Three essays on the microstructure of exchange traded funds

Exchange traded funds (ETFs) have increased significantly in popularity since they were first introduced in 1993. However, there is still much that is unknown about ETFs in the extant literature. This dissertation attempts to fill gaps in the ETF literature by using three related essays. In these three essays, we compare ETFs to closed ended mutual funds (CEFs) by decomposing the bid-ask spread into its three components; we look at the intraday shape of ETFs and compare it to the intraday shape of equities as well as examine the co-integration factor between ETFs on the London Stock Exchange and the New York Stock Exchange; we also examine the differences between leveraged ETFs and unleveraged ETFs by analyzing the impact of liquidity and volatility. These three essays are presented in Chapters 1, 2, and 3, respectively. ^ Chapter one uses the Huang and Stoll (1997) model to decompose the bid-ask spread in CEFs and ETFs for two distinct periods—a normal and a volatile period. We show a higher adverse selection component for CEFs than for ETFs without regard to volatility. However, both ETFs and CEFs increased in magnitude of the adverse selection component in the period of high volatility. Chapter two uses a mix of the Werner and Kleidon (1993) and the Hupperets and Menkveld (2002) methods to get the intraday shape of ETFs and analyze co-integration between London and New York trading. We find two different shapes for New York and London ETFs. There also appears to be evidence of co-integration in the overlapping two-hour trading period but not over the entire trading day for the two locations. The third chapter discusses the new class of ETFs called leveraged ETFs. We examine the liquidity and depth differences between unleveraged and leveraged ETFs at the aggregate level and when the leveraged ETFs are classified by the leveraged multiples of -3, -2, -1, 2, and 3, both for a normal and a volatile period. We find distinct differences between leveraged and unleveraged ETFs at the aggregate level, with leveraged ETFs having larger spreads than unleveraged ETFs. Furthermore, while both leveraged and unleveraged ETFs have larger spreads in high volatility, for the leveraged ETFs the change in magnitude is significantly larger than for the unleveraged ETFs. Among the multiples, the -2 leveraged ETF is the most pronounced in its liquidity characteristics, more so in volatile times. ^

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.

Characterization of urban aerosol in Cork city (Ireland) using aerosol mass spectrometry

Ambient wintertime background urban aerosol in Cork city, Ireland, was characterized using aerosol mass spectrometry. During the three-week measurement study in 2009, 93% of the ca. 1 350 000 single particles characterized by an Aerosol Time-of-Flight Mass Spectrometer (TSI ATOFMS) were classified into five organic-rich particle types, internally mixed to different proportions with elemental carbon (EC), sulphate and nitrate, while the remaining 7% was predominantly inorganic in nature. Non-refractory PM1 aerosol was characterized using a High Resolution Time-of-Flight Aerosol Mass Spectrometer (Aerodyne HR-ToF-AMS) and was also found to comprise organic aerosol as the most abundant species (62 %), followed by nitrate (15 %), sulphate (9 %) and ammonium (9 %), and chloride (5 %). Positive matrix factorization (PMF) was applied to the HR-ToF-AMS organic matrix, and a five-factor solution was found to describe the variance in the data well. Specifically, "hydrocarbon-like" organic aerosol (HOA) comprised 20% of the mass, "low-volatility" oxygenated organic aerosol (LV-OOA) comprised 18 %, "biomass burning" organic aerosol (BBOA) comprised 23 %, non-wood solid-fuel combustion "peat and coal" organic aerosol (PCOA) comprised 21 %, and finally a species type characterized by primary m/z peaks at 41 and 55, similar to previously reported "cooking" organic aerosol (COA), but possessing different diurnal variations to what would be expected for cooking activities, contributed 18 %. Correlations between the different particle types obtained by the two aerosol mass spectrometers are also discussed. Despite wood, coal and peat being minor fuel types used for domestic space heating in urban areas, their relatively low combustion efficiencies result in a significant contribution to PM1 aerosol mass (44% and 28% of the total organic aerosol mass and non-refractory total PM1, respectively).Ambient wintertime background urban aerosol in Cork city, Ireland, was characterized using aerosol mass spectrometry. During the three-week measurement study in 2009, 93% of the ca. 1 350 000 single particles characterized by an Aerosol Time-of-Flight Mass Spectrometer (TSI ATOFMS) were classified into five organic-rich particle types, internally mixed to different proportions with elemental carbon (EC), sulphate and nitrate, while the remaining 7% was predominantly inorganic in nature. Non-refractory PM1 aerosol was characterized using a High Resolution Time-of-Flight Aerosol Mass Spectrometer (Aerodyne HR-ToF-AMS) and was also found to comprise organic aerosol as the most abundant species (62 %), followed by nitrate (15 %), sulphate (9 %) and ammonium (9 %), and chloride (5 %). Positive matrix factorization (PMF) was applied to the HR-ToF-AMS organic matrix, and a five-factor solution was found to describe the variance in the data well. Specifically, "hydrocarbon-like" organic aerosol (HOA) comprised 20% of the mass, "low-volatility" oxygenated organic aerosol (LV-OOA) comprised 18 %, "biomass burning" organic aerosol (BBOA) comprised 23 %, non-wood solid-fuel combustion "peat and coal" organic aerosol (PCOA) comprised 21 %, and finally a species type characterized by primary m/z peaks at 41 and 55, similar to previously reported "cooking" organic aerosol (COA), but possessing different diurnal variations to what would be expected for cooking activities, contributed 18 %. Correlations between the different particle types obtained by the two aerosol mass spectrometers are also discussed. Despite wood, coal and peat being minor fuel types used for domestic space heating in urban areas, their relatively low combustion efficiencies result in a significant contribution to PM1 aerosol mass (44% and 28% of the total organic aerosol mass and non-refractory total PM1, respectively).

