Two Essays in Financial Economics

The following dissertation contains two distinct empirical essays which contribute to the overall field of Financial Economics. Chapter 1, entitled “The Determinants of Dynamic Dependence: An Analysis of Commodity Futures and Equity Markets,” examines the determinants of the dynamic equity-commodity return correlations between five commodity futures sub-sectors (energy, foods and fibers, grains and oilseeds, livestock, and precious metals) and a value-weighted equity market index (S&P 500). The study utilizes the traditional DCC model, as well as three time-varying copulas: (i) the normal copula, (ii) the student’s t copula, and (iii) the rotated-gumbel copula as dependence measures. Subsequently, the determinants of these various dependence measures are explored by analyzing several macroeconomic, financial, and speculation variables over different sample periods. Results indicate that the dynamic equity-commodity correlations for the energy, grains and oilseeds, precious metals, and to a lesser extent the foods and fibers, sub-sectors have become increasingly explainable by broad macroeconomic and financial market indicators, particularly after May 2003. Furthermore, these variables exhibit heterogeneous effects in terms of both magnitude and sign on each sub-sectors’ equity-commodity correlation structure. Interestingly, the effects of increased financial market speculation are found to be extremely varied among the five sub-sectors. These results have important implications for portfolio selection, price formation, and risk management. Chapter 2, entitled, “US Community Bank Failure: An Empirical Investigation,” examines the declining, but still pivotal role, of the US community banking industry. The study utilizes survival analysis to determine which accounting and macroeconomic variables help to predict community bank failure. Federal Deposit Insurance Corporation and Federal Reserve Bank data are utilized to compare 452 community banks which failed between 2000 and 2013, relative to a sample of surviving community banks. Empirical results indicate that smaller banks are less likely to fail than their larger community bank counterparts. Additionally, several unique bank-specific indicators of failure emerge which relate to asset quality and liquidity, as well as earnings ratios. Moreover, results show that the use of the macroeconomic indicator of liquidity, the TED spread, provides a substantial improvement in modeling predictive community bank failure

PRUDENTIAL REGULATORY REGIMES, ACCOUNTING STANDARDS, AND EARNINGS MANAGEMENT IN THE BANKING INDUSTRY

We analyze if a change in accounting standard or a change in prudential regulation impacts banks’ loan loss provision. We find that, in general, the banks using a principles-based accounting standard exhibit a lower level of earnings management compared to banks using a rules-based accounting standard. When a country moves from pro-cyclical macro-prudential regulations to a dynamic provisioning regime, banks are more likely to set aside a larger amount of loan loss provision for the purpose of income smoothing

In Defense of the Epistemic Imperative

Sample (2015) argues that scientists ought not to believe that their theories are true because they cannot fulfill the epistemic obligation to take the diachronic perspective on their theories. I reply that Sample’s argument imposes an inordinately heavy epistemic obligation on scientists, and that it spells doom not only for scientific theories but also for observational beliefs and philosophical ideas that Samples endorses. I also delineate what I take to be a reasonable epistemic obligation for scientists. In sum, philosophers ought to impose on scientists only an epistemic standard that they are willing to impose on themselves

Guidelines for DNA recombination and repair studies: Cellular assays of DNA repair pathways

Understanding the plasticity of genomes has been greatly aided by assays for recombination, repair and mutagenesis. These assays have been developed in microbial systems that provide the advantages of genetic and molecular reporters that can readily be manipulated. Cellular assays comprise genetic, molecular, and cytological reporters. The assays are powerful tools but each comes with its particular advantages and limitations. Here the most commonly used assays are reviewed, discussed, and presented as the guidelines for future studies

