Three essays in financial economics: asset pricing, optimal portfolio selection and financial integration

Executive Summary The unifying theme of this thesis is the pursuit of a satisfactory ways to quantify the riskureward trade-off in financial economics. First in the context of a general asset pricing model, then across models and finally across country borders. The guiding principle in that pursuit was to seek innovative solutions by combining ideas from different fields in economics and broad scientific research. For example, in the first part of this thesis we sought a fruitful application of strong existence results in utility theory to topics in asset pricing. In the second part we implement an idea from the field of fuzzy set theory to the optimal portfolio selection problem, while the third part of this thesis is to the best of our knowledge, the first empirical application of some general results in asset pricing in incomplete markets to the important topic of measurement of financial integration. While the first two parts of this thesis effectively combine well-known ways to quantify the risk-reward trade-offs the third one can be viewed as an empirical verification of the usefulness of the so-called "good deal bounds" theory in designing risk-sensitive pricing bounds. Chapter 1 develops a discrete-time asset pricing model, based on a novel ordinally equivalent representation of recursive utility. To the best of our knowledge, we are the first to use a member of a novel class of recursive utility generators to construct a representative agent model to address some long-lasting issues in asset pricing. Applying strong representation results allows us to show that the model features countercyclical risk premia, for both consumption and financial risk, together with low and procyclical risk free rate. As the recursive utility used nests as a special case the well-known time-state separable utility, all results nest the corresponding ones from the standard model and thus shed light on its well-known shortcomings. The empirical investigation to support these theoretical results, however, showed that as long as one resorts to econometric methods based on approximating conditional moments with unconditional ones, it is not possible to distinguish the model we propose from the standard one. Chapter 2 is a join work with Sergei Sontchik. There we provide theoretical and empirical motivation for aggregation of performance measures. The main idea is that as it makes sense to apply several performance measures ex-post, it also makes sense to base optimal portfolio selection on ex-ante maximization of as many possible performance measures as desired. We thus offer a concrete algorithm for optimal portfolio selection via ex-ante optimization over different horizons of several risk-return trade-offs simultaneously. An empirical application of that algorithm, using seven popular performance measures, suggests that realized returns feature better distributional characteristics relative to those of realized returns from portfolio strategies optimal with respect to single performance measures. When comparing the distributions of realized returns we used two partial risk-reward orderings first and second order stochastic dominance. We first used the Kolmogorov Smirnov test to determine if the two distributions are indeed different, which combined with a visual inspection allowed us to demonstrate that the way we propose to aggregate performance measures leads to portfolio realized returns that first order stochastically dominate the ones that result from optimization only with respect to, for example, Treynor ratio and Jensen's alpha. We checked for second order stochastic dominance via point wise comparison of the so-called absolute Lorenz curve, or the sequence of expected shortfalls for a range of quantiles. As soon as the plot of the absolute Lorenz curve for the aggregated performance measures was above the one corresponding to each individual measure, we were tempted to conclude that the algorithm we propose leads to portfolio returns distribution that second order stochastically dominates virtually all performance measures considered. Chapter 3 proposes a measure of financial integration, based on recent advances in asset pricing in incomplete markets. Given a base market (a set of traded assets) and an index of another market, we propose to measure financial integration through time by the size of the spread between the pricing bounds of the market index, relative to the base market. The bigger the spread around country index A, viewed from market B, the less integrated markets A and B are. We investigate the presence of structural breaks in the size of the spread for EMU member country indices before and after the introduction of the Euro. We find evidence that both the level and the volatility of our financial integration measure increased after the introduction of the Euro. That counterintuitive result suggests the presence of an inherent weakness in the attempt to measure financial integration independently of economic fundamentals. Nevertheless, the results about the bounds on the risk free rate appear plausible from the view point of existing economic theory about the impact of integration on interest rates.

Physical properties and particle-size fractions of soil organic matter in crop-livestock integration

Crop-livestock integration represents an interesting alternative of soil management, especially in regions where the maintenance of cover crops in no-tillage systems is difficult. The objective of this study was to evaluate soil physical and chemical properties, based on the hypothesis that a well-managed crop-livestock integration system improves the soil quality and stabilizes the system. The experiment was set up in a completely randomized design, with five replications. The treatments were arranged in a 6 x 4 factorial design, to assess five crop rotation systems in crop-livestock integration, and native forest as reference of soil undisturbed by agriculture, in four layers (0.0-0.05; 0.05-0.10; 0.10-0.15 and 0.15-0.20 m). The crop rotation systems in crop-livestock integration promoted changes in soil physical and chemical properties and the effects of the different systems were mainly detected in the surface layer. The crops in integrated crop-livestock systems allowed the maintenance of soil carbon at levels equal to those of the native forest, proving the efficiency of these systems in terms of soil conservation. The systems influenced the environmental stability positively; the soil quality indicator mineral-associated organic matter was best related to aggregate stability.