A recessionary debate: who suffered more? A study of sectoral well-being and economic insecurity in Ireland

The aim of this thesis is to identify the relationship between subjective well-being and economic insecurity for public and private sector workers in Ireland using the European Social Survey 2010-2012. Life satisfaction and job satisfaction are the indicators used to measure subjective well-being. Economic insecurity is approximated by regional unemployment rates and self-perceived job insecurity. Potential sample selection bias and endogeneity bias are accounted for. It is traditionally believed that public sector workers are relatively more protected against insecurity due to very institution of public sector employment. The institution of public sector employment is made up of stricter dismissal practices (Luechinger et al., 2010a) and less volatile employment (Freeman, 1987) where workers are subsequently less likely to be affected by business cycle downturns (Clark and Postal-Vinay, 2009). It is found in the literature that economic insecurity depresses the well-being of public sector workers to a lesser degree than private sector workers (Luechinger et al., 2010a; Artz and Kaya, 2014). These studies provide the rationale for this thesis in testing for similar relationships in an Irish context. Sample selection bias arises when a selection into a particular category is not random (Heckman, 1979). An example of this is non-random selection into public sector employment based on personal characteristics (Heckman, 1979; Luechinger et al., 2010b). If selection into public sector employment is not corrected for this can lead to biased and inconsistent estimators (Gujarati, 2009). Selection bias of public sector employment is corrected for by using a standard Two-Step Heckman Probit OLS estimation method. Following Luechinger et al. (2010b), the propensity for individuals to select into public sector employment is estimated by a binomial probit model with the inclusion of the additional regressor Irish citizenship. Job satisfaction is then estimated by Ordinary Least Squares (OLS) with the inclusion of a sample correction term similar as is done in Clark (1997). Endogeneity is where an independent variable included in the model is determined within in the context of the model (Chenhall and Moers, 2007). The econometric definition states that an endogenous independent variable is one that is correlated with the error term (Wooldridge, 2010). Endogeneity is expected to be present due to a simultaneous relationship between job insecurity and job satisfaction whereby both variables are jointly determined (Theodossiou and Vasileiou, 2007). Simultaneity, as an instigator of endogeneity, is corrected for using Instrumental Variables (IV) techniques. Limited Information Methods and Full Information Methods of estimation of simultaneous equations models are assed and compared. The general results show that job insecurity depresses the subjective well-being of all workers in both the public and private sectors in Ireland. The magnitude of this effect differs among sectoral workers. The subjective well-being of private sector workers is more adversely affected by job insecurity than the subjective well-being of public sector workers. This is observed in basic ordered probit estimations of both a life satisfaction equation and a job satisfaction equation. The marginal effects from the ordered probit estimation of a basic job satisfaction equation show that as job insecurity increases the probability of reporting a 9 on a 10-point job satisfaction scale significantly decreases by 3.4% for the whole sample of workers, 2.8% for public sector workers and 4.0% for private sector workers. Artz and Kaya (2014) explain that as a result of many austerity policies implemented to reduce government expenditure during the economic recession, workers in the public sector may for the first time face worsening perceptions of job security which can have significant implications for their well-being (Artz and Kaya, 2014). This can be observed in the marginal effects where job insecurity negatively impacts the well-being of public sector workers in Ireland. However, in accordance with Luechinger et al. (2010a) the results show that private sector workers are more adversely impacted by economic insecurity than public sector workers. This suggests that in a time of high economic volatility, the institution of public sector employment held and was able to protect workers against some of the well-being consequences of rising insecurity. In estimating the relationship between subjective well-being and economic insecurity advanced econometric issues arise. The results show that when selection bias is corrected for, any statistically significant relationship between job insecurity and job satisfaction disappears for public sector workers. Additionally, in order to correct for endogeneity bias the simultaneous equations model for job satisfaction and job insecurity is estimated by Limited Information and Full Information Methods. The results from two different estimators classified as Limited Information Methods support the general findings of this research. Moreover, the magnitude of the endogeneity-corrected estimates are twice as large as those not corrected for endogeneity bias which is similarly found in Geishecker (2010, 2012). As part of the analysis into the effect of economic insecurity on subjective well-being, the effects of other socioeconomic variables and work-related variables are examined for public and private sector workers in Ireland.