Finishing the euchromatic sequence of the human genome

The sequence of the human genome encodes the genetic instructions for human physiology, as well as rich information about human evolution. In 2001, the International Human Genome Sequencing Consortium reported a draft sequence of the euchromatic portion of the human genome. Since then, the international collaboration has worked to convert this draft into a genome sequence with high accuracy and nearly complete coverage. Here, we report the result of this finishing process. The current genome sequence (Build 35) contains 2.85 billion nucleotides interrupted by only 341 gaps. It covers ∼99% of the euchromatic genome and is accurate to an error rate of ∼1 event per 100,000 bases. Many of the remaining euchromatic gaps are associated with segmental duplications and will require focused work with new methods. The near-complete sequence, the first for a vertebrate, greatly improves the precision of biological analyses of the human genome including studies of gene number, birth and death. Notably, the human enome seems to encode only 20,000-25,000 protein-coding genes. The genome sequence reported here should serve as a firm foundation for biomedical research in the decades ahead

Two Essays in Financial Economics

The following dissertation contains two distinct empirical essays which contribute to the overall field of Financial Economics. Chapter 1, entitled “The Determinants of Dynamic Dependence: An Analysis of Commodity Futures and Equity Markets,” examines the determinants of the dynamic equity-commodity return correlations between five commodity futures sub-sectors (energy, foods and fibers, grains and oilseeds, livestock, and precious metals) and a value-weighted equity market index (S&P 500). The study utilizes the traditional DCC model, as well as three time-varying copulas: (i) the normal copula, (ii) the student’s t copula, and (iii) the rotated-gumbel copula as dependence measures. Subsequently, the determinants of these various dependence measures are explored by analyzing several macroeconomic, financial, and speculation variables over different sample periods. Results indicate that the dynamic equity-commodity correlations for the energy, grains and oilseeds, precious metals, and to a lesser extent the foods and fibers, sub-sectors have become increasingly explainable by broad macroeconomic and financial market indicators, particularly after May 2003. Furthermore, these variables exhibit heterogeneous effects in terms of both magnitude and sign on each sub-sectors’ equity-commodity correlation structure. Interestingly, the effects of increased financial market speculation are found to be extremely varied among the five sub-sectors. These results have important implications for portfolio selection, price formation, and risk management. Chapter 2, entitled, “US Community Bank Failure: An Empirical Investigation,” examines the declining, but still pivotal role, of the US community banking industry. The study utilizes survival analysis to determine which accounting and macroeconomic variables help to predict community bank failure. Federal Deposit Insurance Corporation and Federal Reserve Bank data are utilized to compare 452 community banks which failed between 2000 and 2013, relative to a sample of surviving community banks. Empirical results indicate that smaller banks are less likely to fail than their larger community bank counterparts. Additionally, several unique bank-specific indicators of failure emerge which relate to asset quality and liquidity, as well as earnings ratios. Moreover, results show that the use of the macroeconomic indicator of liquidity, the TED spread, provides a substantial improvement in modeling predictive community bank failure

Dairy Farm Business Summary, Western and Central Plain Region, 2007

E.B. 2008-07Dairy farm managers throughout New York State have been participating in Cornell Cooperative Extension's farm business summary and analysis program since the early 1950's. Managers of each participating farm business receive a comprehensive summary and analysis of their farm business. The information in this report represents averages of the data submitted from dairy farms in the Western and Central Plain Region for 2007. Program Objective The primary objective of the dairy farm business summary, DFBS, is to help farm managers improve the business and financial management of their business through appropriate use of historical data and the application of modern farm business analysis techniques. This information can also be used to establish goals that enable the business to better fulfill its mission. In short, DFBS provides business and financial information needed in identifying and evaluating strengths and weaknesses of the farm business. Format Features This regional report follows the same general format as the 2007 DFBS individual farm report received by participating dairy farmers. The analysis tables have an open column or section labeled My Farm. It may be used by any dairy farm manager who wants to compare his or her business with the average data of this region. The individual farm data, the regional averages and other data can then be used to establish goals for the business. Non-DFBS participants can download a DFBS Data Check-In Form at http://dfbs.cornell.edu. After collecting the data on the form, it can be entered in the U. S. Top Dairies business summary program at the same web site to obtain a summary of their business