One billion years of bZIP transcription factor evolution: conservation and change in dimerization and DNA-binding site specificity.

The genomic era has revealed that the large repertoire of observed animal phenotypes is dependent on changes in the expression patterns of a finite number of genes, which are mediated by a plethora of transcription factors (TFs) with distinct specificities. The dimerization of TFs can also increase the complexity of a genetic regulatory network manifold, by combining a small number of monomers into dimers with distinct functions. Therefore, studying the evolution of these dimerizing TFs is vital for understanding how complexity increased during animal evolution. We focus on the second largest family of dimerizing TFs, the basic-region leucine zipper (bZIP), and infer when it expanded and how bZIP DNA-binding and dimerization functions evolved during the major phases of animal evolution. Specifically, we classify the metazoan bZIPs into 19 families and confirm the ancient nature of at least 13 of these families, predating the split of the cnidaria. We observe fixation of a core dimerization network in the last common ancestor of protostomes-deuterostomes. This was followed by an expansion of the number of proteins in the network, but no major dimerization changes in interaction partners, during the emergence of vertebrates. In conclusion, the bZIPs are an excellent model with which to understand how DNA binding and protein interactions of TFs evolved during animal evolution.

La régulation des interdépendances entre la forêt et l'eau potable en France : études de cas sur le site du Mont Forchat : les cas des captages de Ramble et des Moises (projet Alpeau)

Ce working paper traite des règles prévues en France pour gérer les usages des forêts et de l'eau souterraine ainsi que leur interdépendance. En deuxième partie, deux études de cas (sur le Mont Forchat, Haute Savoie) montrent de quelle manière les règles prédéfinies sont mises en oeuvre et parviennent (ou pas) à protéger les captages d'eau souterraine. En troisième partie, une application du cadre d'analyse des régimes institutionnels des ressources (RIR) permet de discuter en profondeur des mécanismes institutionnels en oeuvre et des enjeux en présence dans le contexte français.

Improving Satellite Image Based Forest Inventory by Using A Priori Site Quality Information

Summary

La régulation des interdépendances entre la forêt et l'eau potable en Suisse : études de cas sur le site de La Côte (projet Alpeau) : les cas des captages des Mouilles et du Montant (canton de Vaud, Suisse)

Ce working paper traite des règles prévues en Suisse pour gérer les usages des forêts et de l'eau souterraine ainsi que leur interdépendance. En deuxième partie, deux études de cas (sur La Côte vaudoise) montrent de quelle manière les règles prédéfinies sont mises en oeuvre afin de protéger les captages d'eau souterraine. En troisième partie, une application du cadre d'analyse des régimes institutionnels des ressources (RIR) permet de discuter en profondeur des mécanismes institutionnels en oeuvre et des enjeux en présence dans le contexte suisse.

Donor site morbidity of the posterior conchal region.

BACKGROUND: The perichondral cutaneous graft (PCCG) from the posterior conchal region is an elegant solution for the coverage of facial defects with particular stability requirements. The donor defect can easily be covered with a transposition flap from the postauricular region. Although this region is a common donor site for skin grafts and has an important supporting function for glasses or hearing aids, little is known about long-term morbidity after graft harvest. OBJECTIVE: To assess the morbidity of the posterior concha and the postauricular region in terms of pain, scar formation, and patient satisfaction. MATERIALS AND METHODS: A retrospective study of 16 patients who had a PCCG harvested from the posterior concha. RESULTS: Two patients presented with a postoperative wound dehiscence on the postauricular region and one with a keloid scar on the posterior concha. One case of transitory hyperesthesia and pain when sleeping on the operated site was observed. None had complaints related to wearing glasses or hearing aids. CONCLUSION: Donor site morbidity of the postauricular and posterior conchal region is minimal and associated with high patient satisfaction, excellent aesthetic results, and emotional detachment from the hidden donor site.

Occupancy of a single site by many random walkers

We consider an infinite number of noninteracting lattice random walkers with the goal of determining statistical properties of the time, out of a total time T, that a single site has been occupied by n random walkers. Initially the random walkers are assumed uniformly distributed on the lattice except for the target site at the origin, which is unoccupied. The random-walk model is taken to be a continuous-time random walk and the pausing-time density at the target site is allowed to differ from the pausing-time density at other sites. We calculate the dependence of the mean time of occupancy by n random walkers as a function of n and the observation time T. We also find the variance for the cumulative time during which the site is unoccupied. The large-T behavior of the variance differs according as the random walk is transient or recurrent. It is shown that the variance is proportional to T at large T in three or more dimensions, it is proportional to T3/2 in one dimension and to TlnT in two dimensions.

