Essays on Stock Market Reactions to New Information

A functioning stock market is an essential component of a competitive economy, since it provides a mechanism for allocating the economy’s capital stock. In an ideal situation, the stock market will steer capital in a manner that maximizes the total utility of the economy. As prices of traded stocks depend on and vary with information available to investors, it is apparent that information plays a crucial role in a functioning stock market. However, even though information indisputably matters, several issues regarding how stock markets process and react to new information still remain unanswered. The purpose of this thesis is to explore the link between new information and stock market reactions. The first essay utilizes new methodological tools in order to investigate the average reaction of investors to new financial statement information. The second essay explores the behavior of different types of investors when new financial statement information is disclosed to the market. The third essay looks into the interrelation between investor size, behavior and overconfidence. The fourth essay approaches the puzzle of negative skewness in stock returns from an altogether different angle than previous studies. The first essay presents evidence of the second derivatives of some financial statement signals containing more information than the first derivatives. Further, empirical evidence also indicates that some of the investigated signals proxy risk while others contain information priced with a delay. The second essay documents different categories of investors demonstrating systematical differences in their behavior when new financial statement information arrives to the market. In addition, a theoretical model building on differences in investor overconfidence is put forward in order to explain the observed behavior. The third essay shows that investor size describes investor behavior very well. This finding is predicted by the model proposed in the second essay, and hence strengthens the model. The behavioral differences between investors of different size furthermore have significant economic implications. Finally, the fourth essay finds strong evidence of management news disclosure practices causing negative skewness in stock returns.

Essays on Stock Options, Incentives, and Managerial Action

Executive compensation and managerial behavior have received an increasing amount of attention in the financial economics literature since the mid 1970s. The purpose of this thesis is to extend our understanding of managerial compensation, especially how stock option compensation is linked to the actions undertaken by the management. Furthermore, managerial compensation is continuously and heatedly debated in the media and an emerging consensus from this discussion seems to be that there still exists gaps in our knowledge of optimal contracting. In Finland, the first executive stock options were introduced in the 1980s and throughout the last 15 years it has become increasingly popular for Finnish listed firms to use this type of managerial compensation. The empirical work in the thesis is conducted using data from Finland, in contrast to most previous studies that predominantly use U.S. data. Using Finnish data provides insight of how market conditions affect compensation and managerial action and provides an opportunity to explore what parts of the U.S. evidence can be generalized to other markets. The thesis consists of four essays. The first essay investigates the exercise policy of the executive stock option holders in Finland. In summary, Essay 1 contributes to our understanding of the exercise policies by examining both the determinants of the exercise decision and the markets reaction to the actual exercises. The second essay analyzes the factors driving stock option grants using data for Finnish publicly listed firms. Several agency theory based variables are found to have have explanatory power on the likelihood of a stock option grant. Essay 2 also contributes to our understanding of behavioral factors, such as prior stock return, as determinants of stock option compensation. The third essay investigates the tax and stock option motives for share repurchases and dividend distributions. We document strong support for the tax motive for share repurchases. Furthermore, we also analyze the dividend distribution decision in companies with stock options and find a significant difference between companies with and without dividend protected options. We thus document that the cutting of dividends found in previous U.S. studies can be avoided by dividend protection. In the fourth essay we approach the puzzle of negative skewness in stock returns from an altogether different angle than in previous studies. We suggest that negative skewness in stock returns is generated by management disclosure practices and find proof for this. More specifically, we find that negative skewness in daily returns is induced by returns for days when non-scheduled firm specific news is disclosed.

