Intraday Dynamics of International Equity Markets

The increased availability of high frequency data sets have led to important new insights in understanding of financial markets. The use of high frequency data is interesting and persuasive, since it can reveal new information that cannot be seen in lower data aggregation. This dissertation explores some of the many important issues connected with the use, analysis and application of high frequency data. These include the effects of intraday seasonal, the behaviour of time varying volatility, the information content of various market data, and the issue of inter market linkages utilizing high frequency 5 minute observations from major European and the U.S stock indices, namely DAX30 of Germany, CAC40 of France, SMI of Switzerland, FTSE100 of the UK and SP500 of the U.S. The first essay in the dissertation shows that there are remarkable similarities in the intraday behaviour of conditional volatility across European equity markets. Moreover, the U.S macroeconomic news announcements have significant cross border effect on both, European equity returns and volatilities. The second essay reports substantial intraday return and volatility linkages across European stock indices of the UK and Germany. This relationship appears virtually unchanged by the presence or absence of the U.S stock market. However, the return correlation among the U.K and German markets rises significantly following the U.S stock market opening, which could largely be described as a contemporaneous effect. The third essay sheds light on market microstructure issues in which traders and market makers learn from watching market data, and it is this learning process that leads to price adjustments. This study concludes that trading volume plays an important role in explaining international return and volatility transmissions. The examination concerning asymmetry reveals that the impact of the positive volume changes is larger on foreign stock market volatility than the negative changes. The fourth and the final essay documents number of regularities in the pattern of intraday return volatility, trading volume and bid-ask spreads. This study also reports a contemporaneous and positive relationship between the intraday return volatility, bid ask spread and unexpected trading volume. These results verify the role of trading volume and bid ask quotes as proxies for information arrival in producing contemporaneous and subsequent intraday return volatility. Moreover, asymmetric effect of trading volume on conditional volatility is also confirmed. Overall, this dissertation explores the role of information in explaining the intraday return and volatility dynamics in international stock markets. The process through which the information is incorporated in stock prices is central to all information-based models. The intraday data facilitates the investigation that how information gets incorporated into security prices as a result of the trading behavior of informed and uninformed traders. Thus high frequency data appears critical in enhancing our understanding of intraday behavior of various stock markets’ variables as it has important implications for market participants, regulators and academic researchers.

A Relationship Mediated Theory of Internal Marketing (summary section only)

This report presents a new theory of internal marketing. The thesis has developed as a case study in retrospective action research. This began with the personal involvement of the author in an action research project for customer service improvement at a large Australian retail bank. In other words, much of the theory generating ‘research’ took place after the original project ‘action’ had wound down. The key theoretical proposition is that internal marketing is a relationship development strategy for the purpose of knowledge renewal. In the banking case, exchanges of value between employee participants emerged as the basis for relationship development, with synergistic benefits for customers, employees and the bank. Relationship development turned out to be the mediating variable between the learning activity of employee participants at the project level and success in knowledge renewal at the organisational level. Relationship development was also a pivotal factor in the motivation and customer consciousness of employees. The conclusion reached is that the strength of relationship-mediated internal marketing is in combining a market focused commitment and employee freedom in project work to achieve knowledge renewal. The forgotten truth is that organisational knowledge can be renewed through dialogue and learning, through being trustworthy, and by gaining the trust of employees in return.

Performance Persistence of International Stock Funds

People saving in mutual funds often look at historical performance before they decide which funds to invest in. The implicit assumption made is that superior performance is likely to be repeated in the future. The findings presented in this study, which investigates funds sold on the Swedish market, support such an approach provided that the time horizons are limited to one year. International stock funds that have performed strongly one year are likely to outperform their peers also the following years. But if the historical and future time horizons are extended to two or three years, the positive relationship between past and future performance vanishes in most cases. Persistence tests focusing on the aggregated performance of fund companies were also carried out. These tests produced results rather similar to those on the individual fund level.

Molecular theory of solvation and solvation dynamics of a classical ion in a dipolar liquid

A microscopic theory of equilibrium solvation and solvation dynamics of a classical, polar, solute molecule in dipolar solvent is presented. Density functional theory is used to explicitly calculate the polarization structure around a solvated ion. The calculated solvent polarization structure is different from the continuum model prediction in several respects. The value of the polarization at the surface of the ion is less than the continuum value. The solvent polarization also exhibits small oscillations in space near the ion. We show that, under certain approximations, our linear equilibrium theory reduces to the nonlocal electrostatic theory, with the dielectric function (c(k)) of the liquid now wave vector (k) dependent. It is further shown that the nonlocal electrostatic estimate of solvation energy, with a microscopic c(k), is close to the estimate of linearized equilibrium theories of polar liquids. The study of solvation dynamics is based on a generalized Smoluchowski equation with a mean-field force term to take into account the effects of intermolecular interactions. This study incorporates the local distortion of the solvent structure near the ion and also the effects of the translational modes of the solvent molecules.The latter contribution, if significant, can considerably accelerate the relaxation of solvent polarization and can even give rise to a long time decay that agrees with the continuum model prediction. The significance of these results is discussed.

Hamilton’s theory of turns and a new geometrical representation for polarization optics

Hamilton’s theory of turns for the group SU(2) is exploited to develop a new geometrical representation for polarization optics. While pure polarization states are represented by points on the Poincaré sphere, linear intensity preserving optical systems are represented by great circle arcs on another sphere. Composition of systems, and their action on polarization states, are both reduced to geometrical operations. Several synthesis problems, especially in relation to the Pancharatnam-Berry-Aharonov-Anandan geometrical phase, are clarified with the new representation. The general relation between the geometrical phase, and the solid angle on the Poincaré sphere, is established.

