Lam, Ka Wai. / Thesis (M.Phil.)--Chinese University of Hong Kong, 2008. / Includes bibliographical references (leaves 51-55). / Abstracts in English and Chinese. / Chapter 1 --- Introduction --- p.1 / Chapter 2 --- Levy Processes --- p.6 / Chapter 2.1 --- Definition --- p.6 / Chapter 2.2 --- Levy-Khinchine formula --- p.7 / Chapter 2.3 --- Applications of Levy Processes in Finance --- p.10 / Chapter 2.4 --- Option pricing under Levy Processes --- p.12 / Chapter 2.4.1 --- Black-Scholes Formula with Characteristic Function --- p.12 / Chapter 2.4.2 --- Fast Fourier Transform --- p.14 / Chapter 2.4.3 --- Other Payoff Functions --- p.16 / Chapter 3 --- Dynamic Fund Protection --- p.19 / Chapter 3.1 --- Discrete Dynamic Fund Protection --- p.20 / Chapter 3.2 --- Link DFP to Discrete Lookback Options --- p.22 / Chapter 4 --- Spitzer´ةs Identity --- p.25 / Chapter 4.1 --- Applications of Spitzer's Identity --- p.25 / Chapter 4.2 --- Discrete Lookback Options --- p.29 / Chapter 5 --- Pricing Discrete DFP --- p.32 / Chapter 5.1 --- Girsanov´ةs Theorem --- p.32 / Chapter 5.2 --- Equivalent Martingale Measure in DFP --- p.34 / Chapter 5.3 --- Pricing DFP at any Time Points --- p.36 / Chapter 5.4 --- The Main Algorithm --- p.38 / Chapter 6 --- Numerical Results --- p.40 / Chapter 6.1 --- Simulation of Discrete DFP --- p.40 / Chapter 6.2 --- Numerical Implementation --- p.42 / Chapter 7 --- Conclusion --- p.50 / Bibliography --- p.51

This dissertation consists of three stand-alone but interrelated empirical studies investigating various aspects of the well-documented ??home bias anomaly?? in international investment. The findings help to understand the international investment allocation behaviour of mutual funds as well as their implications for asset pricing and mutual fund evaluation. The first study investigates the roles of various firm attributes that encapsulate the deadweight costs in determining firm level investment bias. The main findings suggest that firm characteristics related to transaction costs, corporate governance and information asymmetry create significant barriers for fund managers. In addition, foreign funds are more constrained than domestic funds by information asymmetry, even in developed and liberalized markets. Moreover, this study stylises the international investment allocation model in Cooper and Kaplanis (1986) with a quadratic cost function, which reveals the marginal influence of market level deadweight costs on the relationship between firm characteristics and investment bias. It is found that when market level cross-border barriers are exacerbated, as in the case of emerging and restricted financial markets, foreign fund managers become more sensitive to market level deadweight costs and ignore firm characteristics. In general, these findings imply that the market level ??home bias anomaly?? is an outcome of the complementary effects of investment barriers at both firm and market levels. The second study examines the role of firm level investment bias in predicting future stock returns. It is found that both firm level foreign and domestic biases contain valuable information with respect to firm prospects. However, domestic bias is more informative than foreign bias in terms of subsequent stock returns, partially because of information asymmetry. The third study explores the determinants of fund level investment bias and its ability to predict fund performance. It is found that fund portfolio attributes determine fund level investment biases after controlling for market and fund investment objective specific effects, and fund level investment bias is positively related to fund performance due to lower deadweight costs. Moreover, good macroeconomic environments foster the development of the mutual fund industry.

In this thesis, I examine the performance of a sample of ten Swedish-based internationally diversified mutual funds managed by one of the largest commercial banks in the Nordic region. The investigation cover a time span between 2000 and 2005 divided into two sets, 2000-2002 and 2003-2005. To measure the performance of the funds, I will utilize the Jensen’s index. The results shows that there is no empirical evidence which indicates that managers seize superior stock selection skills when investing locally compared with investing on different markets for the selected funds. It does on the other hand shows that two out of the seven funds increases the beta towards the market when the market goes up. Finally, this thesis shows that inclusion of emerging markets creates further possibilities for diversification in a portfolio due to more developed markets tends to have high level of integration and move together.

This dissertation contains two essays in empirical finance. The first essay studies the mutual fund industry, and the second essay looks into the stock market. Both studies provide insights in the underlying mechanism of some asset return patterns identified from the data currently available. The first essay investigates the sources of a recently identified performance pattern in mutual funds. Specifically, actively managed mutual funds, in general, underperform a passive benchmark; however, some recent studies find they, in fact, outperform the benchmark in bad economic states. I examine whether a state dependent risk shifting behavior of mutual fund managers contributes to this performance difference across states, and find supportive evidence. As shown in prior studies, the risk shifting behavior is motivated by a non-linear flow-performance relationship. Using a piece-wise linear regression, I demonstrate that the non-linearity exists mainly in good states; whereas in bad states, the flow-performance relationship is close to linear. Thus, non-zero risk shifting incentives are only expected in good states. I empirically measure these incentives in good states, and show that managers do react to the ``gambling'' (i.e., positive) incentives. In addition, higher ``gambling'' incentives are found to be associated with lower fund performance. The second essay, based on joint work with Hai Lu and Kevin Wang, examines how stock price shocks in the absence of public announcement of firm specific news affect future stock returns. We find that both large short term price drops and hikes are followed by negative abnormal returns over the subsequent twelve months. The pattern of asymmetric drifts, the return continuation for negative shocks versus the return reversal for positive shocks, is puzzling. We explore whether investor disagreement can explain the puzzle and find that the evidence is consistent with predictions of disagreement theory. Moreover, price shocks with public news disclosures are followed by weaker drifts, suggesting that reduction of information asymmetry from public disclosures mitigates disagreement-induced overpricing.