Microstructure Characteristics of U.S. Futures Markets

Prior finance literature lacks a comprehensive analysis of microstructure characteristics of U.S. futures markets due to the lack of data availability. Utilizing a unique data set for five different futures contract this dissertation fills this gap in the finance literature. In three essays price discovery, resiliency and the components of bid-ask spreads in electronic futures markets are examined. In order to provide comprehensive and robust analysis, both moderately volatile pre-crisis and volatile crisis periods are included in the analysis. The first essay entitled “Price Discovery and Liquidity Characteristics for U.S. Electronic Futures and ETF Markets” explores the price discovery process in U.S. futures and ETF markets. Hasbrouck’s information share method is applied to futures and ETF instruments. The information share results show that futures markets dominate the price discovery process. The results on the factors that affect the price discovery process show that when volatility increases, the price leadership of futures markets declines. Furthermore, when the relative size of bid-ask spread in one market increases, its information share decreases. The second essay, entitled “The Resiliency of Large Trades for U.S. Electronic Futures Markets,“ examines the effects of large trades in futures markets. How quickly prices and liquidity recovers after large trades is an important characteristic of financial markets. The price effects of large trades are greater during the crisis period compared to the pre-crisis period. Furthermore, relative to the pre-crisis period, during the crisis period it takes more trades until liquidity returns to the pre-block trade levels. The third essay, entitled “Components of Quoted Bid-Ask Spreads in U.S. Electronic Futures Markets,” investigates the bid-ask spread components in futures market. The components of bid-ask spreads is one of the most important subjects of microstructure studies. Utilizing Huang and Stoll’s (1997) method the third essay of this dissertation provides the first analysis of the components of quoted bid-ask spreads in U.S. electronic futures markets. The results show that order processing cost is the largest component of bid-ask spreads, followed by inventory holding costs. During the crisis period market makers increase bid-ask spreads due to increasing inventory holding and adverse selection risks.

Geochemistry of tetrapyrrole, carotenoid, and perylene pigments in sediments at DSDP Holes 63-467 and 63-471

Twenty-one core samples from DSDP/IPOD Leg 63 were analyzed for products of chlorophyll diagenesis. In addition to the tetrapyrrole pigments, perylene and carotenoid pigments were isolated and identified. The 16 core samples from the San Miguel Gap site (467) and the five from the Baja California borderland location (471) afforded the unique opportunity of examining tetrapyrrole diagenesis in clay-rich marine sediments that are very high in total organic matter. The chelation reaction, whereby free-base porphyrins give rise to metalloporphyrins (viz., nickel), is well documented within the downhole sequence of sediments from the San Miguel Gap (Site 467). Recognition of unique arrays of highly dealkylated copper and nickel ETIO-porphyrins, exhibiting nearly identical carbonnumber homologies (viz., C-23 to C-30; mode = C-26), enabled subtraction of this component (thought to be derived from an allochthonous source) and thus permitted description of the actual in situ diagenesis of autochthonous chlorophyll derivatives.