A Story about a Message that was a Story: Message Form and its Implications to Knowledge Flow

Knowledge Flow, my dear friend! I would like to introduce you to a close relative of yours: Organizational Communication. You might want to take a moment to hear what your newfound kin has to say. As bright as you are dear Flow, you're missing a piece of the puzzle - for one cannot study any aspect of an organization relating to communication without acknowledging the message. Without a message, communication does not exist. Organizational Communication has always appreciated this. Perhaps the time has come for you to join rank and do so too? The main point of this work is to prove that the form of a message considerably affects communication, interpretation - and knowledge flow. As stories are at the heart of this thesis; and entertaining, reader-friendly communication its main argument, the entire manuscript is written in story form and is intentionally breaking academic writing tradition as far as writing style goes. Each chapter reads as a story of sorts and put together they create a grand narrative of my journey as a PhD student, the research I have conducted and the outcomes of this work. Thus if a reader hopes to make any sense of this title, she must read it in the same way one would read a novel, from beginning to end. This is a thesis with three aspirations. First, it sets out to prove that knowledge flow cannot be studied without a message. Second, it moves on to give the reader a once-over of a much used message form: storytelling. After these two goals are tackled the path is clear to research if message form indeed is as essential as claimed. I do so through both a qualitative and a quantitative study. The former acted as both a stepping stone into the research area and as an inspirational pilot, from which the research design for the larger quantitative study was drawn. Together, these two studies answered my research question - and allowed me to fulfill the third, final and foremost aspiration of this study - bridging the gap between two separate fields of knowledge management: knowledge flow and storytelling.

Unrealized expectations of jumps in volatility: An explanation to the low and time-varying predictive power of implied volatility

The low predictive power of implied volatility in forecasting the subsequently realized volatility is a well-documented empirical puzzle. As suggested by e.g. Feinstein (1989), Jackwerth and Rubinstein (1996), and Bates (1997), we test whether unrealized expectations of jumps in volatility could explain this phenomenon. Our findings show that expectations of infrequently occurring jumps in volatility are indeed priced in implied volatility. This has two important consequences. First, implied volatility is actually expected to exceed realized volatility over long periods of time only to be greatly less than realized volatility during infrequently occurring periods of very high volatility. Second, the slope coefficient in the classic forecasting regression of realized volatility on implied volatility is very sensitive to the discrepancy between ex ante expected and ex post realized jump frequencies. If the in-sample frequency of positive volatility jumps is lower than ex ante assessed by the market, the classic regression test tends to reject the hypothesis of informational efficiency even if markets are informationally effective.

How the development of condensation particle counters is reforming our view on atmospheric nucleation

Aerosol particles deteriorate air quality, atmospheric visibility and our health. They affect the Earth s climate by absorbing and scattering sunlight, forming clouds, and also via several feed-back mechanisms. The net effect on the radiative balance is negative, i.e. cooling, which means that particles counteract the effect of greenhouse gases. However, particles are one of the poorly known pieces in the climate puzzle. Some of the airborne particles are natural, some anthropogenic; some enter the atmosphere in particle form, while others form by gas-to-particle conversion. Unless the sources and dynamical processes shaping the particle population are quantified, they cannot be incorporated into climate models. The molecular level understanding of new particle formation is still inadequate, mainly due to the lack of suitable measurement techniques to detect the smallest particles and their precursors. This thesis has contributed to our ability to measure newly formed particles. Three new condensation particle counter applications for measuring the concentration of nano-particles were developed. The suitability of the methods for detecting both charged and electrically neutral particles and molecular clusters as small as 1 nm in diameter was thoroughly tested both in laboratory and field conditions. It was shown that condensation particle counting has reached the size scale of individual molecules, and besides measuring the concentration they can be used for getting size information. In addition to atmospheric research, the particle counters could have various applications in other fields, especially in nanotechnology. Using the new instruments, the first continuous time series of neutral sub-3 nm particle concentrations were measured at two field sites, which represent two different kinds of environments: the boreal forest and the Atlantic coastline, both of which are known to be hot-spots for new particle formation. The contribution of ions to the total concentrations in this size range was estimated, and it could be concluded that the fraction of ions was usually minor, especially in boreal forest conditions. Since the ionization rate is connected to the amount of cosmic rays entering the atmosphere, the relative contribution of neutral to charged nucleation mechanisms extends beyond academic interest, and links the research directly to current climate debate.

