Economic Activity of Firms and Asset Prices

In this review we survey the recent research on the fundamental determinants of stock returns. These studies explore how firms' systematic risk and their investment and production decisions are jointly determined in equilibrium. Models with production provide insights into several types of empirical patterns, including (a) the correlations between firms' economic characteristics and their risk premia, (b) the comovement of stock returns among firms with similar characteristics, and (c) the joint dynamics of asset returns and macroeconomic quantities. Moreover, by explicitly relating firms' stock returns and cash flows to fundamental shocks, models with production connect the analysis of financial markets with the research on the origins of macroeconomic fluctuations

Keeping the Board in the Dark: CEO Compensation and Entrenchment

We study a model in which a CEO can entrench himself by hiding information from the board that would allow the board to conclude that he should be replaced. Assuming that even diligent monitoring by the board cannot fully overcome the information asymmetry visà- vis the CEO, we ask if there is a role for CEO compensation to mitigate the inefficiency. Our analysis points to a novel argument for high-powered, non-linear CEO compensation such as bonus pay or stock options. By shifting the CEO’s compensation into states where the firm’s value is highest, a high-powered compensation scheme makes it as unattractive as possible for the CEO to entrench himself when he expects that the firm’s future value under his management and strategy is low. This, in turn, minimizes the severance pay needed to induce the CEO not to entrench himself, thereby minimizing the CEO’s informational rents. Amongst other things, our model suggests how deregulation and technological changes in the 1980s and 1990s might have contributed to the rise in CEO pay and turnover over the same period

Modeling Monetary Policy

We develop a macroeconomic framework where money issupplied against only few eligible securities in open marketoperations. The relationship between the policy rate,expected inflation and consumption growth is affected bymoney market conditions, i.e. the varying liquidity value ofeligible assets and the associated risk. This induces a liquiditypremium, which explains the observed systematic wedgebetween the policy rate and consumption Euler interest ratethat standard models equate. It further implies a dampenedresponse of consumption to policy rate shocks that is humpshapedwhen we account for realistic central bank transfersand the dynamics of bond holdings

Leveraging the T2T Assembly to Resolve Rare and Pathogenic Inversions in Reference Genome Gaps

Chromosomal inversions (INVs) are particularly challenging to detect due to their copy-number neutral state and association with repetitive regions. Inversions represent about 1/20 of all balanced structural chromosome aberrations and can lead to disease by gene disruption or altering regulatory regions of dosage-sensitive genes in cis. Short-read genome sequencing (srGS) can only resolve ∼70% of cytogenetically visible inversions referred to clinical diagnostic laboratories, likely due to breakpoints in repetitive regions. Here, we study 12 inversions by long-read genome sequencing (lrGS) (n = 9) or srGS (n = 3) and resolve nine of them. In four cases, the inversion breakpoint region was missing from at least one of the human reference genomes (GRCh37, GRCh38, T2T-CHM13) and a reference agnostic analysis was needed. One of these cases, an INV9 mappable only in de novo assembled lrGS data using T2T-CHM13 disrupts EHMT1 consistent with a Mendelian diagnosis (Kleefstra syndrome 1; MIM#610253). Next, by pairwise comparison between T2T-CHM13, GRCh37, and GRCh38, as well as the chimpanzee and bonobo, we show that hundreds of megabases of sequence are missing from at least one human reference, highlighting that primate genomes contribute to genomic diversity. Aligning population genomic data to these regions indicated that these regions are variable between individuals. Our analysis emphasizes that T2T-CHM13 is necessary to maximize the value of lrGS for optimal inversion detection in clinical diagnostics. These results highlight the importance of leveraging diverse and comprehensive reference genomes to resolve unsolved molecular cases in rare diseases

Structural Variant Allelic Heterogeneity in MECP2 Duplication Syndrome Provides Insight Into Clinical Severity and Variability of Disease Expression

BACKGROUND: MECP2 Duplication Syndrome, also known as X-linked intellectual developmental disorder Lubs type (MRXSL; MIM: 300260), is a neurodevelopmental disorder caused by copy number gains spanning MECP2. Despite varying genomic rearrangement structures, including duplications and triplications, and a wide range of duplication sizes, no clear correlation exists between DNA rearrangement and clinical features. We had previously demonstrated that up to 38% of MRXSL families are characterized by complex genomic rearrangements (CGRs) of intermediate complexity (2 ≤ copy number variant breakpoints \u3c 5), yet the impact of these genomic structures on regulation of gene expression and phenotypic manifestations have not been investigated. METHODS: To study the role of the genomic rearrangement structures on an individual\u27s clinical phenotypic variability, we employed a comprehensive genomics, transcriptomics, and deep phenotyping analysis approach on 137 individuals affected by MRXSL. Genomic structural information was correlated with transcriptomic and quantitative phenotypic analysis using Human Phenotype Ontology (HPO) semantic similarity scores. RESULTS: Duplication sizes in the cohort ranging from 64.6 kb to 16.5 Mb were classified into four categories comprising of tandem duplications (48%), terminal duplications (22%), inverted triplications (20%), and other CGRs (10%). Most of the terminal duplication structures consist of translocations (65%) followed by recombinant chromosomes (23%). Notably, 65% of de novo events occurred in the Terminal duplication group in contrast with 17% observed in Tandem duplications. RNA-seq data from lymphoblastoid cell lines indicated that the MECP2 transcript quantity in MECP2 triplications is statistically different from all duplications, but not between other classes of genomic structures. We also observed a significant (p \u3c 0.05) correlation (Pearson R = 0.6, Spearman p = 0.63) between the log-transformed MECP2 RNA levels and MECP2 protein levels, demonstrating that genomic aberrations spanning MECP2 lead to altered MECP2 RNA and MECP2 protein levels. Genotype-phenotype analyses indicated a gradual worsening of phenotypic features, including overall survival, developmental levels, microcephaly, epilepsy, and genitourinary/eye abnormalities in the following order: Tandem duplications, Other complex duplications, Terminal duplications/Translocations, and Triplications encompassing MECP2. CONCLUSION: In aggregate, this combined analysis uncovers an interplay between MECP2 dosage, genomic rearrangement structure and phenotypic traits. Whereas the level of MECP2 is a key determinant of the phenotype, the DNA rearrangement structure can contribute to clinical severity and disease expression variability. Employing this type of analytical approach will advance our understanding of the impact of genomic rearrangements on genomic disorders and may help guide more targeted therapeutic approaches

Monetary Policy and its Impact on Stock Market Liquidity: Evidence from the Euro Zone

The recent financial crisis has been characterized by unprecedented monetary policy interventions of central banks with the intention to stabilize financial markets and the real economy. This paper sheds light on the actual impact of monetary policy on stock liquidity and thereby addresses its role as a determinant of commonality in liquidity. To capture effects both at the micro and macro level of stock markets, we apply panel estimations and vector autoregressive models. Our results suggest that an expansionary monetary policy of the European Central Bank leads to an increase of stock market liquidity in the German, French and Italian markets. These findings are robust for seven proxies of liquidity and two measures of monetary policy