On ignoring scientific evidence: The bumpy road to enlightenment

It is well accepted that people resist evidence that contradicts their beliefs.Moreover, despite their training, many scientists reject results that are inconsistent withtheir theories. This phenomenon is discussed in relation to the field of judgment anddecision making by describing four case studies. These concern findings that clinical judgment is less predictive than actuarial models; simple methods have proven superiorto more theoretically correct methods in times series forecasting; equal weighting ofvariables is often more accurate than using differential weights; and decisions cansometimes be improved by discarding relevant information. All findings relate to theapparently difficult-to-accept idea that simple models can predict complex phenomenabetter than complex ones. It is true that there is a scientific market place for ideas.However, like its economic counterpart, it is subject to inefficiencies (e.g., thinness,asymmetric information, and speculative bubbles). Unfortunately, the market is only correct in the long-run. The road to enlightenment is bumpy.

Moral hazard and non-exclusive contracts

This paper studies equilibria for economies characterized by moral hazard(hidden action), in which the set of contracts marketed in equilibrium isdetermined by the interaction of financial intermediaries.The crucial aspect of the environment that we study is thatintermediaries are restricted to trade non-exclusive contracts: theagents' contractual relationships with competing intermediaries cannot bemonitored (or are not contractible upon). We fully characterize equilibrium allocations and contracts. In thisset-up equilibrium allocations are clearly incentive constrainedinefficient. A robust property of equilibria with non-exclusivity isthat the contracts issued in equilibrium do not implement the optimalaction. Moreover we prove that, whenever equilibrium contracts doimplement the optimal action, intermediaries make positive profits andequilibrium allocations are third best inefficient (where the definitionof third best efficiency accounts for constraints which capture thenon-exclusivity of contracts).

An experimental study of discharge partitioning and flow structure at symmetrical bifurcations

Recent research has examined the factors controlling the geometrical configuration of bifurcations, determined the range of stability conditions for a number of bifurcation types and assessed the impact of perturbations on bifurcation evolution. However, the flow division process and the parameters that influence flow and sediment partitioning are still poorly characterized. To identify and isolate these parameters, three-dimensional velocities were measured at 11 cross-sections in a fixed-walled experimental bifurcation. Water surface gradients were controlled, and systematically varied, using a weir in each distributary. As may be expected, the steepest distributary conveyed the most discharge ( was dominant) while the mildest distributary conveyed the least discharge ( was subordinate). A zone of water surface super-elevation was co-located with the bifurcation in symmetric cases or displaced into the subordinate branch in asymmetric cases. Downstream of a relatively acute-angled bifurcation, primary velocity cores were near to the water surface and against the inner banks, with near-bed zones of lower primary velocity at the outer banks. Downstream of an obtuse-angled bifurcation, velocity cores were initially at the outer banks, with near-bed zones of lower velocities at the inner banks, but patterns soon reverted to match the acute-angled case. A single secondary flow cell was generated in each distributary, with water flowing inwards at the water surface and outwards at the bed. Circulation was relatively enhanced within the subordinate branch, which may help explain why subordinate distributaries remain open, may play a role in determining the size of commonly-observed topographic features, and may thus exert some control on the stability of asymmetric bifurcations. Further, because larger values of circulation result from larger gradient disadvantages, the length of confluence-diffluence units in braided rivers or between diffluences within delta distributary networks may vary depending upon flow structures inherited from upstream and whether, and how, they are fed by dominant or subordinate distributaries. Copyright (C) 2011 John Wiley & Sons, Ltd.

Risk dominance selects the leader. An experimental analysis

Coordination games arise very often in studies of industrial organization and international trade. This type of games has multiple strict equilibria, and therefore the identification of testable predictions isvery difficult. We study a vertical product differentiation model with two asymmetric players choosing first qualities and then prices. This game has two equilibria for some parameter values. However, we apply the risk dominance criterion suggested by Harsanyi and Selten and show that it always selects the equilibrium where the leader is the firm having some initial advantage. We then perform an experimental analysis totest whether the risk dominance prediction is supported by the behaviour oflaboratory agents. We show that the probability that the risk dominance prediction is right depends crucially on the degree of asymmetry of the game. The stronger the asymmetries the higher the predictive power of the risk dominance criterion.