This dissertation contains two essays in empirical finance. The first essay studies the mutual fund industry, and the second essay looks into the stock market. Both studies provide insights in the underlying mechanism of some asset return patterns identified from the data currently available. The first essay investigates the sources of a recently identified performance pattern in mutual funds. Specifically, actively managed mutual funds, in general, underperform a passive benchmark; however, some recent studies find they, in fact, outperform the benchmark in bad economic states. I examine whether a state dependent risk shifting behavior of mutual fund managers contributes to this performance difference across states, and find supportive evidence. As shown in prior studies, the risk shifting behavior is motivated by a non-linear flow-performance relationship. Using a piece-wise linear regression, I demonstrate that the non-linearity exists mainly in good states; whereas in bad states, the flow-performance relationship is close to linear. Thus, non-zero risk shifting incentives are only expected in good states. I empirically measure these incentives in good states, and show that managers do react to the ``gambling'' (i.e., positive) incentives. In addition, higher ``gambling'' incentives are found to be associated with lower fund performance. The second essay, based on joint work with Hai Lu and Kevin Wang, examines how stock price shocks in the absence of public announcement of firm specific news affect future stock returns. We find that both large short term price drops and hikes are followed by negative abnormal returns over the subsequent twelve months. The pattern of asymmetric drifts, the return continuation for negative shocks versus the return reversal for positive shocks, is puzzling. We explore whether investor disagreement can explain the puzzle and find that the evidence is consistent with predictions of disagreement theory. Moreover, price shocks with public news disclosures are followed by weaker drifts, suggesting that reduction of information asymmetry from public disclosures mitigates disagreement-induced overpricing.

Mutual funds attracted great attention of both shareholders and academics in last few decades. Mutual funds provide benefits like diversification, professional managements and reduced costs for individual shareholders. Shareholders invest their assets into mutual funds managed by professionals. Managers may have an incentive to use those assets to satisfy their own interests. They can achieve this by charging excessive fees or spending more on the perquisites. These unmatched interests of shareholders and managers create so called principal-agent conflicts. Some researchers argue that market competition in mutual funds industry is strong enough to align interests of both shareholders and managers, thus mitigating principal-agent conflicts. Others believe there is need for internal governance to monitor managers‟ behaviors. Board of directors as an internal governance mechanism is responsible for aligning shareholders and managers interests.We collected data on board characteristics to find if they are related to funds attributes. Our sample of funds consists of 68 fund management companies with total of 603 mutual funds managed by those companies. Board characteristics include board size, age and gender of board members, and presence of CEO on the board. Fund attributes are total expense ratio, rate of return and management fees used as a measure of board effectiveness. We analyzed relationship of board characteristics and fund attributes separately on the company level and fund level.On the company level we found no relationship between board size and board age with expense ratio and rate of returns. We found significant positive relationship between board gender and presence of CEO with expense ratio. These results indicate that with the increase of male members on the board and the presence of CEO on the board there is an increase in total expense ratio. On the fund level analysis we found different relations with various types of funds. This may indicate that depending on the type of the fund the structure of the board that is effective changes.

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In recent year, wireless communications systems require transmission of higher and higher data rates to foster various multimedia services. The multiple-input multiple-output (MIMO) antennas system has been studied to increase wireless channel capacity and reliability. The mutual coupling of MIMO antennas affects the capacity of the wireless channel. Traditionally, the minimal mutual coupling distance between antenna elements needs to be at least one half wavelength. When MIMO antenna system is used in miniature mobile device, the problem of mutual coupling becomes even more serious. In the first part of this thesis we propose a WLAN/WiMAX antenna that can be operated in 2.4 GHz (2.4¡V2.48 GHz) WLAN band; 2.5 GHz (2.5¡V2.7 GHz) and 3.5 GHz (3.4¡V3.7 GHz) WiMAX band. We use the inverted U slot band notch and omega slot band notch to reduce the mutual coupling in MIMO antennas. Our design is able to reduce the mutual coupling to be less than ¡V20 dB in all interested bands. In the second part, we propose a planar WLAN/WiMAX antenna that can be operated in 2.4 GHz (2.4¡V2.48 GHz), 5.2/5.8GHz (5.15-5.35GHz/5.725-5.825GHz) WLAN band; 2.5 GHz (2.5¡V2.7 GHz), 3.5 GHz (3.4¡V3.7 GHz) and 5.5 GHz (5.25-5.85 GHz) WiMAX band and mutual coupling of MIMO antenna is less than ¡V20 dB in all interested bands.

<p>Future warfare concerns information superiority, i.e. supplying decisionmakers with better information than their opponents. Their decisions will be based on information from various sensors such as radars, UAVs, satellites, or any other object that can supply the decision makers with information. A system like this will make use of a huge amount of data, and the decisionmakers may not be able to handle all information that will be presented to them. Because of this, they might make decisions that are not optimal for the task.</p><p>To enhance tha capability in decision making, the national defence college will create an avatar which will be located in a 3D presentation device, called the Visioscope (tm). If the computer system detects that a person might have made an erroneous decision, the avatar will act and point out the error, i.e. there will be a dialog between the decision makers and the avatar. One important factor when humans communicate with each other is mutual eye gaze. If mutual eye gaze can occur between the users and the avatar, and if the avatar can behave like a human, the communication process will be improved and the users will make less errors.</p><p>This literature study aims to generate some ideas about how existing technology supports mutual eye gaze between the avatar and the users in the ROLF 2010 environment. The study partly concerns how a computer system can control an avatar so that it behaves like a human.</p>