The Financialization of Food: An Inquiry into the 2008-2011 Food Price Spikes

This dissertation investigates the question: has financial speculation contributed to global food price volatility since the mid 2000s? I problematize the mainstream academic literature on the 2008-2011 food price spikes as being dominated by neoclassical economic perspectives and offer new conceptual and empirical insights into the relationship between financial speculation and food. Presented in three journal style manuscripts, manuscript one uses circuits of capital to conceptualize the link between financial speculators in the global north and populations in the global south. Manuscript two argues that what makes commodity index speculation (aka ‘index funds’ or index swaps) novel is that it provides institutional investors with what Clapp (2014) calls “financial distance” from the biopolitical implications of food speculation. Finally, manuscript three combines Gramsci’s concepts of hegemony and ‘the intellectual’ with the concept of performativity to investigate the ideological role that public intellectuals and the rhetorical actor the market play in the proliferation and governance of commodity index speculation. The first two manuscripts take an empirically mixed method approach by combining regression analysis with discourse analysis, while the third relies on interview data and discourse analysis. The findings show that financial speculation by index swap dealers and hedge funds did indeed significantly contribute to the price volatility of food commodities between June 2006 and December 2014. The results from the interview data affirm these findings. The discourse analysis of the interview data shows that public intellectuals and rhetorical characters such as ‘the market’ play powerful roles in shaping how food speculation is promoted, regulated and normalized. The significance of the findings is three-fold. First, the empirical findings show that a link does exist between financial speculation and food price volatility. Second, the findings indicate that the post-2008 CFTC and the Dodd-Frank reforms are unlikely to reduce financial speculation or the price volatility that it causes. Third, the findings suggest that institutional investors (such as pension funds) should think critically about how they use commodity index speculation as a way of generating financial earnings.

Earnings Variability and Earnings Instability of Women and Men in Canada: How Do the 1990's Compare to the 1980's (Working Paper 25)

It seems to be generally assumed that earnings instability has increased in the last decade or so, as earnings inequality has widened, but is this indeed the case, and if so, to what degree? This paper builds on earlier U.S. work to look at the total variance in individuals’ earnings with a focus on the distinction between permanent earnings variation associated with factors such as human capital investments or other persistent worker attributes, and transitory earnings variation or instability for a given individual from one year to another. We find that there was an increase in overall earnings variability, especially for men, but that the greatest part of this increase was driven by the permanent component – that is, by a widening dispersion of (life-cycle) earnings differentials across workers. The increased volatility of workers’ earnings about their life-cycle earnings profiles played a secondary role in the overall increase in men’s earnings variability, whereas for women this effect was very small or even worked in the opposite direction (depending on the particular age group). Patterns by age and region are also investigated.

Micro-Foundations of Financialization. Status Anxiety and the Market for Consumer Credit in Chile

This project investigates why people in Chile acquired so much consumer debt in contexts of material prosperity, and asks what the role of inequality and commodification is in this process. The case raises an important challenge to the literature. Insofar as existing accounts assume that the financialization of consumption occurs in contexts marked by wage stagnation and a general deterioration of the middle classes, they engender two contradictory explanations: while political economists argue that people use credit in order to smooth their consumption in the face of market volatility, economists maintain that concentration of wealth at the top pushes middle income consumers to emulate the expenditures of the rich and consume beyond their means. These explanations do not necessarily fit the reality of developing countries. Triangulating in-depth interviews with middle class families, multivariate statistical analysis and secondary literature, the project shows that consumers in Chile use credit to finance “ordinary” forms of consumption that do not aim either at coping with market instability or emulating and signaling status to others. Rather, Chileans use department store credit cards in order to acquire a standard package of “inconspicuous” goods that they feel entitled to have. From this point of view, the systematic indebtedness of consumers originates in a major concern with “rank”, “achievement” and "security" that – following De Botton -- I call “status anxiety”. Status anxiety does not stem from the desire to emulate rich consumers, but from the impossibility of complying with normative expectations about what a middle class family should be (and have) that outweigh wage improvements. The project thus investigates the way in which “status anxiety” is systematically reproduced by means of two broad mechanisms that prompt people to acquire consumer debt. The first mechanism generating debt stems from an increase of real wages and high levels of inequality. It is explained by a general sociological principle known as relative deprivation, which points to the fact that general satisfaction with one´s income, possessions or status, is assessed not in absolute terms such as total income, but in relation with reference groups. In this sense, I explore the mechanisms that operate as catalyzers of relative deprivation, by making explicit social inequalities and distorting the perception of others´ wealth. Despite upward mobility and economic improvement, Chileans share the perception of “falling behind,” which materializes in an “imaginary middle class” against which people compare their status, possessions and economic independence. Finally, I show that the commodification of education, health and pension funds does not directly prompt people to acquire consumer debt, but operate as “income draining” mechanisms that demand higher shares of middle class families’ “discretionary income.” In combination with “relative deprivation,” these “income draining” mechanisms leave families with few options to perform their desired class identities, other than learning how to bring resources from the future into the present with the help of department store credit cards.