A possible origin of viscosity in Keplerian accretion disks due to secondary perturbation: Turbulent transport without magnetic fields

The origin of hydrodynamic turbulence in rotating shear flow is a long standing puzzle. Resolving it is especially important in astrophysics when the flow's angular momentum profile is Keplerian which forms an accretion disk having negligible molecular viscosity. Hence, any viscosity in such systems must be due to turbulence, arguably governed by magnetorotational instability, especially when temperature T greater than or similar to 10(5). However, such disks around quiescent cataclysmic variables, protoplanetary and star-forming disks, and the outer regions of disks in active galactic nuclei are practically neutral in charge because of their low temperature, and thus are not expected to be coupled with magnetic fields enough to generate any transport due to the magnetorotational instability. This flow is similar to plane Couette flow including the Coriolis force, at least locally. What drives their turbulence and then transport, when such flows do not exhibit any unstable mode under linear hydrodynamic perturbation? We demonstrate that the three-dimensional secondary disturbance to the primarily perturbed flow that triggers elliptical instability may generate significant turbulent viscosity in the range 0.0001 less than or similar to nu(t) less than or similar to 0.1, which can explain transport in accretion flows.

Secondary Perturbation Effects in Keplerian Accretion Disks: Elliptical Instability

Origin of turbulence in cold accretion disks, particularly in 3D, which is expected to be hydrodynamic but not magnetohydrodynamic, is a big puzzle. While the flow must exhibit some turbulence in support of the transfer of mass inward and angular momentum outward, according to the linear perturbation theory it should always be stable. We demonstrate that the 3D secondary disturbance to the primarily perturbed disk which exhibits elliptical vortices into the system solves the problem. This result is essentially applicable to the outer region of accretion disks in active galactic nuclei where the gas is significantly cold and neutral in charge and the magnetic Reynolds number is smaller than 10^4.

Unconventional initiator tRNAs sustain Escherichia coli

Of all tRNAs, initiator tRNA is unique in its ability to start protein synthesis by directly binding the ribosomal P-site. This ability is believed to derive from the almost universal presence of three consecutive G-C base (3G-C) pairs in the anticodon stem of initiator tRNA. Consistent with the hypothesis, a plasmid-borne initiator tRNA with one, two, or all 3G-C pairs mutated displays negligible initiation activity when tested in a WT Escherichia coli cell. Given this, the occurrence of unconventional initiator tRNAs lacking the 3G-C pairs, as in some species of Mycoplasma and Rhizobium, is puzzling. We resolve the puzzle by showing that the poor activity of unconventional initiator tRNAs in E. coli is because of competition from a large pool of the endogenous WT initiator tRNA (possessing the 3G-C pairs). We show that E. coli can be sustained on an initiator tRNA lacking the first and third G-C pairs; thereby reducing the 3G-C rule to a mere middle G-C requirement. Two general inferences following from our findings, that the activity of a mutant gene product may depend on its abundance in the cell relative to that of the WT, and that promiscuous initiation with elongator tRNAs has the potential to enhance phenotypic diversity without affecting genomic integrity, have been discussed.

Ovarian developmental variation in the primitively eusocial wasp Ropalidia marginata suggests a gateway to worker ontogeny and the evolution of sociality

Social insects are characterized by reproductive caste differentiation of colony members into one or a small number of fertile queens and a large number of sterile workers. The evolutionary origin and maintenance of such sterile workers remains an enduring puzzle in insect sociobiology. Here, we studied ovarian development in over 600 freshly eclosed, isolated, virgin female Ropalidia marginata wasps, maintained in the laboratory. The wasps differed greatly both in the time taken to develop their ovaries and in the magnitude of ovarian development despite having similar access to resources. All females started with no ovarian development at day zero, and the percentage of individuals with at least one oocyte at any stage of development increased gradually across age, reached 100% at 100. days and decreased slightly thereafter. Approximately 40% of the females failed to develop ovaries within the average ecological lifespan of the species. Age, body size and adult feeding rate, when considered together, were the most important factors governing ovarian development. We suggest that such flexibility and variation in the potential and timing of reproductive development may physiologically predispose females to accept worker roles and thus provide a gateway to worker ontogeny and the evolution of sociality.