First price auctions: Monotonicity and uniqueness

I study monotonicity and uniqueness of the equilibrium strategies in a two-person first price auction with affiliated signals. I show thatwhen the game is symmetric there is a unique Nash equilibrium thatsatisfies a regularity condition requiring that the equilibrium strategies be{\sl piecewise monotone}. Moreover, when the signals are discrete-valued, the equilibrium is unique. The central part of the proof consists of showing that at any regular equilibrium the bidders' strategies must be monotone increasing within the support of winning bids. The monotonicity result derived in this paper provides the missing link for the analysis of uniqueness in two-person first price auctions. Importantly, this result extends to asymmetric auctions.

Reputation and honesty in a market for information

Previous works on asymmetric information in asset markets tendto focus on the potential gains in the asset market itself. We focus on the market for information and conduct an experimental study to explore, in a game of finite but uncertain duration, whether reputation can be an effective constraint on deliberate misinformation. At the beginning of each period, an uninformed potential asset buyer can purchase information, at a fixed price and from a fully-informed source, about the value of the asset in that period. The informational insiders cannot purchase the asset and are given short-term incentives to provide false information when the asset value is low. Our model predicts that, in accordance with the Folk Theorem, Pareto-superior outcomes featuring truthful revelation should be sustainable. However, this depends critically on beliefs about rationality and behavior. We find that, overall, sellers are truthful 89% of the time. More significantly, the observed frequency of truthfulness is 81% when the asset value is low. Our result is consistent with both mixed-strategy and trigger strategy interpretations and provides evidence that most subjects correctly anticipate rational behavior. We discuss applications to financial markets, media regulation, and the stability of cartels.

Gross capital flows: Dynamics and crises

This paper analyzes the behavior of international capital flows by foreign and domestic agents,dubbed gross capital flows, over the business cycle and during financial crises. We show thatgross capital flows are very large and volatile, especially relative to net capital flows. Whenforeigners invest in a country, domestic agents invest abroad, and vice versa. Gross capital flowsare also pro-cyclical. During expansions, foreigners invest more domestically and domesticagents invest more abroad. During crises, total gross flows collapse and there is a retrenchmentin both inflows by foreigners and outflows by domestic agents. These patterns hold for differenttypes of capital flows and crises. This evidence sheds light on the sources of fluctuations drivingcapital flows and helps discriminate among existing theories. Our findings seem consistent withcrises affecting domestic and foreign agents asymmetrically, as would be the case under thepresence of sovereign risk or asymmetric information.

Electoral competition under the threat of political unrest

We study elections in which one party (the strong party) controls a source of political unrest; e.g., this party could instigate riots if it lost the election. We show that the strong party is more likely to win the election when there is less information about its ability to cause unrest. This is because when theweak party is better informed, it can more reliably prevent political unrest by implementing a ``centrist'' policy. When there is uncertainty over the credibility of the threat, ``posturing'' by the strong party leads to platform divergence.

Synapses on motoneuron dendrites in the brachial section of the frog spinal cord: a computer-aided electron microscopic study of cobalt-filled cells.

Cobalt-labelled motoneuron dendrites of the frog spinal cord at the level of the second spinal nerve were photographed in the electron microscope from long series of ultrathin sections. Three-dimensional computer reconstructions of 120 dendrite segments were analysed. The samples were taken from two locations: proximal to cell body and distal, as defined in a transverse plane of the spinal cord. The dendrites showed highly irregular outlines with many 1-2 microns-long 'thorns' (on average 8.5 thorns per 100 microns 2 of dendritic area). Taken together, the reconstructed dendrite segments from the proximal sites had a total length of about 250 microns; those from the distal locations, 180 microns. On all segments together there were 699 synapses. Nine percent of the synapses were on thorns, and many more close to their base on the dendritic shaft. The synapses were classified in four groups. One third of the synapses were asymmetric with spherical vesicles; one half were symmetric with spherical vesicles; and one tenth were symmetric with flattened vesicles. A fourth, small class of asymmetric synapses had dense-core vesicles. The area of the active zones was large for the asymmetric synapses (median value 0.20 microns 2), and small for the symmetric ones (median value 0.10 microns 2), and the difference was significant. On average, the areas of the active zones of the synapses on thin dendrites were larger than those of synapses on large calibre dendrites. About every 4 microns 2 of dendritic area received one contact. There was a significant difference between the areas of the active zones of the synapses at the two locations. Moreover, the number per unit dendritic length was correlated with dendrite calibre. On average, the active zones covered more than 4% of the dendritic area; this value for thin dendrites was about twice as large as that of large calibre dendrites. We suggest that the larger active zones and the larger synaptic coverage of the thin dendrites compensate for the longer electrotonic distance of these synapses from the soma.

