Impact of a change in tillage and crop residue management practice on soil chemical and microbiological properties in a cereal-producing red duplex soil in NSW, Australia

The effect of a change of tillage and crop residue management practice on the chemical and micro-biological properties of a cereal-producing red duplex soil was investigated by superimposing each of three management practices (CC: conventional cultivation, stubble burnt, crop conventionally sown; DD: direct-drilling, stubble retained, no cultivation, crop direct-drilled; SI: stubble incorporated with a single cultivation, crop conventionally sown), for a 3-year period on plots previously managed with each of the same three practices for 14 years. A change from DD to CC or SI practice resulted in a significant decline, in the top 0-5 cm of soil, in organic C, total N, electrical conductivity, NH4-N, NO3-N, soil moisture holding capacity, microbial biomass and CO2 respiration as well as a decline in the microbial quotient (the ratio of microbial biomass C to organic C; P <0.05). In contrast, a change from SI to DD or CC practice or a change from CC to DD or SI practice had only negligible impact on soil chemical properties (P >0.05). However, there was a significant increase in microbial biomass and the microbial quotient in the top 0-5 cm of soil following the change from CC to DD or SI practice and with the change from SI to DD practice (P <0.05). Analysis of ester-linked fatty acid methyl esters (EL-FAMEs) extracted from the 0- to 5-cm and 5- to 10-cm layers of the soils of the various treatments detected changes in the FAME profiles following a change in tillage practice. A change from DD practice to SI or CC practice was associated with a significant decline in the ratio of fungal to bacterial fatty acids in the 0- to 5-cm soil (P <0.05). The results show that a change in tillage practice, particularly the cultivation of a previously minimum-tilled (direct-drilled) soil, will result in significant changes in soil chemical and microbiological properties within a 3-year period. They also show that soil microbiological properties are sensitive indicators of a change in tillage practice.

Effect of Oil Price on Emissions Trading Market: VAR Analysis

In this study, we investigated the relationship of European Union carbon dioxide CO2 allowances EUAs prices and oil prices by employing a VAR analysis, Granger causality test and impulse response function. If oil price continues increasing, companies will decrease dependency on fossil fuels because of an increase in energy costs. Therefore, the price of EUAs may be affected by variations in oil prices if the greenhouse gases discharged by the consumption of alternative energy are less than that of fossil fuels. There are no previous studies that investigated these relationships. In this study, we analyzed eight types of EUAs EUA05 to EUA12 with a time series daily data set during 2005-2007 collected from a European Climate Exchange time series data set. Differentiations in these eight types were redemption period. We used the New York Mercantile Exchange light sweet crude price as an oil price. From our examination, we found that only the EUA06 and EUA07 types of EUAs Granger-cause oil prices and vice versa and other six types of EUAs do not Granger-cause oil price. These results imply that the earlier redemption period types of EUAs are more sensitive to oil price. In employing the impulse response function, the results showed that a shock to oil price has a slightly positive effect on all types of EUAs for a very short period. On the other hand, we found that a shock to price of EUA has a slightly negative effect on oil price following a positive effect in only EUA06 and EUA07 types. Therefore, these results imply that fluctuations in EUAs prices and oil prices have little effect on each other. Lastly, we did not consider the substitute energy prices in this study, so we plan to include the prices of coal and natural gas in future analyses.

Calcium phosphate flocs and the clarification of sugar cane juice from whole of crop harvesting