Suppression of gravitational instabilities by dominant dark matter halo in low-surface-brightness galaxies

The low-surface-brightness galaxies are gas rich and yet have a low star formation rate; this is a well-known puzzle. The spiral features in these galaxies are weak and difficult to trace, although this aspect has not been studied much. These galaxies are known to be dominated by the dark matter halo from the innermost regions. Here, we do a stability analysis for the galactic disc of UGC 7321, a low-surface-brightness, superthin galaxy, for which the various observational input parameters are available. We show that the disc is stable against local, linear axisymmetric and non-axisymmetric perturbations. The Toomre Q parameter values are found to be large (>> 1) mainly due to the low disc surface density, and the high rotation velocity resulting due to the dominant dark matter halo, which could explain the observed low star formation rate. For the stars-alone case, the disc shows finite swing amplification but the addition of dark matter halo suppresses that amplification almost completely. Even the inclusion of the low-dispersion gas which constitutes a high disc mass fraction does not help in causing swing amplification. This can explain why these galaxies do not show strong spiral features. Thus, the dynamical effect of a halo that is dominant from inner regions can naturally explain why star formation and spiral features are largely suppressed in low-surface-brightness galaxies, making these different from the high-surface-brightness galaxies.

Homeostasis of functional maps in active dendrites emerges in the absence of individual channelostasis

The maintenance of ion channel homeostasis, or channelostasis, is a complex puzzle in neurons with extensive dendritic arborization, encompassing a combinatorial diversity of proteins that encode these channels and their auxiliary subunits, their localization profiles, and associated signaling machinery. Despite this, neurons exhibit amazingly stereotypic, topographically continuous maps of several functional properties along their active dendritic arbor. Here, we asked whether the membrane composition of neurons, at the level of individual ion channels, is constrained by this structural requirement of sustaining several functional maps along the same topograph. We performed global sensitivity analysis on morphologically realistic conductance-based models of hippocampal pyramidal neurons that coexpressed six well-characterized functional maps along their trunk. We generated randomized models by varying 32 underlying parameters and constrained these models with quantitative experimental measurements from the soma and dendrites of hippocampal pyramidal neurons. Analyzing valid models that satisfied experimental constraints on all six functional maps, we found topographically analogous functional maps to emerge from disparate model parameters with weak pairwise correlations between parameters. Finally, we derived a methodology to assess the contribution of individual channel conductances to the various functional measurements, using virtual knockout simulations on the valid model population. We found that the virtual knockout of individual channels resulted in variable, measurement and location-specific impacts across the population. Our results suggest collective channelostasis as a mechanism behind the robust emergence of analogous functional maps and have significant ramifications for the localization and targeting of ion channels and enzymes that regulate neural coding and homeostasis.

Using the system dynamics paradigm in teaching and learning technological university subjets

2nd International Conference on Education and New Learning Technologies

More than one language in the brain

Boeckx C., M.C. Horno & J.L. Mendívil (Eds.)

Black holes in the early universe, in compact binaries, and as energy sources inside solar-type stars

This thesis consists of three separate studies of roles that black holes might play in our universe.

In the first part we formulate a statistical method for inferring the cosmological parameters of our universe from LIGO/VIRGO measurements of the gravitational waves produced by coalescing black-hole/neutron-star binaries. This method is based on the cosmological distance-redshift relation, with "luminosity distances" determined directly, and redshifts indirectly, from the gravitational waveforms. Using the current estimates of binary coalescence rates and projected "advanced" LIGO noise spectra, we conclude that by our method the Hubble constant should be measurable to within an error of a few percent. The errors for the mean density of the universe and the cosmological constant will depend strongly on the size of the universe, varying from about 10% for a "small" universe up to and beyond 100% for a "large" universe. We further study the effects of random gravitational lensing and find that it may strongly impair the determination of the cosmological constant.

In the second part of this thesis we disprove a conjecture that black holes cannot form in an early, inflationary era of our universe, because of a quantum-field-theory induced instability of the black-hole horizon. This instability was supposed to arise from the difference in temperatures of any black-hole horizon and the inflationary cosmological horizon; it was thought that this temperature difference would make every quantum state that is regular at the cosmological horizon be singular at the black-hole horizon. We disprove this conjecture by explicitly constructing a quantum vacuum state that is everywhere regular for a massless scalar field. We further show that this quantum state has all the nice thermal properties that one has come to expect of "good" vacuum states, both at the black-hole horizon and at the cosmological horizon.