Live and Feeder Cattle Options Markets: Returns, Risk, and Volatility Forecasting

unpublished

Probabilistic design optimization of horizontal axis wind turbine rotors

Considerable interest in renewable energy has increased in recent years due to the concerns raised over the environmental impact of conventional energy sources and their price volatility. In particular, wind power has enjoyed a dramatic global growth in installed capacity over the past few decades. Nowadays, the advancement of wind turbine industry represents a challenge for several engineering areas, including materials science, computer science, aerodynamics, analytical design and analysis methods, testing and monitoring, and power electronics. In particular, the technological improvement of wind turbines is currently tied to the use of advanced design methodologies, allowing the designers to develop new and more efficient design concepts. Integrating mathematical optimization techniques into the multidisciplinary design of wind turbines constitutes a promising way to enhance the profitability of these devices. In the literature, wind turbine design optimization is typically performed deterministically. Deterministic optimizations do not consider any degree of randomness affecting the inputs of the system under consideration, and result, therefore, in an unique set of outputs. However, given the stochastic nature of the wind and the uncertainties associated, for instance, with wind turbine operating conditions or geometric tolerances, deterministically optimized designs may be inefficient. Therefore, one of the ways to further improve the design of modern wind turbines is to take into account the aforementioned sources of uncertainty in the optimization process, achieving robust configurations with minimal performance sensitivity to factors causing variability. The research work presented in this thesis deals with the development of a novel integrated multidisciplinary design framework for the robust aeroservoelastic design optimization of multi-megawatt horizontal axis wind turbine (HAWT) rotors, accounting for the stochastic variability related to the input variables. The design system is based on a multidisciplinary analysis module integrating several simulations tools needed to characterize the aeroservoelastic behavior of wind turbines, and determine their economical performance by means of the levelized cost of energy (LCOE). The reported design framework is portable and modular in that any of its analysis modules can be replaced with counterparts of user-selected fidelity. The presented technology is applied to the design of a 5-MW HAWT rotor to be used at sites of wind power density class from 3 to 7, where the mean wind speed at 50 m above the ground ranges from 6.4 to 11.9 m/s. Assuming the mean wind speed to vary stochastically in such range, the rotor design is optimized by minimizing the mean and standard deviation of the LCOE. Airfoil shapes, spanwise distributions of blade chord and twist, internal structural layup and rotor speed are optimized concurrently, subject to an extensive set of structural and aeroelastic constraints. The effectiveness of the multidisciplinary and robust design framework is demonstrated by showing that the probabilistically designed turbine achieves more favorable probabilistic performance than those of the initial baseline turbine and a turbine designed deterministically.

Amphiphilic catalysts for the treatment of oily wastewaters

The main objective of this study was to obtain an effective catalyst for removal of diazo dye - Sudan IV by Catalytic Wet Peroxide Oxidation (CWPO). For this purpose liquid phase treatment was used to increase the basicity of activated carbon surface favoring the adsorption of organic pollutants. Modified activated carbon catalysts were used in different types of experiments: 1) decomposition of H2O2 in aquatic media, 2) decomposition of H2O2 in organic media, 3) adsorption of Sudan IV, 4) Sudan IV removal by CWPO. As the result of all of these experiments the most effective catalyst was obtained and discussed. It was not observed removal of Sudan IV from biphasic system by CWPO. The obtained results in some cases show a slight increase in concentration of Sudan IV, which may be ascribed to experimental errors. Different factors could be the reason of those errors. For example, the high volatility properties of organic media used in experiments should be taken into account during experiments. Under settled reaction temperature the decrease of cyclohexane volume during experiment could give rise in Sudan IV concentration. The initial concentration of model diazo dye also should be reviewed more detailed for CWPO experiments. Despite of these experimental errors the behavior of our catalysts in different media was observed.