Solving ambiguities in contig assembly of Idiomarina loihiensis L2TR chromosome by in silico analyses.

Nucleotide composition analyses of bacterial genomes such as cumulative GC skew highlight the atypical, strongly asymmetric architecture of the recently published chromosome of Idiomarina loihiensis L2TR, suggesting that an inversion of a 600-kb chromosomal segment occurred. The presence of 3.4-kb inverted repeated sequences at the borders of the putative rearrangement supports this hypothesis. Reverting in silico this segment restores (1) a symmetric chromosome architecture; (2) the co-orientation of transcription of all rRNA operons with DNA replication; and (3) a better conservation of gene order between this chromosome and other gamma-proteobacterial ones. Finally, long-range PCRs encompassing the ends of the 600-kb segment reveal the existence of the reverted configuration but not of the published one. This demonstrates how cumulative nucleotide-skew analyses can validate genome assemblies.

How do thyroid hormone receptors bind to structurally diverse response elements?

Three classes of thyroid hormone response elements have been described. They are composed of two half-sites arranged either as a palindromic, a direct repeat or as an inverted palindromic array. Receptor homodimers as well as heterodimers can bind to all three types of response element. While the ligand binding domain of the receptors provides the major dimerization surface, asymmetric contacts between the DNA binding domains are necessary for binding to a direct repeat. Moreover, some recent findings suggest that in TR, compared to RXR, the ligand binding domain has a 180 degrees rotation with respect to the DNA binding domain. This feature could explain the preferential binding of the RXR-TR heterodimer to the direct repeat response element, in which RXR exclusively binds the 5' half-site, and of the TR homodimer to the inverted palindrome response element.

Diffuse large B-cell lymphoma of Waldeyer's ring has distinct clinicopathologic features: a GELA study.

BACKGROUND: Diffuse large B-cell lymphomas (DLBCLs) arising in specific extranodal sites have peculiar clinicopathologic features. PATIENTS AND METHODS: We analyzed a cohort of 187 primary Waldeyer's ring (WR) DLBCLs retrieved from GELA protocols using anthracyclin-based polychemotherapy. RESULTS: Most patients (92%) had stage I-II disease. A germinal center B-cell-like (GCB) immunophenotype was observed in 61%, and BCL2 expression in 55%, of WR DLBCLs. BCL2, BCL6, IRF4 and MYC breakpoints were observed in, respectively, 3 of 42 (7%), 9 of 36 (25%), 2 of 26 (8%) and 4 of 40 (10%) contributive cases. A variable follicular pattern was evidenced in 30 of 68 (44%) large biopsy specimens. The 5-year progression-free survival (PFS) and the overall survival (OS) of 153 WR DLBCL patients with survival information were 69.5% and 77.8%, respectively. The GCB immunophenotype correlated with a better OS (P = 0.0015), while BCL2 expression predicted a worse OS (P = 0.037), an effect overcome by the GCB/non-GCB classification. Compared with matched nodal DLBCLs, WR DLBCLs with no age-adjusted international prognostic index factor disclosed a better 5-year PFS rate (77.5% versus 70.7%; P = 0.03). CONCLUSIONS: WR DLBCLs display distinct clinicopathologic features compared with conventional DLBCLs, with usual localized-stage disease, common follicular features and a high frequency of GCB immunophenotype contrasting with a low rate of BCL2 rearrangements. In addition, they seem to be associated with a better outcome than their nodal counterpart.

Plasma membrane H+-ATPase regulation is required for auxin gradient formation preceding phototropic growth.

