Foundations of Portfolio Theory

Prize Lecture to the memory of Alfred Nobel, December 7, 1990.Portfolio Theory;

Risk and Lack of Diversification under Employee Ownership and Shared Capitalism

Some analysts view risk as the Achilles Heel of employee ownership and to some extent variable pay plans such as profit sharing and gainsharing. Workers in such "shared capitalist" firms may invest too much of their wealth in the firm, contrary to the principle of diversification. This paper addresses whether the risk in shared capitalism makes it unwise for most workers or whether the risk can be managed to limit much of the loss of utility from holding the extra risk. We create an index of financial security based on worker pay and wealth, and find that workers who feel financially insecure exhibit fewer of the positive outcomes associated with shared capitalism, and are less interested than other workers in receiving more employee ownership or even more profit sharing in their workplaces. This response is substantially lessened, however, when accounting for worker empowerment, good employee relations, and high-performance work bundles that appear to buffer worker response toward risk and increase interest in shared capitalism plans. We also discuss portfolio theory which suggests that any risky investment -- including stock in one's company -- can be part of an efficient portfolio as long as the overall portfolio is properly diversified. We show that given estimates of risk aversion parameters, workers could prudently hold reasonable proportions of their assets in employee stock ownership of their firm with only a modest loss in utility due to risk. A good strategy for firms is to personalize individual portfolios on the basis of worker characteristics and preferences, developing investment strategies that would diversify each worker's entire portfolio in ways consistent with individual risk preferences.

A Cryogenic Silicon Interferometer for Gravitational-wave Detection

The detection of gravitational waves from compact binary mergers by LIGO has opened the era of gravitational wave astronomy, revealing a previously hidden side of the cosmos. To maximize the reach of the existing LIGO observatory facilities, we have designed a new instrument that will have 5 times the range of Advanced LIGO, or greater than 100 times the event rate. Observations with this new instrument will make possible dramatic steps toward understanding the physics of the nearby universe, as well as observing the universe out to cosmological distances by the detection of binary black hole coalescences. This article presents the instrument design and a quantitative analysis of the anticipated noise floor

First LIGO search for gravitational wave bursts from cosmic (super)strings

We report on a matched-filter search for gravitational wave bursts from cosmic string cusps using LIGO data from the fourth science run (S4) which took place in February and March 2005. No gravitational waves were detected in 14.9 days of data from times when all three LIGO detectors were operating. We interpret the result in terms of a frequentist upper limit on the rate of gravitational wave bursts and use the limits on the rate to constrain the parameter space (string tension, reconnection probability, and loop sizes) of cosmic string models.Comment: 11 pages, 3 figures. Replaced with version submitted to PR

All-sky search for periodic gravitational waves in LIGO S4 data

We report on an all-sky search with the LIGO detectors for periodic gravitational waves in the frequency range 50-1000 Hz and with the frequency's time derivative in the range -1.0E-8 Hz/s to zero. Data from the fourth LIGO science run (S4) have been used in this search. Three different semi-coherent methods of transforming and summing strain power from Short Fourier Transforms (SFTs) of the calibrated data have been used. The first, known as "StackSlide", averages normalized power from each SFT. A "weighted Hough" scheme is also developed and used, and which also allows for a multi-interferometer search. The third method, known as "PowerFlux", is a variant of the StackSlide method in which the power is weighted before summing. In both the weighted Hough and PowerFlux methods, the weights are chosen according to the noise and detector antenna-pattern to maximize the signal-to-noise ratio. The respective advantages and disadvantages of these methods are discussed. Observing no evidence of periodic gravitational radiation, we report upper limits; we interpret these as limits on this radiation from isolated rotating neutron stars. The best population-based upper limit with 95% confidence on the gravitational-wave strain amplitude, found for simulated sources distributed isotropically across the sky and with isotropically distributed spin-axes, is 4.28E-24 (near 140 Hz). Strict upper limits are also obtained for small patches on the sky for best-case and worst-case inclinations of the spin axes.Comment: 39 pages, 41 figures An error was found in the computation of the C parameter defined in equation 44 which led to its overestimate by 2^(1/4). The correct values for the multi-interferometer, H1 and L1 analyses are 9.2, 9.7, and 9.3, respectively. Figure 32 has been updated accordingly. None of the upper limits presented in the paper were affecte