Sugar cane biomass is one of the most viable feedstocks for the production of renewable fuels and chemicals. Therefore, processing the whole of crop (WC) (i.e., stalk and trash, instead of stalk only) will increase the amount of available biomass for this purpose. However, effective clarification of juice expressed from WC for raw sugar manufacture is a major challenge because of the amounts and types of non-sucrose impurities (e.g., polysaccharides, inorganics, proteins, etc.) present. Calcium phosphate flocs are important during sugar cane juice clarification because they are responsible for the removal of impurities. Therefore, to gain a better understanding of the role of calcium phosphate flocs during the juice clarification process,the effects of impurities on the physicochemical properties of calcium phosphate flocs were examined using small-angle laser light scattering technique, attenuated total reflectance Fourier transformed infrared spectroscopy, and X-ray powder diffraction. Results on synthetic sugar juice solutions showed that the presence of SiO2 and Na+ ions affected floc size and floc structure. Starch and phosphate ions did not affect the floc structure; however, the former reduced the floc size, whereas the latter increased the floc size. The study revealed that high levels of Na+ ions would negatively affect the clarification process the most, as they would reduce the amount of suspended particles trapped by the flocs. A complementary study on prepared WC juice using cold and cold/intermediate liming techniques was conducted. The study demonstrated that, in comparison to the one-stage (i.e., conventional) clarification process, a two-stage clarification process using cold liming removed more polysaccharides (≤19%),proteins (≤82%), phosphorus (≤53%), and SiO2 (≤23%) in WC juice but increased Ca2+ (≤136%) and sulfur (≤200%)

Obesity crisis must be owned not only by individuals but governments and industry

FOR the first time in Australia’s history, diet is the No.1 risk factor contributing to our burden of disease. That’s more than smoking, alcohol, injury or anything else. I’m sure some of you are thinking: “Life’s too short to worry about every mouthful you eat. This is such a First World problem.” But it’s not. Around the world, in countries rich and poor, more people die from preventable disease than any other kind, and what we eat is recognised as a major contributor...

Short-term responses of leaf growth rate to water deficit scale up to whole-plant and crop levels: An integrated modelling approach in maize.

Physiological and genetic studies of leaf growth often focus on short-term responses, leaving a gap to whole-plant models that predict biomass accumulation, transpiration and yield at crop scale. To bridge this gap, we developed a model that combines an existing model of leaf 6 expansion in response to short-term environmental variations with a model coordinating the development of all leaves of a plant. The latter was based on: (1) rates of leaf initiation, appearance and end of elongation measured in field experiments; and (2) the hypothesis of an independence of the growth between leaves. The resulting whole-plant leaf model was integrated into the generic crop model APSIM which provided dynamic feedback of environmental conditions to the leaf model and allowed simulation of crop growth at canopy level. The model was tested in 12 field situations with contrasting temperature, evaporative demand and soil water status. In observed and simulated data, high evaporative demand reduced leaf area at the whole-plant level, and short water deficits affected only leaves developing during the stress, either visible or still hidden in the whorl. The model adequately simulated whole-plant profiles of leaf area with a single set of parameters that applied to the same hybrid in all experiments. It was also suitable to predict biomass accumulation and yield of a similar hybrid grown in different conditions. This model extends to field conditions existing knowledge of the environmental controls of leaf elongation, and can be used to simulate how their genetic controls flow through to yield.

Soil properties and crop yields in a dryland Vertisol sown with cotton-based crop rotations

