Three essays in dynamic corporate finance

Summary Throughout my thesis, I elaborate on how real and financing frictions affect corporate decision making under uncertainty, and I explore how firms time their investment and financing decisions given such frictions. While the macroeconomics literature has focused on the impact of real frictions on investment decisions assuming all equity financed firms, the financial economics literature has mainly focused on the study of financing frictions. My thesis therefore assesses the join interaction of real and financing frictions in firms' dynamic investment and financing decisions. My work provides a rationale for the documented poor empirical performance of neoclassical investment models based on the joint effect of real and financing frictions on investment. A major observation relies in how the infrequency of corporate decisions may affect standard empirical tests. My thesis suggests that the book to market sorts commonly used in the empirical asset pricing literature have economic content, as they control for the lumpiness in firms' optimal investment policies. My work also elaborates on the effects of asymmetric information and strategic interaction on firms' investment and financing decisions. I study how firms time their decision to raise public equity when outside investors lack information about their future investment prospects. I derive areal-options model that predicts either cold or hot markets for new stock issues conditional on adverse selection, and I provide a rational approach to study jointly the market timing of corporate decisions and announcement effects in stock returns. My doctoral dissertation therefore contributes to our understanding of how under real and financing frictions may bias standard empirical tests, elaborates on how adverse selection may induce hot and cold markets in new issues' markets, and suggests how the underlying economic behaviour of firms may induce alternative patterns in stock prices.

Dynamic properties of human brain structure: learning-related changes in cortical areas and associated fiber connections.

Recent findings in neuroscience suggest that adult brain structure changes in response to environmental alterations and skill learning. Whereas much is known about structural changes after intensive practice for several months, little is known about the effects of single practice sessions on macroscopic brain structure and about progressive (dynamic) morphological alterations relative to improved task proficiency during learning for several weeks. Using T1-weighted and diffusion tensor imaging in humans, we demonstrate significant gray matter volume increases in frontal and parietal brain areas following only two sessions of practice in a complex whole-body balancing task. Gray matter volume increase in the prefrontal cortex correlated positively with subject's performance improvements during a 6 week learning period. Furthermore, we found that microstructural changes of fractional anisotropy in corresponding white matter regions followed the same temporal dynamic in relation to task performance. The results make clear how marginal alterations in our ever changing environment affect adult brain structure and elucidate the interrelated reorganization in cortical areas and associated fiber connections in correlation with improvements in task performance.

Static and dynamic structure of liquid metals: Role of the different parts of the interaction potential

The influence of different parts of the interaction potential on the microscopic behavior of simple liquid metals is investigated by molecular dynamics simulation. The role of the soft-core repulsive, short-range attractive, and long-range oscillatory forces on the properties of liquid lithium close to the triple point is analyzed by comparing the results from simulations of identical systems but truncating the potential at different distances. Special attention is paid to dynamic collective properties such as the dynamic structure factors, transverse current correlation functions, and transport coefficients. It is observed that, in general, the effects of the short-range attractive forces are important. On the contrary, the influence of the oscillatory long-range interactions is considerably less, being the most pronounced for the dynamic structure factor at long wavelengths. The results of this work suggest that the influence of the attractive forces becomes less significant when temperature and density increase.

Self and cross-velocity correlation functions and diffusion coefficients in liquids: a molecular dynamics study of binary mixtures of soft spheres

Molecular dynamics simulation is applied to the study of the diffusion properties in binary liquid mixtures made up of soft-sphere particles with different sizes and masses. Self- and distinct velocity correlation functions and related diffusion coefficients have been calculated. Special attention has been paid to the dynamic cross correlations which have been computed through recently introduced relative mean molecular velocity correlation functions which are independent on the reference frame. The differences between the distinct velocity correlations and diffusion coefficients in different reference frames (mass-fixed, number-fixed, and solvent-fixed) are discussed.

