behaviors, such as working beyond the school day, engaging in lifelong learning, and assisting colleagues to improve their practice. Working as teachers is their life's compass, guiding and wrapping them into meaningful and purposeful lives. Pedagogical tact, teacher selfhood, and professional dispositions were shown to be relevant, offering important insights into good teaching. Results indicate that for these ToYs, good teaching is experienced by getting through to students using effective and moral means; they are emotionally open, have a sense of the sacred, and they operate from a sense of intentionality. The essence of the ToYs teaching experience was their being properly engaged in their craft, embodying logical, psychological, and moral realms. Findings challenge current teacher effectiveness process-product orthodoxy which makes a causal connection between effective teaching and student test scores, and which assumes that effective teaching arises solely from and because of the actions of the teacher.

Adult Alternatives for Social Drinking: A Direction

In their survey/study - Adult Alternatives for Social Drinking: A Direction - by John Dienhart and Sandra Strick, Assistant Professors, Department of Restaurant, Hotel and Institutional Management, Purdue University, Dienhart and Strick begin with: “Changes in consumer habits have brought about a change in the business of selling alcoholic drinks and have impacted upon hotel food and beverage operations. The authors surveyed a sample of hotel corporate food and beverage directors to ascertain how they are handling this challenge.” Dienhart and Strick declare that the alcoholic beverage market, sale and consumption thereof, has taken a bit of a hit in contemporary society. “Even to the casual observer, it's obvious that the bar and beverage industry has undergone a great deal of change in the past few years,” say the authors. “Observations include a change in the types of drinks people are ordering, as well as a decrease in the number of drinks being sold,” they qualify. Dienhart and Strick allude to an increase in the federal excise tax, attacks from alcohol awareness groups, the diminished capacity of bars and restaurants to offer happy hours, increased liability insurance premiums as well as third-party liability issues, and people’s awareness of their own mortality as some of the reasons for the change. To quantify some empirical data on beverage consumption the Restaurant, Hotel, and Institutional Management Department of Purdue University conducted a study “… to determine if observed trends could be documented with hard data.” In regards to the subject, the study asks and answers a lot of interesting questions with the results presented to concerned followers via percentages. Typical of the results are: “When asked whether the corporation experienced a change in alcoholic sales in the past year, 67 percent reported a decrease in the amount of alcohol sold.” “Sixty-two percent of the respondents reported an increase in non-alcoholic sales over the past year. The average size of the increase was 8 percent. What Dienhart and Strick observe is that the decrease in alcoholic beverage consumption has resulted in a net increase for non-alcoholic beverage consumption. What are termed specialty drinks are gaining a foothold in the market, say the authors. “These include traditional cocktails made with alcohol-free products, as well as creative new juice based drinks, cream based drinks, carbonated beverages, and heated drinks,” say Dienhart and Strick by way of citation . Another result of the non-alcoholic consumption trend is the emergence of some novel marketing approaches by beer, wine, and spirits producers, including price increases on their alcohol based beverages as well as the introduction of faux alcoholic drinks like non-alcoholic beer and wine. Who or what is the big winner in all of this? That distinction might go to bottled water!