In the third part of the thesis we study the evolution and implications of a hypothetical primordial black hole that might have found its way into the center of the Sun or any other solar-type star. As a foundation for our analysis, we generalize the mixing-length theory of convection to an optically thick, spherically symmetric accretion flow (and find in passing that the radial stretching of the inflowing fluid elements leads to a modification of the standard Schwarzschild criterion for convection). When the accretion is that of solar matter onto the primordial hole, the rotation of the Sun causes centrifugal hangup of the inflow near the hole, resulting in an "accretion torus" which produces an enhanced outflow of heat. We find, however, that the turbulent viscosity, which accompanies the convective transport of this heat, extracts angular momentum from the inflowing gas, thereby buffering the torus into a lower luminosity than one might have expected. As a result, the solar surface will not be influenced noticeably by the torus's luminosity until at most three days before the Sun is finally devoured by the black hole. As a simple consequence, accretion onto a black hole inside the Sun cannot be an answer to the solar neutrino puzzle.

Theory of ozone isotopic effects and various electron transfer reactions

Three separate topics, each stimulated by experiments, are treated theoretically in this dessertation: isotopic effects of ozone, electron transfer at interfaces, and intramolecular directional electron transfer in a supramolecular system.

The strange mass-independent isotope effect for the enrichment of ozone, which has been a puzzle in the literature for some 20 years, and the equally puzzling unconventional strong mass-dependent effect of individual reaction rate constants are studied as different aspects of a symmetry-driven behavior. A statistical (RRKM-based) theory with a hindered-rotor transition state is used. The individual rate constant ratios of recombination reactions at low pressures are calculated using the theory involving (1) small deviation from the statistical density of states for symmetric isotopomers, and (2) weak collisions for deactivation of the vibrationally excited ozone molecules. The weak collision and partitioning among exit channels play major roles in producing the large unconventional isotope effect in "unscrambled" systems. The enrichment studies reflect instead the non-statistical effect in "scrambled" systems. The theoretical results of low-pressure ozone enrichments and individual rate constant ratios obtained from these calculations are consistent with the corresponding experimental results. The isotopic exchange rate constant for the reaction ^(16)O + ^(18)O ^(18)O→+ ^(16)O ^(18)O + ^(18)O provides information on the nature of a variationally determined hindered-rotor transition state using experimental data at 130 K and 300 K. Pressure effects on the recombination rate constant, on the individual rate constant ratios and on the enrichments are also investigated. The theoretical results are consistent with the experimental data. The temperature dependence of the enrichment and rate constant ratios is also discussed, and experimental tests are suggested. The desirability of a more accurate potential energy surface for ozone in the transition state region is also noted.

Electron transfer reactions at semiconductor /liquid interfaces are studied using a tight-binding model for the semiconductors. The slab method and a z-transform method are employed in obtaining the tight-binding electronic structures of semiconductors having surfaces. The maximum electron transfer rate constants at Si/viologen^(2-/+) and InP /Me_(2)Fc^(+/O) interfaces are computed using the tight-binding type calculations for the solid and the extended-Huckel for the coupling to the redox agent at the interface. These electron transfer reactions are also studied using a free electron model for the semiconductor and the redox molecule, where Bardeen's method is adapted to calculate the coupling matrix element between the molecular and semiconductor electronic states. The calculated results for maximum rate constant of the electron transfer from the semiconductor bulk states are compared with the experimentally measured values of Lewis and coworkers, and are in reasonable agreement, without adjusting parameters. In the case of InP /liquid interface, the unusual current vs applied potential behavior is additionally interpreted, in part, by the presence of surface states.

Photoinduced electron transfer reactions in small supramolecular systems, such as 4-aminonaphthalimide compounds, are interesting in that there are, in principle, two alternative pathways (directions) for the electron transfer. The electron transfer, however, is unidirectional, as deduced from pH-dependent fluorescence quenching studies on different compounds. The role of electronic coupling matrix element and the charges in protonation are considered to explain the directionality of the electron transfer and other various results. A related mechanism is proposed to interpret the fluorescence behavior of similar molecules as fluorescent sensors of metal ions.