Fifth Judicial District, Department of Correctional Services Facility and Site Study Final Report, December 12, 2008

The goal of the study is to locate a site appropriate for a 170 offender unit, based on an understanding of current needs, existing and proposed procedure and the longevity of existing facility use. The study is based on master-plan process. A framework on which multiple stages of infrastructure development can be based is initiated through the systemic study of infrastructure condition, infrastructure needs and treatment objectives.

Regulation of the integration of newly generated neurons in the adult hippocampus

Hippocampal adult neurogenesis results in the continuous formation of new neurons in the adult hippocampus, which participate to learning and memory. Manipulations increasing adult neurogenesis have a huge clinical potential in pathologies involving memory loss. Intringuingly, most of the newborn neurons die during their maturation. Thus, increasing newborn neuron survival during their maturation may be a powerful way to increase overall adult neurogenesis. The factors governing this neuronal death are yet poorly known. In my PhD project, we made the hypothesis that synaptogenesis and synaptic activity play a role in the survival of newborn hippocampal neurons. We studied three factors potentially involved in the regulation of the synaptic integration of adult-born neurons. First, we used propofol anesthesia to provoke a global increase in GABAergic activity of the network, and we evaluated the outcome on newborn neuron synaptic integration, morphological development and survival. Propofol anesthesia impaired the dendritic maturation and survival of adult-born neurons in an age-dependent manner. Next, we examined the development of astrocytic ensheathment on the synapses formed by newborn neurons, as we hypothesized that astrocytes are involved in their synaptic integration. Astrocytic processes ensheathed the synapses of newborn neurons very early in their development, and the processes modulated synaptic transmission on these cells. Finally, we studied the cell-autonomous effects of the overexpression of synaptic adhesion molecules on the development, synaptic integration and survival of newborn neurons, and we found that manipulating of a single adhesion molecule was sufficient to modify synaptogenesis and/or synapse function, and to modify newborn neuron survival. Together, these results suggest that the activity of the neuronal network, the modulation of glutamate transport by astrocytes, and the synapse formation and activity of the neuron itself may regulate the survival of newborn neurons. Thus, the survival of newborn neurons may depend on their ability to communicate with the network. This knowledge is crucial for finding ways to increase neurogenesis in patients. More generally, understanding how the neurogenic niche works and which factors are important for the generation, maturation and survival of neurons is fundamental to be able to maybe, one day, replace neurons in any region of the brain.

Interhemispheric visual integration in humans explored by multimodal brain imaging