A molecular theory of collective orientational relaxation in pure and binary dipolar liquids

A molecular theory of collective orientational relaxation of dipolar molecules in a dense liquid is presented. Our work is based on a generalized, nonlinear, Smoluchowski equation (GSE) that includes the effects of intermolecular interactions through a mean‐field force term. The effects of translational motion of the liquid molecules on the orientational relaxation is also included self‐consistently in the GSE. Analytic expressions for the wave‐vector‐dependent orientational correlation functions are obtained for one component, pure liquid and also for binary mixtures. We find that for a dipolar liquid of spherical molecules, the correlation function ϕ(k,t) for l=1, where l is the rank of the spherical harmonics, is biexponential. At zero wave‐vector, one time constant becomes identical with the dielectric relaxation time of the polar liquid. The second time constant is the longitudinal relaxation time, but the contribution of this second component is small. We find that polar forces do not affect the higher order correlation functions (l>1) of spherical dipolar molecules in a linearized theory. The expression of ϕ(k,t) for a binary liquid is a sum of four exponential terms. We also find that the wave‐vector‐dependent relaxation times depend strongly on the microscopic structure of the dense liquid. At intermediate wave vectors, the translational diffusion greatly accelerates the rate of orientational relaxation. The present study indicates that one must pay proper attention to the microscopic structure of the liquid while treating the translational effects. An analysis of the nonlinear terms of the GSE is also presented. An interesting coupling between the number density fluctuation and the orientational fluctuation is uncovered.

Density-wave theory of dislocations in crystals

The density-wave theory of Ramakrishnan and Yussouff is extended to provide a scheme for describing dislocations and other topological defects in crystals. Quantitative calculations are presented for the order-parameter profiles, the atomic configuration, and the free energy of a screw dislocation with Burgers vector b=(a/2, a/2, a/2) in a bcc solid. These calculations are done using a simple parametrization of the direct correlation function and a gradient expansion. It is conventional to express the free energy of the dislocation in a crystal of size R as (λb2/4π)ln(αR/‖b‖), where λ is the shear elastic constant, and α is a measure of the core energy. Our results yield for Na the value α≃1.94a/(‖c1’’‖)1/2 (≃1.85) at the freezing temperature (371 K) and α≃2.48a/(‖c1’’‖)1/2 at 271 K, where c1’’ is the curvature of the first peak of the direct correlation function c(q). Detailed results for the density distribution in the dislocation, particularly the core region, are also presented. These show that the dislocation core has a columnar character. To our knowledge, this study represents the first calculation of dislocation structure, including the core, within the framework of an order-parameter theory and incorporating thermal effects.

Gauge theory of a group of diffeomorphisms. III. The fiber bundle description

A new fiber bundle approach to the gauge theory of a group G that involves space‐time symmetries as well as internal symmetries is presented. The ungauged group G is regarded as the group of left translations on a fiber bundle G(G/H,H), where H is a closed subgroup and G/H is space‐time. The Yang–Mills potential is the pullback of the Maurer–Cartan form and the Yang–Mills fields are zero. More general diffeomorphisms on the bundle space are then identified as the appropriate gauged generalizations of the left translations, and the Yang–Mills potential is identified as the pullback of the dual of a certain kind of vielbein on the group manifold. The Yang–Mills fields include a torsion on space‐time.

A Comprehensive Theory of Erosive Burning in Solid Rocket Propeilants

The theory of erosive burning has been constructed front first principles using turbulent boundary layer concepts. It is shown that the problem constitutes one of solution of flame propagation equation for turbulent flow. The final approximate solution for the case of single step overall kinetics reveals the combined effects of fluid mechanics and chemical kinetics. The results obtained from this theory are compared with earlier experimental results. The dependence of erosive burning characteristics on various parameters has been elucidated.

On higher order shear deformation theory of laminated composite panels

In this paper we examine the suitability of higher order shear deformation theory based on cubic inplane displacements and parabolic normal displacements, for stress analysis of laminated composite plates including the interlaminar stresses. An exact solution of a symmetrical four layered infinite strip under static loading has been worked out and the results obtained by the present theory are compared with the exact solution. The present theory provides very good estimates of the deflections, and the inplane stresses and strains. Nevertheless, direct estimates of strains and stresses do not display the required interlaminar stress continuity and strain discontinuity across the interlaminar surface. On the other hand, ‘statically equivalent stresses and strains’ do display the required interlaminar stress continuity and strain discontinuity and agree very closely with the exact solution.

Theory of unitarity bounds and low-energy form factors

We present a general formalism for deriving bounds on the shape parameters of the weak and electromagnetic form factors using as input correlators calculated from perturbative QCD, and exploiting analyticity and unitarily. The values resulting from the symmetries of QCD at low energies or from lattice calculations at special points inside the analyticity domain can be included in an exact way. We write down the general solution of the corresponding Meiman problem for an arbitrary number of interior constraints and the integral equations that allow one to include the phase of the form factor along a part of the unitarity cut. A formalism that includes the phase and some information on the modulus along a part of the cut is also given. For illustration we present constraints on the slope and curvature of the K-l3 scalar form factor and discuss our findings in some detail. The techniques are useful for checking the consistency of various inputs and for controlling the parameterizations of the form factors entering precision predictions in flavor physics.