Phototropism is a growth response allowing plants to align their photosynthetic organs toward incoming light and thereby to optimize photosynthetic activity. Formation of a lateral gradient of the phytohormone auxin is a key step to trigger asymmetric growth of the shoot leading to phototropic reorientation. To identify important regulators of auxin gradient formation, we developed an auxin flux model that enabled us to test in silico the impact of different morphological and biophysical parameters on gradient formation, including the contribution of the extracellular space (cell wall) or apoplast. Our model indicates that cell size, cell distributions, and apoplast thickness are all important factors affecting gradient formation. Among all tested variables, regulation of apoplastic pH was the most important to enable the formation of a lateral auxin gradient. To test this prediction, we interfered with the activity of plasma membrane H(+)-ATPases that are required to control apoplastic pH. Our results show that H(+)-ATPases are indeed important for the establishment of a lateral auxin gradient and phototropism. Moreover, we show that during phototropism, H(+)-ATPase activity is regulated by the phototropin photoreceptors, providing a mechanism by which light influences apoplastic pH.

Essays in general equilibrium asset pricing

ABSTRACT : Research in empirical asset pricing has pointed out several anomalies both in the cross section and time series of asset prices, as well as in investors' portfolio choice. This dissertation aims to discover the forces driving some of these "puzzling" asset pricing dynamics and portfolio decisions observed in the financial market. Through the dissertation I construct and study dynamic general equilibrium models of heterogeneous investors in the presence of frictions and evaluate quantitatively their implications for financial-market asset prices and portfolio choice. I also explore the potential roots of puzzles in international finance. Chapter 1 shows that, by introducing jointly endogenous no-default type of borrowing constraints and heterogeneous beliefs in a dynamic general-equilibrium economy, many empirical features of stock return volatility can be reproduced. While most of the research on stock return volatility is empirical, this paper provides a theoretical framework that is able to reproduce simultaneously the cross section and time series stylized facts concerning stock returns and their volatility. In contrast to the existing theoretical literature related to stock return volatility, I don't impose persistence or regimes in any of the exogenous state variables or in preferences. Volatility clustering, asymmetry in the stock return-volatility relationship, and pricing of multi-factor volatility components in the cross section all arise endogenously as a consequence of the feedback between the binding of no-default constraints and heterogeneous beliefs. Chapters 2 and 3 explore the implications of differences of opinion across investors in different countries for international asset pricing anomalies. Chapter 2 demonstrates that several international finance "puzzles" can be reproduced by a single risk factor which captures heterogeneous beliefs across international investors. These puzzles include: (i) home equity preference; (ii) the dependence of firm returns on local and foreign factors; (iii) the co-movement of returns and international capital flows; and (iv) abnormal returns around foreign firm cross-listing events in the local market. These are reproduced in a setup with symmetric information and in a perfectly integrated world with multiple countries and independent processes producing the same good. Chapter 3 shows that by extending this framework to multiple goods and correlated production processes; the "forward premium puzzle" arises naturally as a compensation for the heterogeneous expectations about the depreciation of the exchange rate held by international investors. Chapters 2 and 3 propose differences of opinion across international investors as the potential resolution of several international finance `puzzles'. In a globalized world where both capital and information flow freely across countries, this explanation seems more appealing than existing asymmetric information or segmented markets theories aiming to explain international finance puzzles.

Gene loss and evolutionary rates following whole-genome duplication in teleost fishes.

Teleost fishes provide the first unambiguous support for ancient whole-genome duplication in an animal lineage. Studies in yeast or plants have shown that the effects of such duplications can be mediated by a complex pattern of gene retention and changes in evolutionary pressure. To explore such patterns in fishes, we have determined by phylogenetic analysis the evolutionary origin of 675 Tetraodon duplicated genes assigned to chromosomes, using additional data from other species of actinopterygian fishes. The subset of genes, which was retained in double after the genome duplication, is enriched in development, signaling, behavior, and regulation functional categories. The evolutionary rate of duplicate fish genes appears to be determined by 3 forces: 1) fish proteins evolve faster than mammalian orthologs; 2) the genes kept in double after genome duplication represent the subset under strongest purifying selection; and 3) following duplication, there is an asymmetric acceleration of evolutionary rate in one of the paralogs. These results show that similar mechanisms are at work in fishes as in yeast or plants and provide a framework for future investigation of the consequences of duplication in fishes and other animals.