Résumé: Les récents progrès techniques de l'imagerie cérébrale non invasives ont permis d'améliorer la compréhension des différents systèmes fonctionnels cérébraux. Les approches multimodales sont devenues indispensables en recherche, afin d'étudier dans sa globalité les différentes caractéristiques de l'activité neuronale qui sont à la base du fonctionnement cérébral. Dans cette étude combinée d'imagerie par résonance magnétique fonctionnelle (IRMf) et d'électroencéphalographie (EEG), nous avons exploité le potentiel de chacune d'elles, soit respectivement la résolution spatiale et temporelle élevée. Les processus cognitifs, de perception et de mouvement nécessitent le recrutement d'ensembles neuronaux. Dans la première partie de cette thèse nous étudions, grâce à la combinaison des techniques IRMf et EEG, la réponse des aires visuelles lors d'une stimulation qui demande le regroupement d'éléments cohérents appartenant aux deux hémi-champs visuels pour en faire une seule image. Nous utilisons une mesure de synchronisation (EEG de cohérence) comme quantification de l'intégration spatiale inter-hémisphérique et la réponse BOLD (Blood Oxygenation Level Dependent) pour évaluer l'activité cérébrale qui en résulte. L'augmentation de la cohérence de l'EEG dans la bande beta-gamma mesurée au niveau des électrodes occipitales et sa corrélation linéaire avec la réponse BOLD dans les aires de VP/V4, reflète et visualise un ensemble neuronal synchronisé qui est vraisemblablement impliqué dans le regroupement spatial visuel. Ces résultats nous ont permis d'étendre la recherche à l'étude de l'impact que le contenu en fréquence des stimuli a sur la synchronisation. Avec la même approche, nous avons donc identifié les réseaux qui montrent une sensibilité différente à l'intégration des caractéristiques globales ou détaillées des images. En particulier, les données montrent que l'implication des réseaux visuels ventral et dorsal est modulée par le contenu en fréquence des stimuli. Dans la deuxième partie nous avons a testé l'hypothèse que l'augmentation de l'activité cérébrale pendant le processus de regroupement inter-hémisphérique dépend de l'activité des axones calleux qui relient les aires visuelles. Comme le Corps Calleux présente une maturation progressive pendant les deux premières décennies, nous avons analysé le développement de la fonction d'intégration spatiale chez des enfants âgés de 7 à 13 ans et le rôle de la myelinisation des fibres calleuses dans la maturation de l'activité visuelle. Nous avons combiné l'IRMf et la technique de MTI (Magnetization Transfer Imaging) afin de suivre les signes de maturation cérébrale respectivement sous l'aspect fonctionnel et morphologique (myelinisation). Chez lés enfants, les activations associées au processus d'intégration entre les hémi-champs visuels sont, comme chez l'adulte, localisées dans le réseau ventral mais se limitent à une zone plus restreinte. La forte corrélation que le signal BOLD montre avec la myelinisation des fibres du splenium est le signe de la dépendance entre la maturation des fonctions visuelles de haut niveau et celle des connections cortico-corticales. Abstract: Recent advances in non-invasive brain imaging allow the visualization of the different aspects of complex brain dynamics. The approaches based on a combination of imaging techniques facilitate the investigation and the link of multiple aspects of information processing. They are getting a leading tool for understanding the neural basis of various brain functions. Perception, motion, and cognition involve the formation of cooperative neuronal assemblies distributed over the cerebral cortex. In this research, we explore the characteristics of interhemispheric assemblies in the visual brain by taking advantage of the complementary characteristics provided by EEG (electroencephalography) and fMRI (Functional Magnetic Resonance Imaging) techniques. These are the high temporal resolution for EEG and high spatial resolution for fMRI. In the first part of this thesis we investigate the response of the visual areas to the interhemispheric perceptual grouping task. We use EEG coherence as a measure of synchronization and BOLD (Blood Oxygenar tion Level Dependent) response as a measure of the related brain activation. The increase of the interhemispheric EEG coherence restricted to the occipital electrodes and to the EEG beta band and its linear relation to the BOLD responses in VP/V4 area points to a trans-hemispheric synchronous neuronal assembly involved in early perceptual grouping. This result encouraged us to explore the formation of synchronous trans-hemispheric networks induced by the stimuli of various spatial frequencies with this multimodal approach. We have found the involvement of ventral and medio-dorsal visual networks modulated by the spatial frequency content of the stimulus. Thus, based on the combination of EEG coherence and fMRI BOLD data, we have identified visual networks with different sensitivity to integrating low vs. high spatial frequencies. In the second part of this work we test the hypothesis that the increase of brain activity during perceptual grouping depends on the activity of callosal axons interconnecting the visual areas that are involved. To this end, in children of 7-13 years, we investigated functional (functional activation with fMRI) and morphological (myelination of the corpus callosum with Magnetization Transfer Imaging (MTI)) aspects of spatial integration. In children, the activation associated with the spatial integration across visual fields was localized in visual ventral stream and limited to a part of the area activated in adults. The strong correlation between individual BOLD responses in .this area and the myelination of the splenial system of fibers points to myelination as a significant factor in the development of the spatial integration ability.

Cost limitation through constrained oviposition site in a plant-pollinator/seed predator mutualism

Mutualism often involves reciprocal exploitation due to individual selection for increased benefits even at the expense of the partner. Therefore, stability and outcomes of such interactions crucially depend on cost limitation mechanisms. In the plant, pollinator /seed predator interaction between Silene latifolia (Caryophyllaceae) and Hadena bicruris (Lepidoptera: Noctuidae), moths generate pollination benefits as adults but impose seed predation costs as larvae. We examined whether floral morphology limits over-exploitation by constraining oviposition site. Oviposition site varies naturally inside vs. outside the corolla tube, but neither its determinants nor its effect on the interaction have been investigated. In a common garden with plants originating from eight populations, corolla tube length predicted oviposition site, but not egg presence or pollination efficiency, suggesting that long corolla tubes constrain the moth to lay eggs on petals. Egg position was also predicted by the combined effect of corolla tube and moth ovipositor lengths, with shorter ovipositor than corolla tube resulting in higher probability for eggs outside. Egg position on a given plant was repeatable over different exposure nights. When egg position was experimentally manipulated, eggs placed on the petal resulted in significantly fewer successful fruit attacks compared with eggs placed inside the corolla tube, suggesting differences in egg/larval mortality. Egg position also differently affected larval mass, fruit mass and fruit development. Our results indicate that constraining oviposition site through a long corolla tube reduces seed predation costs suffered by the plant without negatively affecting pollination efficiency and, hence may act to limit over-exploitation. However, the net effects of corolla tube depth variation on this interaction may fluctuate with extrinsic factors affecting egg mortality, and with patterns of gene flow affecting trait matching between the interacting species. The intermediate fitness costs incurred by both plant and insect associated with the different egg positions may reduce selective pressures for this interaction to evolve towards antagonism, favouring instead a mutualistic outcome. While a role for oviposition site variation in cost limitation is a novel finding in this system, it may apply more generally also to other mutualisms involving pollinating seed predators.