Information on the effects of growing cotton (Gossypium hirsutum L.)-based crop rotations on soil quality of dryland Vertisols is sparse. The objective of this study was to quantify the effects of growing cereal and leguminous crops in rotation with dryland cotton on physical and chemical properties of a grey Vertisol near Warra, SE Queensland, Australia. The experimental treatments, selected after consultations with local cotton growers, were continuous cotton (T1), cotton-sorghum (Sorghum bicolor (L.) Moench.) (T2), cotton-wheat (Triticum aestivum L.) double cropped (T3), cotton-chickpea (Cicer arietinum L.) double cropped followed by wheat (T4) and cotton-wheat (T5). From 1993 to 1996 land preparation was by chisel ploughing to about 0.2 m followed by two to four cultivations with a Gyral tyne cultivator. Thereafter all crops were sown with zero tillage except for cultivation with a chisel plough to about 0.07-0.1 m after cotton picking to control heliothis moth pupae. Soil was sampled from 1996 to 2004 and physical (air-filled porosity of oven-dried soil, an indicator of soil compaction; plastic limit; linear shrinkage; dispersion index) and chemical (pH in 0.01 M CaCl2, organic carbon, exchangeable Ca, Mg, K and Na contents) properties measured. Crop rotation affected soil properties only with respect to exchangeable Na content and air-filled porosity. In the surface 0.15 m during 2000 and 2001 lowest air-filled porosity occurred with T1 (average of 34.6 m3/100 m3) and the highest with T3 (average of 38.9 m3/100 m3). Air-filled porosity decreased in the same depth between 1997 and 1998 from 45.0 to 36.1 m3/100 m3, presumably due to smearing and compaction caused by shallow cultivation in wet soil. In the subsoil, T1 and T2 frequently had lower air-filled porosity values in comparison with T3, T4 and T5, particularly during the early stages of the experiment, although values under T1 increased subsequently. In general, compaction was less under rotations which included a wheat crop (T3, T4, T5). For example, average air-filled porosity (in m3/100 m3) in the 0.15-0.30 m depth from 1996 to 1999 was 19.8 with both T1 and T2, and 21.2 with T3, 21.1 with T4 and 21.5 with T5. From 2000 to 2004, average air-filled porosity (in m3/100 m3) in the same depth was 21.3 with T1, 19.0 with T2, 19.8 with T3, 20.0 with T4 and 20.5 with T5. The rotation which included chickpea (T4) resulted in the lowest exchangeable Na content, although differences among rotations were small. Where only a cereal crop with a fibrous root system was sown in rotation with cotton (T2, T3, T5) linear shrinkage in the 0.45-0.60 m depth was lower than in rotations, which included tap-rooted crops such as chickpea (T4) or continuous cotton (T1). Dispersion index and organic carbon decreased, and plastic limit increased with time. Soil organic carbon stocks decreased at a rate of 1.2 Mg/ha/year. Lowest average cotton lint yield occurred with T2 (0.54 Mg/ha) and highest wheat yield with T3 (2.8 Mg/ha). Rotations which include a wheat crop are more likely to result in better soil structure and cotton lint yield than cotton-sorghum or continuous cotton.

Impact of tillage and residues from rotation crops on the nematode community in soil and surface mulch during the following sugarcane crop.

The impact of three cropping histories (sugarcane, maize and soybean) and two tillage practices (conventional tillage and direct drill) on plant-parasitic and free-living nematodes in the following sugarcane crop was examined in a field trial at Bundaberg. Soybean reduced populations of lesion nematode (Pratylenchus zeae) and root-knot nematode (Meloidogyne javanica) in comparison to previous crops of sugarcane or maize but increased populations of spiral nematode (Helicotylenchus dihystera) and maintained populations of dagger nematode (Xiphinema elongatum). However the effect of soybean on P zeae and M. javanica was no longer apparent 15 weeks after planting sugarcane, while later in the season, populations of these nematodes following soybean were as high as or higher than maize or sugarcane. Populations of P zeae were initially reduced by cultivation but due to strong resurgence tended to be higher in conventionally tilled than direct drill plots at the end of the plant crop. Even greater tillage effects were observed with M. javanica and X. elongatum, as nematode populations were significantly higher in conventionally tilled than direct drill plots late in the season. Populations of free-living nematodes in the upper 10 cm of soil were initially highest following soybean, but after 15, 35 and 59 weeks were lower than after sugarcane and contained fewer omnivorous and predatory nematodes. Conventional tillage increased populations of free-living nematodes in soil in comparison to direct drill and was also detrimental to omnivorous and predatory nematodes. These results suggest that crop rotation and tillage not only affect plant-parasitic nematodes directly, but also have indirect effects by impacting on natural enemies that regulate nematode populations. More than 2 million nematodes/m(2) were often present in crop residues on the surface of direct drill plots. Bacterial-feeding nematodes were predominant in residues early in the decomposition process but fungal-feeding nematodes predominated after 15 weeks. This indicates that fungi become an increasingly important component of the detritus food web as decomposition proceeds, and that that the rate of nutrient cycling decreases with time. Correlations between total numbers of free-living nematodes and mineral N concentrations in crop residues and surface soil suggested that the free-living nematode community may provide an indication of the rate of mineralisation of N from organic matter.