Identification of Ligands for the Tau Exon 10 Splicing Regulatory Element RNA Using Dynamic Combinatorial Chemistry

We describe the use of dynamic combinatorial chemistry (DCC) to identify ligands for the stem-loop structure located at the exon 10-5'-intron junction of Tau pre-mRNA, which is involved in the onset of several tauopathies including frontotemporal dementia with Parkinsonism linked to chromosome 17 (FTDP-17). A series of ligands that combine the small aminoglycoside neamine and heteroaromatic moieties (azaquinolone and two acridines) have been identified by using DCC. These compounds effectively bind the stem-loop RNA target (the concentration required for 50% RNA response (EC(50)): 2-58 μM), as determined by fluorescence titration experiments. Importantly, most of them are able to stabilize both the wild-type and the +3 and +14 mutated sequences associated with the development of FTDP-17 without producing a significant change in the overall structure of the RNA (as analyzed by circular dichroism (CD) spectroscopy), which is a key factor for recognition by the splicing regulatory machinery. A good correlation has been found between the affinity of the ligands for the target and their ability to stabilize the RNA secondary structure.

Dynamic Deflections to Determine Roadway Support Ratings, HR-245, 1983

The Benkelman Beam structural test of flexible pavements was replaced in 1976 by dynamic deflection testing with a model 400 Road Rater. The Road Rater is used to determine structural ratings of flexible pavements. New pavement construction in Iowa has decreased with a corresponding increase of restoration and rehabilitation. A method to determine structural ratings of layered systems and rigid pavements is needed to properly design overlay thickness. The objective of this research was to evaluate the feasibility of using the Road Rater to determine support values of layered systems and rigid pavements. This evaluation was accomplished by correlating the Road Rater with the Federal Highway Administration (FHWA) Thumper, a dynamic deflection testing device. Data were obtained with the Road Rater and Thumper at 411 individual test locations on 39 different structural sections ranging from 10" of PCC pavement and 25" of asphalt pavement to a newly graveled unpaved roadway. A high correlation between a 9000 pound Thumper deflection and the 1185 pound Road Rater deflection was obtained. A Road Rater modification has been completed to provide 2000 pound load inputs. The basin, defined by four sensors spaced at 1 foot intervals, resulting from the 2000 pound loading is being used to develop a graph for determining relative subgrade strengths. Road Rater deflections on rigid pavements are sufficient to support the potential for this technique.

Dynamic Deflections for Determining Structural Rating of Flexible Pavements, HR-178, 1979

The Road Rater is a dynamic deflection measuring apparatus for flexible base pavements. The Road Rater replaces the Benkelman Beam which was last used by the Iowa DOT in 1977. Road Rater test results correlate reasonably well (correlation coefficient = 0.83) with Benkelman Beam test data. The basic differences between the Road Rater and Benkelman Beam are as follows: 1. The Benkelman Beam uses a static 18,000 lb. load while the Road Rater uses a dynamic 800 to 2,000 lb. loading. 2. The Road Rater tests much faster and more economically than the Benkelman Beam. 3. The Road Rater better simulates a moving truck than the Benkelman Beam. The basic operating principle of the Road Rater is to impart a dynamic loading and measure the resultant movement of the pavement with velocity sensors. This data, when properly adjusted for temperature by use of a nomograph included in this report, can be used to determine pavement life expectancy and estimate overlay thickness required. Road Rater testing will be conducted in the spring, when pavements are in their weakest condition, until seasonal correction factors can be developed. The Road Rater does not have sufficient ram weight to effectively evaluate load carrying capacity of rigid pavements. All rigid pavements react similarly to Road Rater testing and generally deflect from 0.65 to 1.30 mils. Research will be contined to evaluate rigid pavements with the Road Rater, however. The Road Rater has proven to be a reliable, troublefree pavement evaluation machine. The deflection apparatus was originally front-mounted,but was rear-mounted during the winter of 1977-78. Since that time, van handling has greatly improved, and front suspension parts are no longer overstressed due to improper weight distribution.

Use of a dynamic foot pressure index to monitor the effects of treatment for equinus gait in children with cerebral palsy.

