STABILITY ANALYSIS WITH APPLICATIONS OF A TWO-DIMENSIONAL DYNAMICAL SYSTEM ARISING FROM A STOCHASTIC MODEL FOR AN ASSET MARKET

We analyze the stability properties of equilibrium solutions and periodicity of orbits in a two-dimensional dynamical system whose orbits mimic the evolution of the price of an asset and the excess demand for that asset. The construction of the system is grounded upon a heterogeneous interacting agent model for a single risky asset market. An advantage of this construction procedure is that the resulting dynamical system becomes a macroscopic market model which mirrors the market quantities and qualities that would typically be taken into account solely at the microscopic level of modeling. The system`s parameters correspond to: (a) the proportion of speculators in a market; (b) the traders` speculative trend; (c) the degree of heterogeneity of idiosyncratic evaluations of the market agents with respect to the asset`s fundamental value; and (d) the strength of the feedback of the population excess demand on the asset price update increment. This correspondence allows us to employ our results in order to infer plausible causes for the emergence of price and demand fluctuations in a real asset market. The employment of dynamical systems for studying evolution of stochastic models of socio-economic phenomena is quite usual in the area of heterogeneous interacting agent models. However, in the vast majority of the cases present in the literature, these dynamical systems are one-dimensional. Our work is among the few in the area that construct and study analytically a two-dimensional dynamical system and apply it for explanation of socio-economic phenomena.

Size and book to market effects and the Fama French three factor asset pricing model: Evidence from the Australian stockmarket

The present study adds to the sparse published Australian literature on the size effect, the book to market (BM) effect and the ability of the Fama French three factor model to account for these effects and to improve on the asset pricing ability of the Capital Asset Pricing Model (CAPM). The present study extends the 1981–1991 period examined by Halliwell, Heaney and Sawicki (1999) a further 10 years to 2000 and addresses several limitations and findings of that research. In contrast to Halliwell, Heaney and Sawicki the current study finds the three factor model provides significantly improved explanatory power over the CAPM, and evidence that the BM factor plays a role in asset pricing.

Three essays on the psychology of investment and financial markets

Préface My thesis consists of three essays where I consider equilibrium asset prices and investment strategies when the market is likely to experience crashes and possibly sharp windfalls. Although each part is written as an independent and self contained article, the papers share a common behavioral approach in representing investors preferences regarding to extremal returns. Investors utility is defined over their relative performance rather than over their final wealth position, a method first proposed by Markowitz (1952b) and by Kahneman and Tversky (1979), that I extend to incorporate preferences over extremal outcomes. With the failure of the traditional expected utility models in reproducing the observed stylized features of financial markets, the Prospect theory of Kahneman and Tversky (1979) offered the first significant alternative to the expected utility paradigm by considering that people focus on gains and losses rather than on final positions. Under this setting, Barberis, Huang, and Santos (2000) and McQueen and Vorkink (2004) were able to build a representative agent optimization model which solution reproduced some of the observed risk premium and excess volatility. The research in behavioral finance is relatively new and its potential still to explore. The three essays composing my thesis propose to use and extend this setting to study investors behavior and investment strategies in a market where crashes and sharp windfalls are likely to occur. In the first paper, the preferences of a representative agent, relative to time varying positive and negative extremal thresholds are modelled and estimated. A new utility function that conciliates between expected utility maximization and tail-related performance measures is proposed. The model estimation shows that the representative agent preferences reveals a significant level of crash aversion and lottery-pursuit. Assuming a single risky asset economy the proposed specification is able to reproduce some of the distributional features exhibited by financial return series. The second part proposes and illustrates a preference-based asset allocation model taking into account investors crash aversion. Using the skewed t distribution, optimal allocations are characterized as a resulting tradeoff between the distribution four moments. The specification highlights the preference for odd moments and the aversion for even moments. Qualitatively, optimal portfolios are analyzed in terms of firm characteristics and in a setting that reflects real-time asset allocation, a systematic over-performance is obtained compared to the aggregate stock market. Finally, in my third article, dynamic option-based investment strategies are derived and illustrated for investors presenting downside loss aversion. The problem is solved in closed form when the stock market exhibits stochastic volatility and jumps. The specification of downside loss averse utility functions allows corresponding terminal wealth profiles to be expressed as options on the stochastic discount factor contingent on the loss aversion level. Therefore dynamic strategies reduce to the replicating portfolio using exchange traded and well selected options, and the risky stock.