Agronomic challenges for organic crop husbandry

With respect to resource management and environmental impact, organic farming offers rationales for agricultural sustainability. However, agronomic productivity is usually higher with conventional farming. This work aimed at investigating two factors of major importance for the agronomic productivity of organic crop husbandry, nitrogen (N) supply through symbiotic N fixation (SNF) and weed occurrence. Perennial red clover-grass leys and spring cereal crops subjected to regular agricultural practices were studied on 34 organic farms located in the southern and the north-western coastal regions of Finland. Herbage growth, clover content as a proportion of the ley and extent of SNF in perennial leys, and the occurrence of weed species and weed-crop competition in spring cereal stands were related to climate conditions, soil properties, and management measures. The herbage accumulated from the first and the second cut of one- and two-year-old leys averaged 7.5 t DM ha-1 (SD ± 1.7 t DM ha-1); the clover content averaged 43.9% (SD ± 18.8%). Along with the clover content, herbage production decreased with ley age. Radiation use efficiency (RUE) correlated positively with clover proportion but despite low clover contents, three-year-old leys were still productive with regard to RUE. SNF in the accumulated annual growth of one- and two-year-old leys averaged 247.5 kg N ha-1 yr-1 (SD ± 114.4 kg N ha-1 yr-1). It was supposed that if red clover-grass leys constituted 40% of the rotation, then the mean N supply by SNF would be able to sustain two or three succeeding cereal crops (green manure and forage ley, respectively), yielding 3.0 to 4.0 t grain ha-1. Being a function of clover biomass, the SNF increased from the first to the second cut and thereafter declined with ley age. Coefficients of variation of clover contents (and SNF) between and within fields were around 50%, which was about twice as high as those of herbage production. The lower were the clover contents, the higher were the within-field variations of clover as a proportion of the ley. Low clover contents in one-year-old leys and increasing variability with ley age suggested that red clover growth was limited by poor establishment and poor overwintering. The proportions of clover in leys were lower and their variability was higher in the northwest than in the south. Soil properties, primarily texture and structure, had a major impact on clover proportion and herbage production, which largely explained regional differences in ley growth. Within-field variability of soil properties can be amended through site-specific measures, including drainage, liming, and applications of organic manures and mineral fertilizers. Overwintering and the persistence of leys can be improved by the choice of winter-hardy varieties, careful establishment and the appropriate harvest regime. Mean grain yields of spring cereal crops amounted to 3.2 t ha-1 in the south and 3.6 t ha-1 in the northwest. At 570 and 565 m-2 for the south and northwest respectively, mean weed densities did not differ between the regions, whereas the respective mean weed biomass of 697 and 1594 kg dry weight ha-1, respectively did differ. Weed abundance varied remarkably between single fields. The number of weed species was higher in the south than in the northwest. For example, Fumaria officinalis and Lamium spp. were found only in the south. Frequencies and abundances of Lapsana communis, Myosotis arvensis, Polygonum aviculare, Tripleurospermum inodorum, and Vicia spp. were higher in the south, whereas those of Elymus repens, Persicaria spp. and Spergula arvensis were higher in the northwest. The number of years since conversion to organic farming, i.e. long-term management, was one of the variables that explained the abundance of single weed species. E. repens was the weed species whose biomass increased most with the duration of organic farming. Another significant variable was crop biomass, which was affected by short-term management. The presence of different weed species was related to the duration of organic farming and to low crop yield. This finding demonstrated that it was not the organic farming regime per se, which resulted in high weed infestation and low yielding crops, but failures in the understanding and the management of organic farming systems. Successful weed control relies on farm- and field-specific long- and short-term management approaches. The agronomic productivity of ley and spring cereal crops managed by full-time farmers with an interest in organic farming was on the same level as of the mean for conventional farming. Given the many options for further improvements of the agronomic performance of organic arable systems, organic farming offers foundations for the development of sustainable agriculture. The main threat to the sustainability of farming in Finland, both conventional and organic, is the spatial separation of crop production and animal husbandry by region, along with the simplification of associated crop rotations.