The purpose of this study is to introduce and describe a newly developed index using foot pressure analysis to quantify the degree of equinus gait in children with cerebral palsy before and after injection with botulinum toxin. Data were captured preinjection and 12 weeks postinjection. Ten children aged 2(1/2) to 6(1/2) years took part (5 boys and 5 girls). Three of them had a diagnosis of spastic diplegia and 7 of congenital hemiplegia. In total, 13 limbs were analyzed. After orientation and segmentation of raw pedobarographic data, we determined a dynamic foot pressure index graded 0 to 100 that quantified the relative degree of heel and forefoot contact during stance. These data were correlated (Pearson correlation) with clinical measurements of dorsiflexion at the ankle (on a slow and fast stretch) and video observation (using the Observational Gait Scale). Pedobarograph data were strongly correlated with both the Observational Gait Scale scores (R = 0.79, P < 0.005) and clinical measurements of dorsiflexion on a fast stretch, which is reflective of spasticity (R = 0.70, P < 0.005). We demonstrated the index's sensitivity in detecting changes in spasticity and good correlation with video observations seems to indicate this technique's potential validity. When manipulated and segmented appropriately, and with the development of a simple ordinal index, we found that foot pressure data provided a useful tool in tracking changes in patients with spastic equinus.

Conditional predictive density evaluation in the presence of instabilities

We propose new methods for evaluating predictive densities. The methods includeKolmogorov-Smirnov and Cram?r-von Mises-type tests for the correct specification ofpredictive densities robust to dynamic mis-specification. The novelty is that the testscan detect mis-specification in the predictive densities even if it appears only overa fraction of the sample, due to the presence of instabilities. Our results indicatethat our tests are well sized and have good power in detecting mis-specification inpredictive densities, even when it is time-varying. An application to density forecastsof the Survey of Professional Forecasters demonstrates the usefulness of the proposedmethodologies.

Simulated-annealing-based conditional simulation for the local-scale characterization of heterogeneous aquifers

Simulated-annealing-based conditional simulations provide a flexible means of quantitatively integrating diverse types of subsurface data. Although such techniques are being increasingly used in hydrocarbon reservoir characterization studies, their potential in environmental, engineering and hydrological investigations is still largely unexploited. Here, we introduce a novel simulated annealing (SA) algorithm geared towards the integration of high-resolution geophysical and hydrological data which, compared to more conventional approaches, provides significant advancements in the way that large-scale structural information in the geophysical data is accounted for. Model perturbations in the annealing procedure are made by drawing from a probability distribution for the target parameter conditioned to the geophysical data. This is the only place where geophysical information is utilized in our algorithm, which is in marked contrast to other approaches where model perturbations are made through the swapping of values in the simulation grid and agreement with soft data is enforced through a correlation coefficient constraint. Another major feature of our algorithm is the way in which available geostatistical information is utilized. Instead of constraining realizations to match a parametric target covariance model over a wide range of spatial lags, we constrain the realizations only at smaller lags where the available geophysical data cannot provide enough information. Thus we allow the larger-scale subsurface features resolved by the geophysical data to have much more due control on the output realizations. Further, since the only component of the SA objective function required in our approach is a covariance constraint at small lags, our method has improved convergence and computational efficiency over more traditional methods. Here, we present the results of applying our algorithm to the integration of porosity log and tomographic crosshole georadar data to generate stochastic realizations of the local-scale porosity structure. Our procedure is first tested on a synthetic data set, and then applied to data collected at the Boise Hydrogeophysical Research Site.

Empirical study of correlated survival times for recurrent events with proportional hazards margins and the effect of correlation and censoring.

Background: In longitudinal studies where subjects experience recurrent incidents over a period of time, such as respiratory infections, fever or diarrhea, statistical methods are required to take into account the within-subject correlation. Methods: For repeated events data with censored failure, the independent increment (AG), marginal (WLW) and conditional (PWP) models are three multiple failure models that generalize Cox"s proportional hazard model. In this paper, we revise the efficiency, accuracy and robustness of all three models under simulated scenarios with varying degrees of within-subject correlation, censoring levels, maximum number of possible recurrences and sample size. We also study the methods performance on a real dataset from a cohort study with bronchial obstruction. Results: We find substantial differences between methods and there is not an optimal method. AG and PWP seem to be preferable to WLW for low correlation levels but the situation reverts for high correlations. Conclusions: All methods are stable in front of censoring, worsen with increasing recurrence levels and share a bias problem which, among other consequences, makes asymptotic normal confidence intervals not fully reliable, although they are well developed theoretically.

Chaotic systems with a null conditional Lyapunov exponent under nonlinear driving.