An object oriented road asset information model

Preservation and enhancement of transportation infrastructure is critical to continuous economic development in Australia. Of particular importance are the road assets infrastructure, due to their high costs of setting up and their social and economic impact on the national economy. Continuous availability of road assets, however, is contingent upon their effective design, condition monitoring, maintenance, and renovation and upgrading. However, in order to achieve this data exchange, integration, and interoperability is required across municipal boundaries. On the other hand, there are no agreed reference frameworks that consistently describe road infrastructure assets. As a consequence, specifications and technical solutions being chosen to manage road assets do not provide adequate detail and quality of information to support asset lifecycle management processes and decisions taken are based on perception not reality. This paper presents a road asset information model, which works as reference framework to, link other kinds of information with asset information; integrate different data suppliers; and provide a foundation for service driven integrated information framework for community infrastructure and asset management.

Stress relaxation analysis of single chondrocytes using porohyperelastic model based on AFM experiments

The aim of this study is to investigate the stress relaxation behavior of single chondrocytes using the Porohyperelastic (PHE) model and inverse Finite Element Analysis (FEA). Firstly, based on Atomic Force Microscopy (AFM) technique, we have found that the chondrocytes exhibited stress relaxation behavior. We explored the mechanism of this stress relaxation behavior and concluded that the intracellular fluid exuding out from the cells during deformation plays the most important role in the stress relaxation. Next, we have applied the inverse FEA technique to determine necessary material parameters for PHE model to simulate this stress relaxation behavior as this model is proven capable of capturing the non-linear behavior and the fluid-solid interaction during the stress relaxation of the single chondrocytes. It is observed that this PHE model can precisely capture the stress relaxation behavior of single chondrocytes and would be a suitable model for cell biomechanics.

Semi-active vibration isolation using a near-zero-spring-rate device:steady state analysis of a single-degree-of-freedom model

A vibration isolator is described which incorporates a near-zero-spring-rate device within its operating range. The device is an assembly of a vertical spring in parallel with two inclined springs. A low spring rate is achieved by combining the equivalent stiffness in the vertical direction of the inclined springs with the stiffness of the vertical central spring. It is shown that there is a relation between the geometry and the stiffness of the individual springs that results in a low spring rate. Computer simulation studies of a single-degree-of-freedom model for harmonic base input show that the performance of the proposed scheme is superior to that of the passive schemes with linear springs and skyhook damping configuration. The response curves show that, for small to large amplitudes of base disturbance, the system goes into resonance at low frequencies of excitation. Thus, it is possible to achieve very good isolation over a wide low-frequency band. Also, the damper force requirements for the proposed scheme are much lower than for the damper force of a skyhook configuration or a conventional linear spring with a semi-active damper.

Is the mental wellbeing of young Australians best represented by a single, multidimensional or bifactor model?

Internationally there is a growing interest in the mental wellbeing of young people. However, it is unclear whether mental wellbeing is best conceptualized as a general wellbeing factor or a multidimensional construct. This paper investigated whether mental wellbeing, measured by the Mental Health Continuum-Short Form (MHC-SF), is best represented by: (1) a single-factor general model; (2) a three-factor multidimensional model or (3) a combination of both (bifactor model). 2,220 young Australians aged between 16 and 25 years completed an online survey including the MHC-SF and a range of other wellbeing and mental ill-health measures. Exploratory factor analysis supported a bifactor solution, comprised of a general wellbeing factor, and specific group factors of psychological, social and emotional wellbeing. Confirmatory factor analysis indicated that the bifactor model had a better fit than competing single and three-factor models. The MHC-SF total score was more strongly associated with other wellbeing and mental ill-health measures than the social, emotional or psychological subscale scores. Findings indicate that the mental wellbeing of young people is best conceptualized as an overarching latent construct (general wellbeing) to which emotional, social and psychological domains contribute. The MHC-SF total score is a valid and reliable measure of this general wellbeing factor.

Capital Asset Price Model (CAPM) : uma aplicação ao mercado brasileiro de ações

Este trabalho tem por objetivo apresentar a fundamentação teórica e efetuar uma aplicação prática de uma das mais importantes descobertas no campo das finanças: o modelo de precificação de ativos de capital padrão, denominado de Capital Asset Price Model (CAPM). Na realização da aplicação prática, comparou-se a performance entre os retornos dos investimentos exigidos pelo referido modelo e os realmente obtidos. Foram analisadas cinco ações com a maior participação relativa na carteira teórica do Ibovespa e com retornos publicados de junho de 1998 a maio de 2001. Os dados foram obtidos da Economática da UFRGS e testados utilizando-se o Teste-t (duas amostras em par para médias) na ferramenta MS Excel. Os resultados foram tabelados e analisados, de onde se concluiu que, estatisticamente, com índice de confiança de 95%, não houve diferença de performance entre os retornos esperados e os realmente obtidos dos ativos objeto desta dissertação, no período estudado.