Is the supply of long-term debt independent of the term premia? Evidence from Portugal

An important assumption in the statistical analysis of the financial market effects of the central bank’s large scale asset purchase program is that the "long-term debt stock variables were exogenous to term premia". We test this assumption for a small open economy in a currency union over the period 2000M3 to 2015M10, via the determinants of short- term financing relative to long-term financing. Empirical estimations indicate that the maturity composition of debt does not respond to the level of interest rate or to the term structure. These findings suggest a lower adherence to the cost minimization mandate of debt management. However, we find that volatility and relative market size respectively decrease and increase short-term financing relative to long-term financing, while it decreases with an increase in government indebtedness.

Modeling the Effect of Vapor Wall Deposition on the Formation of Secondary Organic Aerosol in Chamber Studies

Laboratory chamber experiments are used to investigate formation of secondary organic aerosol (SOA) from biogenic and anthropogenic precursors under a variety of environmental conditions. Simulations of these experiments test our understanding of the prevailing chemistry of SOA formation as well as the dynamic processes occurring in the chamber itself. One dynamic process occurring in the chamber that was only recently recognized is the deposition of vapor species to the Teflon walls of the chamber. Low-volatility products formed from the oxidation of volatile organic compounds (VOCs) deposit on the walls rather than forming SOA, decreasing the amount of SOA formed (quantified as the SOA yield: mass of SOA formed per mass of VOC reacted). In this work, several modeling studies are presented that address the effect of vapor wall deposition on SOA formation in chambers.

A coupled vapor-particle dynamics model is used to examine the competition among the rates of gas-phase oxidation to low volatility products, wall deposition of these products, and mass transfer to the particle phase. The relative time scales of these rates control the amount of SOA formed by affecting the influence of vapor wall deposition. Simulations show that an effect on SOA yield of changing the vapor-particle mass transfer rate is only observed when SOA formation is kinetically limited. For systems with kinetically limited SOA formation, increasing the rate of vapor-particle mass transfer by increasing the concentration of seed particles is an effective way to minimize the effect of vapor wall deposition.

This coupled vapor-particle dynamics model is then applied to α-pinene ozonolysis SOA experiments. Experiments show that the SOA yield is affected when changing the oxidation rate but not when changing the rate of gas-particle mass transfer by changing the concentration of seed particles. Model simulations show that the absence of an effect of changing the seed particle concentration is consistent with SOA formation being governed by quasi-equilibrium growth, in which gas-particle equilibrium is established much faster than the rate of change of the gas-phase concentration. The observed effect of oxidation rate on SOA yield arises due to the presence of vapor wall deposition: gas-phase oxidation products are produced more quickly and condense preferentially onto seed particles before being lost to the walls. Therefore, for α-pinene ozonolysis, increasing the oxidation rate is the most effective way to mitigate the influence of vapor wall deposition.

Finally, the detailed model GECKO-A (Generator for Explicit Chemistry and Kinetics of Organics in the Atmosphere) is used to simulate α-pinene photooxidation SOA experiments. Unexpectedly, α-pinene OH oxidation experiments show no effect when changing either the oxidation rate or the vapor-particle mass transfer rate, whereas GECKO-A predicts that changing the oxidation rate should drastically affect the SOA yield. Sensitivity studies show that the assumed magnitude of the vapor wall deposition rate can greatly affect conclusions drawn from comparisons between simulations and experiments. If vapor wall loss in the Caltech chamber is of order 10^-5 s^-1, GECKO-A greatly overpredicts SOA during high UV experiments, likely due to an overprediction of second-generation products. However, if instead vapor wall loss in the Caltech chamber is of order 10^-3 s^-1, GECKO-A greatly underpredicts SOA during low UV experiments, possibly due to missing autoxidation pathways in the α-pinene mechanism.

A Markov switching unobserved component analysis of the CDX index term premium

Using a Markov switching unobserved component model we decompose the term premium of the North American CDX index into a permanent and a stationary component. We establish that the inversion of the CDX term premium is induced by sudden changes in the unobserved stationary component, which represents the evolution of the fundamentals underpinning the probability of default in the economy. We find evidence that the monetary policy response from the Fed during the crisis period was effective in reducing the volatility of the term premium. We also show that equity returns make a substantial contribution to the term premium over the entire sample period.