Northern challanges for profitable production of quality naked oat

Naked oat (Avena sativa f.sp. nuda L.) is the highest quality cereal in northern growing conditions. However the cultivation area of naked oat is remarkably small. Major challenges for naked oat production are to observe its nakedness. The caryopsis of naked oat is sensitive to mechanical damage at harvest, especially at high grain moisture content. The greater the grain moisture content of naked oat at harvest, the more loses of germination capacity was caused by threshing. For producing high quality naked oat seed, it is recommended that harvesting be done at as low grain moisture content as possible. However, if this is not possible, better germination can be ensure with gentle harvest by reducing the cylinder speed. In spite of conventional oat s excellent fat and amino acid composition in animal feed use, as far as nutritional value is concerned, the total energy yield of oat is weaker than other cereals because of the hulls. Also with naked oat the dehulling is not complete, while hull content on different cultivars mostly varied between one to six percent. In addition to genotype, environmental conditions markedly control the expression of nakedness. Thresher settings had only limited effects on hull content. The function of hulls is to protect the groat, but this was confirmed only for Finnish, small grain, cultivar Lisbeth. The oat kernel is generally covered with fine silky hairs termed trichomes. The trichomes of naked oat are partly lost during threshing and handling of grains. Trichomes can cause itchiness in those handling the grains and also accumulate and form fine dust and can block-up machinery. The cultivars differed considerably in pubescence. Some thresher settings, including increased cylinder speed, slightly increased grain polishing such that grains had some areas completely free of trichomes. Adjusting thresher settings was generally not an efficient means of solving the problems associated with naked oat trichomes. The main differences in cultivation costs between naked and conventional oat lie in the amount of seeds required and the drying costs. The main differences affecting the economic result lie in market prices, yield level and feed value. The results indicate that naked oat is financially more profitable than conventional oat, when the crop is sold at a specific price at all yield levels and when the crop is used as feed at highest yield level. At lower yield levels, conventional oat is, in spite of its lower feed value, the more profitable option for feed use. Dehulled oat did not achieve the same economic result as naked oat, as the cost of dehulling, including the hull waste, was considerable. According to this study naked oat can be cultivated successfully under northern conditions, when taking into consideration the soft, naked grain through cultivation chain.

Context-dependency of a complex fruit-frugivore mutualism: temporal variation in crop size and neighborhood effects

The quantity of fruit consumed by dispersers is highly variable among individuals within plant populations. The outcome Of Such selection operated by firugivores has been examined mostly with respect to changing spatial contexts. The influence of varying temporal contexts on frugivore choice, and their possible demographic and evolutionary consequences is poorly understood. We examined if temporal variation in fruit availability across a hierarchy of nested temporal levels (interannual, intraseasonal, 120 h, 24 h) altered frugivore choice for a complex seed dispersal system in dry tropical forests of southern India. The interactions between Phyllanthus emblica and its primary disperser (ruminants) was mediated by another frugivore (a primate),which made large quantities of fruit available on the ground to ruminants. The direction and strength of crop size and neighborhood effects on this interaction varied with changing temporal contexts.Fruit availability was higher in the first of the two study years, and at the start of the season in both years. Fruit persistence on trees,determined by primate foraging, was influenced by crop size andconspecific neighborhood densities only in the high fruit availability year. Fruit removal by ruminants was influenced by crop size in both years and neighborhood densities only in the high availability year. In both years, these effects were stronger at the start of the season.Intraseasonal reduction in fruit availability diminished inequalities in fruit removal by ruminants and the influence of crop size and fruiting neighborhoods. All trees were not equally attractive to frugivores in a P. emblica population at all points of time. Temporal asymmetry in frugivore-mediated selection could reduce potential for co-evolution between firugivores and plants by diluting selective pressures. Inter-dependencies; formed between disparate animal consumers can add additional levels of complexity to plant-frugivore mutualistic networks and have potential reproductive consequences for specific individuals within populations.