Liquidity, governance and adverse selection in asset pricing

A plethora of recent literature on asset pricing provides plenty of empirical evidence on the importance of liquidity, governance and adverse selection of equity on pricing of assets together with more traditional factors such as market beta and the Fama-French factors. However, literature has usually stressed that these factors are priced individually. In this dissertation we argue that these factors may be related to each other, hence not only individual but also joint tests of their significance is called for. ^ In the three related essays, we examine the liquidity premium in the context of the finer three-digit SIC industry classification, joint importance of liquidity and governance factors as well as governance and adverse selection. Recent studies by Core, Guay and Rusticus (2006) and Ben-Rephael, Kadan and Wohl (2010) find that governance and liquidity premiums are dwindling in the last few years. One reason could be that liquidity is very unevenly distributed across industries. This could affect the interpretation of prior liquidity studies. Thus, in the first chapter we analyze the relation of industry clustering and liquidity risk following a finer industry classification suggested by Johnson, Moorman and Sorescu (2009). In the second chapter, we examine the dwindling influence of the governance factor if taken simultaneously with liquidity. We argue that this happens since governance characteristics are potentially a proxy for information asymmetry that may be better captured by market liquidity of a company's shares. Hence, we jointly examine both the factors, namely, governance and liquidity - in a series of standard asset pricing tests. Our results reconfirm the importance of governance and liquidity in explaining stock returns thus independently corroborating the findings of Amihud (2002) and Gompers, Ishii and Metrick (2003). Moreover, governance is not subsumed by liquidity. Lastly, we analyze the relation of governance and adverse selection, and again corroborate previous findings of a priced governance factor. Furthermore, we ascertain the importance of microstructure measures in asset pricing by employing Huang and Stoll's (1997) method to extract an adverse selection variable and finding evidence for its explanatory power in four-factor regressions.^

An empirical analysis of the global audit market: International Financial Reporting Standards-related changes and differences within the Big 4 global networks

Ongoing debates within the professional and academic communities have raised a number of questions specific to the international audit market. This dissertation consists of three related essays that address such issues. First, I examine whether the propensity to switch between auditors of different sizes (i.e., Big 4 versus non-Big 4) changes as adoption of International Financial Reporting Standards (IFRS) becomes a more common phenomenon, arguing that smaller auditors have an opportunity to invest in necessary skills and training needed to enter this market. Findings suggest that clients are relatively less (more) likely to switch to (away from) a Big 4 auditor if the client's adoption of IFRS occurs in more recent years. ^ In the second essay, I draw on these inferences and test whether the change in audit fees in the year of IFRS adoption changes over time. As the market becomes less concentrated, larger auditors becomes less able to demand a premium for their services. Consistent with my arguments, results suggest that the change in audit service fees declines over time, although this effect seems concentrated among the Big 4. I also find that this effect is partially attributable to a differential effect of the auditors' experience in pricing audit services related to IFRS based on the period in which adoption occurs. The results of these two essays offer important implications to policy debates on the costs and benefits of IFRS adoption. ^ In the third essay, I differentiate Big 4 auditors into three classifications—Parent firms, Brand Name affiliates, and Local affiliates—and test for differences in audit fee premiums (relative to non-Big 4 auditors) and audit quality. Results suggest that there is significant heterogeneity between the three classifications based on both of these characteristics, which is an important consideration for future research. Overall, this dissertation provides additional insights into a variety of aspects of the global audit market.^

Mother-Infant Reciprocity and the Development of Joint Attention in 12 Month Old Infants

Social contingency is the ability to connect social stimuli, such as those behaviors performed by oneself and those performed by others. Detecting social contingencies occurs by means of reciprocity through shared experiences with others. Reciprocity denotes a circumstance in which two individuals participate in a collaborative exchange, and is distinguished from an event in which two individuals engage in separate, unrelated activities. Specifically, reciprocity incorporates joint attention (JA), which occurs when two individuals simultaneously and visually attend to the same item. JA is facilitated by gazing and pointing, whereby one individual initiates the action and the second individual follows suit by, for example, gaze-following. However, little is known about the role the mother may play in the development of JA. The purpose of our study was to investigate social contingency between mothers and infants engaging in dyadic interactions. Thirty-three 12-month-old typically developing infants (M = 12.2, SD = .19; N = 19 males) were filmed for 10 minutes during free play with their mothers and toys provided by an experimenter. Reciprocity was measured by coding mother-infant interactions when a precise chain of events occurred: (1) mother initiated a bid by introducing a toy/activity or request to the infant, (2) infant accepted the bid/request by engaging in play with the given toy/activity, and (3) mother persisted by continuing to engage in play with said toy/activity. We computed a Pearson Correlation to assess the relation between the mothers’ initiations of JA and their infants’ responses to JA. We found a moderately positive correlation between the two variables (r= 0.37, p<.05). Our findings suggest that reciprocity, an important component of social relationships, during parent-infant dyads may serve as a scaffold for joint attention abilities, which have been linked to social and language development.

