A study of stock market fluctuations and their relation to business conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubblelike deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the nonfundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

Correspondence of historic salinity fluctuations in Florida Bay, USA, to atmospheric variability and anthropogenic changes

Florida Bay is a highly dynamic estuary that exhibits wide natural fluctuations in salinity due to changes in the balance of precipitation, evaporation and freshwater runoff from the mainland. Rapid and large-scale modification of freshwater flow and construction of transportation conduits throughout the Florida Keys during the late nineteenth and twentieth centuries reshaped water circulation and salinity patterns across the ecosystem. In order to determine long-term patterns in salinity variation across the Florida Bay estuary, we used a diatom-based salinity transfer function to infer salinity within 3.27 ppt root mean square error of prediction from diatom assemblages from four ~130 year old sediment records. Sites were distributed along a gradient of exposure to anthropogenic shifts in the watershed and salinity. Precipitation was found to be the primary driver influencing salinity fluctuations over the entire record, but watershed modifications on the mainland and in the Florida Keys during the late-1800s and 1900s were the most likely cause of significant shifts in baseline salinity. The timing of these shifts in the salinity baseline varies across the Bay: that of the northeastern coring location coincides with the construction of the Florida Overseas Railway (AD 1906–1916), while that of the east-central coring location coincides with the drainage of Lake Okeechobee (AD 1881–1894). Subsequent decreases occurring after the 1960s (east-central region) and early 1980s (southwestern region) correspond to increases in freshwater delivered through water control structures in the 1950s–1970s and again in the 1980s. Concomitant increases in salinity in the northeastern and south-central regions of the Bay in the mid-1960s correspond to an extensive drought period and the occurrence of three major hurricanes, while the drop in the early 1970s could not be related to any natural event. This paper provides information about major factors influencing salinity conditions in Florida Bay in the past and quantitative estimates of the pre- and post-South Florida watershed modification salinity levels in different regions of the Bay. This information should be useful for environmental managers in setting restoration goals for the marine ecosystems in South Florida, especially for Florida Bay.

A Study of Stock Market Fluctuations and their Relations to Business Conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubble-like deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the non-fundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

Analyzing Tidal Fluctuations in the Big Pine Key Freshwater Lens with Time-Lapse Resistivity

The tidal influence on the Big Pine Key saltwater/freshwater interface was analyzed using time-lapse electrical resistivity imaging and shallow well measurements. The transition zone at the saltwater/freshwater interface was measured over part of a tidal cycle along three profiles. The resistivity was converted to salinity by deriving a formation factor for the Miami Oolite. A SEAWAT model was created to attempt to recreate the field measurements and test previously established hydrogeologic parameters. The results imply that the tide only affects the groundwater within 20 to 30 m of the coast. The effect is small and caused by flooding from the high tide. The low relief of the island means this effect is very sensitive to small changes in the magnitude. The SEAWAT model proved to be insufficient in modeling this effect. The study suggests that the extent of flooding is the largest influence on the salinity of the groundwater.