A Cointegration Approach to Topics in Empirical Macroeconomics (summary section only)

Mikael Juselius’ doctoral dissertation covers a range of significant issues in modern macroeconomics by empirically testing a number of important theoretical hypotheses. The first essay presents indirect evidence within the framework of the cointegrated VAR model on the elasticity of substitution between capital and labor by using Finnish manufacturing data. Instead of estimating the elasticity of substitution by using the first order conditions, he develops a new approach that utilizes a CES production function in a model with a 3-stage decision process: investment in the long run, wage bargaining in the medium run and price and employment decisions in the short run. He estimates the elasticity of substitution to be below one. The second essay tests the restrictions implied by the core equations of the New Keynesian Model (NKM) in a vector autoregressive model (VAR) by using both Euro area and U.S. data. Both the new Keynesian Phillips curve and the aggregate demand curve are estimated and tested. The restrictions implied by the core equations of the NKM are rejected on both U.S. and Euro area data. These results are important for further research. The third essay is methodologically similar to essay 2, but it concentrates on Finnish macro data by adopting a theoretical framework of an open economy. Juselius’ results suggests that the open economy NKM framework is too stylized to provide an adequate explanation for Finnish inflation. The final essay provides a macroeconometric model of Finnish inflation and associated explanatory variables and it estimates the relative importance of different inflation theories. His main finding is that Finnish inflation is primarily determined by excess demand in the product market and by changes in the long-term interest rate. This study is part of the research agenda carried out by the Research Unit of Economic Structure and Growth (RUESG). The aim of RUESG it to conduct theoretical and empirical research with respect to important issues in industrial economics, real option theory, game theory, organization theory, theory of financial systems as well as to study problems in labor markets, macroeconomics, natural resources, taxation and time series econometrics. RUESG was established at the beginning of 1995 and is one of the National Centers of Excellence in research selected by the Academy of Finland. It is financed jointly by the Academy of Finland, the University of Helsinki, the Yrjö Jahnsson Foundation, Bank of Finland and the Nokia Group. This support is gratefully acknowledged.

Essays on the Linkages Between Financial Markets, and Risk Asymmetries (summary section only)

During the last few decades there have been far going financial market deregulation, technical development, advances in information technology, and standardization of legislation between countries. As a result, one can expect that financial markets have grown more interlinked. The proper understanding of the cross-market linkages has implications for investment and risk management, diversification, asset pricing, and regulation. The purpose of this research is to assess the degree of price, return, and volatility linkages between both geographic markets and asset categories within one country, Finland. Another purpose is to analyze risk asymmetries, i.e., the tendency of equity risk to be higher after negative events than after positive events of equal magnitude. The analysis is conducted both with respect to total risk (volatility), and systematic risk (beta). The thesis consists of an introductory part and four essays. The first essay studies to which extent international stock prices comove. The degree of comovements is low, indicating benefits from international diversification. The second essay examines the degree to which the Finnish market is linked to the “world market”. The total risk is divided into two parts, one relating to world factors, and one relating to domestic factors. The impact of world factors has increased over time. After 1993, when foreign investors were allowed to freely invest in Finnish assets, the risk level has been higher than previously. This was also the case during the economic recession in the beginning of the 1990’s. The third essay focuses on the stock, bond, and money markets in Finland. According to a trading model, the degree of volatility linkages should be strong. However, the results contradict this. The linkages are surprisingly weak, even negative. The stock market is the most independent, while the money market is affected by events on the two other markets. The fourth essay concentrates on volatility and beta asymmetries. Contrary to many international studies there are only few cases of risk asymmetries. When they occur, they tend to be driven by the market-wide component rather than the portfolio specific element.

Essays on Stock Option Compensation and the Role of Incentives and Risk (summary section only)