Gaining Insight into Teaching: A Phenomenological Exploration of the Lived Experience of the Teachers of the Year

What qualities, skills, and knowledge produce quality teachers? Many stake-holders in education argue that teacher quality should be measured by student achievement. This qualitative study shows that good teachers are multi-dimensional; their effectiveness cannot be represented by students’ test scores alone. The purpose of this phenomenological study was to gain a deeper understanding of quality in teaching by examining the lived experiences of 10 winners or finalists of the Teacher of the Year (ToY) Award. Phenomenology describes individuals’ daily experiences of phenomena, examines how these experiences are structured, and focuses analysis on the perspectives of the persons having the experience (Moustakas, 1994). This inquiry asked two questions: (a) How is teaching experienced by recognized as outstanding Teachers of the Year? and (b) How do ToYs feelings and perceptions about being good teachers provide insight, if any, about concepts such as pedagogical tact, teacher selfhood, and professional dispositions? Ten participants formed the purposive sample; the major data collection tool was semi-structured interviews (Patton, 1990; Seidman, 2006). Sixty to 90-minute interviews were conducted with each participant. Data also included the participants’ ToY application essays. Data analysis included a three-phase process: description, reduction, interpretation. Findings revealed that the ToYs are dedicated, hard-working individuals. They exhibit behaviors, such as working beyond the school day, engaging in lifelong learning, and assisting colleagues to improve their practice. Working as teachers is their life’s compass, guiding and wrapping them into meaningful and purposeful lives. Pedagogical tact, teacher selfhood, and professional dispositions were shown to be relevant, offering important insights into good teaching. Results indicate that for these ToYs, good teaching is experienced by getting through to students using effective and moral means; they are emotionally open, have a sense of the sacred, and they operate from a sense of intentionality. The essence of the ToYs teaching experience was their being properly engaged in their craft, embodying logical, psychological, and moral realms. Findings challenge current teacher effectiveness process-product orthodoxy which makes a causal connection between effective teaching and student test scores, and which assumes that effective teaching arises solely from and because of the actions of the teacher.

Liquidity, Governance and Adverse Selection in Asset Pricing

A plethora of recent literature on asset pricing provides plenty of empirical evidence on the importance of liquidity, governance and adverse selection of equity on pricing of assets together with more traditional factors such as market beta and the Fama-French factors. However, literature has usually stressed that these factors are priced individually. In this dissertation we argue that these factors may be related to each other, hence not only individual but also joint tests of their significance is called for. In the three related essays, we examine the liquidity premium in the context of the finer three-digit SIC industry classification, joint importance of liquidity and governance factors as well as governance and adverse selection. Recent studies by Core, Guay and Rusticus (2006) and Ben-Rephael, Kadan and Wohl (2010) find that governance and liquidity premiums are dwindling in the last few years. One reason could be that liquidity is very unevenly distributed across industries. This could affect the interpretation of prior liquidity studies. Thus, in the first chapter we analyze the relation of industry clustering and liquidity risk following a finer industry classification suggested by Johnson, Moorman and Sorescu (2009). In the second chapter, we examine the dwindling influence of the governance factor if taken simultaneously with liquidity. We argue that this happens since governance characteristics are potentially a proxy for information asymmetry that may be better captured by market liquidity of a company’s shares. Hence, we jointly examine both the factors, namely, governance and liquidity – in a series of standard asset pricing tests. Our results reconfirm the importance of governance and liquidity in explaining stock returns thus independently corroborating the findings of Amihud (2002) and Gompers, Ishii and Metrick (2003). Moreover, governance is not subsumed by liquidity. Lastly, we analyze the relation of governance and adverse selection, and again corroborate previous findings of a priced governance factor. Furthermore, we ascertain the importance of microstructure measures in asset pricing by employing Huang and Stoll’s (1997) method to extract an adverse selection variable and finding evidence for its explanatory power in four-factor regressions.