Control of a chaotic system by homogeneous nonlinear driving, when a conditional Lyapunov exponent is zero, may give rise to special and interesting synchronizationlike behaviors in which the response evolves in perfect correlation with the drive. Among them, there are the amplification of the drive attractor and the shift of it to a different region of phase space. In this paper, these synchronizationlike behaviors are discussed, and demonstrated by computer simulation of the Lorentz model [E. N. Lorenz, J. Atmos. Sci. 20 130 (1963)] and the double scroll [T. Matsumoto, L. O. Chua, and M. Komuro, IEEE Trans. CAS CAS-32, 798 (1985)].

Alternative tests for correct specification of conditional predictive densities

We propose new methods for evaluating predictive densities that focus on the models' actual predictive ability in finite samples. The tests offer a simple way of evaluatingthe correct specification of predictive densities, either parametric or non-parametric.The results indicate that our tests are well sized and have good power in detecting mis-specification in predictive densities. An empirical application to the Survey ofProfessional Forecasters and a baseline Dynamic Stochastic General Equilibrium modelshows the usefulness of our methodology.

Conditional equilibrium constants in multicomponent heterogeneous adsorption: The conditional affinity spectrum

The concept of conditional stability constant is extended to the competitive binding of small molecules to heterogeneous surfaces or macromolecules via the introduction of the conditional affinity spectrum (CAS). The CAS describes the distribution of effective binding energies experienced by one complexing agent at a fixed concentration of the rest. We show that, when the multicomponent system can be described in terms of an underlying affinity spectrum [integral equation (IE) approach], the system can always be characterized by means of a CAS. The thermodynamic properties of the CAS and its dependence on the concentration of the rest of components are discussed. In the context of metal/proton competition, analytical expressions for the mean (conditional average affinity) and the variance (conditional heterogeneity) of the CAS as functions of pH are reported and their physical interpretation discussed. Furthermore, we show that the dependence of the CAS variance on pH allows for the analytical determination of the correlation coefficient between the binding energies of the metal and the proton. Nonideal competitive adsorption isotherm and Frumkin isotherms are used to illustrate the results of this work. Finally, the possibility of using CAS when the IE approach does not apply (for instance, when multidentate binding is present) is explored. © 2006 American Institute of Physics.

Correlation of the EPR properties of perchlorotriphenylmethyl radical and their efficiency as DNP polarizers

Water soluble perchlorinated trityl (PTM) radicals were found to be effective 95 GHz DNP (dynamic nuclear polarization) polarizers in ex situ (dissolution) 13C DNP (Gabellieri et al., Angew Chem., Int. Ed. 2010, 49, 3360). The degree of the nuclear polarization obtained was reported to be dependent on the position of the chlorine substituents on the trityl skeleton. In addition, on the basis of the DNP frequency sweeps it was suggested that the 13C NMR signal enhancement is mediated by the Cl nuclei. To understand the DNP mechanism of the PTM radicals we have explored the 95 GHz EPR characteristics of these radicals that are relevant to their performance as DNP polarizers. The EPR spectra of the radicals revealed axially symmetric g-tensors. A comparison of the spectra with the 13C DNP frequency sweeps showed that although the solid effect mechanism is operational the DNP frequency sweeps reveal some extra width suggesting that contributions from EPR forbidden transitions involving 35,37Cl nuclear flips are likely. This was substantiated experimentally by ELDOR (electron-electron double resonance) detected NMR measurements, which map the EPR forbidden transitions, and ELDOR experiments that follow the depolarization of the electron spin upon irradiation of the forbidden EPR transitions. DFT (density functional theory) calculations helped to assign the observed transitions and provided the relevant spin Hamiltonian parameters. These results show that the 35,37Cl hyperfine and nuclear quadrupolar interactions cause a considerable nuclear state mixing at 95 GHz thus facilitating the polarization of the Cl nuclei upon microwave irradiation. Overlap of Cl nuclear frequencies and the 13C Larmor frequency further facilitates the polarization of the 13C nuclei by spin diffusion. Calculation of the 13C DNP frequency sweep based on the Cl nuclear polarization showed that it does lead to an increase in the width of the spectra, improving the agreement with the experimental sweeps, thus supporting the existence of a new heteronuclear assisted DNP mechanism.