Managerial pay-for-performance sensitivity has increased rapidly around the world. Early empirical research showed that pay-for-performance sensitivity resulting from stock ownership and stock options appeared to be quite low during the 1970s and early 1980s in the U.S. However, recent empirical research from the U.S. shows an enormous increase in pay-for-performance sensitivity. The global trend has also reached Finland, where stock options have become a major ingredient of executive compensation. The fact that stock options seem to be an appealing form of remuneration from a theoretical point of view combined with the observation that the use of this compensation form has increased significantly during the recent years, implies that research on the dynamics of stock option compensation is highly relevant for the academic community, as well as for practitioners and regulators. The research questions of the thesis are analyzed in four separate essays. The first essay examines whether stock option compensation practices of Finnish firms are consistent with predictions from principal-agent theory. The second essay explores one of the major puzzles in the compensation literature by studying determinants of stock option contract design. In theory, optimal contract design should vary according to firm characteristics. However, in the U.S., variation in contract design seems to be surprisingly low, a phenomenon generally attributed to tax and accounting considerations. In Finland, however, firms are not subject to stringent contracting restrictions, and the variation in contract design tends, in fact, to be quite substantial. The third essay studies the impact of price- and risk incentives arising from stock option compensation on firm investment. In addition, the essay explores one of the most debated questions in the literature, in particular, the relation between incentives and firm performance. Finally, several strands of literature in both economics and corporate finance hypothesize that economic uncertainty is related to corporate decision-making. Previous research has shown that risk tends to slow down firm investment. In the fourth essay, it is hypothesized that firm risk slows down growth from a more universal perspective. Consistent with this view, it is shown that risk not only tends to slow down firm investment, but also employment growth. Moreover, the essay explores whether the nature of firms’ compensation policies, in particular, whether firms make use of stock option compensation, affects the relation between risk and firm growth. In summary, the four essays contribute to the current understanding of stock options as a form of equity incentives, and how incentives and risk affect corporate decision-making. By this, the thesis promotes the knowledge related to the modern theory of the firm.

Inference on Cointegration in Vector Autoregressive Models (summary section only)

In the thesis we consider inference for cointegration in vector autoregressive (VAR) models. The thesis consists of an introduction and four papers. The first paper proposes a new test for cointegration in VAR models that is directly based on the eigenvalues of the least squares (LS) estimate of the autoregressive matrix. In the second paper we compare a small sample correction for the likelihood ratio (LR) test of cointegrating rank and the bootstrap. The simulation experiments show that the bootstrap works very well in practice and dominates the correction factor. The tests are applied to international stock prices data, and the .nite sample performance of the tests are investigated by simulating the data. The third paper studies the demand for money in Sweden 1970—2000 using the I(2) model. In the fourth paper we re-examine the evidence of cointegration between international stock prices. The paper shows that some of the previous empirical results can be explained by the small-sample bias and size distortion of Johansen’s LR tests for cointegration. In all papers we work with two data sets. The first data set is a Swedish money demand data set with observations on the money stock, the consumer price index, gross domestic product (GDP), the short-term interest rate and the long-term interest rate. The data are quarterly and the sample period is 1970(1)—2000(1). The second data set consists of month-end stock market index observations for Finland, France, Germany, Sweden, the United Kingdom and the United States from 1980(1) to 1997(2). Both data sets are typical of the sample sizes encountered in economic data, and the applications illustrate the usefulness of the models and tests discussed in the thesis.

Monetary Policy, Stock Price Misalignments and Macroeconomic Instability

Perhaps the most fundamental prediction of financial theory is that the expected returns on financial assets are determined by the amount of risk contained in their payoffs. Assets with a riskier payoff pattern should provide higher expected returns than assets that are otherwise similar but provide payoffs that contain less risk. Financial theory also predicts that not all types of risks should be compensated with higher expected returns. It is well-known that the asset-specific risk can be diversified away, whereas the systematic component of risk that affects all assets remains even in large portfolios. Thus, the asset-specific risk that the investor can easily get rid of by diversification should not lead to higher expected returns, and only the shared movement of individual asset returns – the sensitivity of these assets to a set of systematic risk factors – should matter for asset pricing. It is within this framework that this thesis is situated. The first essay proposes a new systematic risk factor, hypothesized to be correlated with changes in investor risk aversion, which manages to explain a large fraction of the return variation in the cross-section of stock returns. The second and third essays investigate the pricing of asset-specific risk, uncorrelated with commonly used risk factors, in the cross-section of stock returns. The three essays mentioned above use stock market data from the U.S. The fourth essay presents a new total return stock market index for the Finnish stock market beginning from the opening of the Helsinki Stock Exchange in 1912 and ending in 1969 when other total return indices become available. Because a total return stock market index for the period prior to 1970 has not been available before, academics and stock market participants have not known the historical return that stock market investors in Finland could have achieved on their investments. The new stock market index presented in essay 4 makes it possible, for the first time, to calculate the historical average return on the Finnish stock market and to conduct further studies that require long time-series of data.