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# Thermopower in p-type GaAs/AlGaAs layers

## I Introduction

We investigate the thermopower $`S`$ of two-dimensional hole gases (2DHGs) in p-type GaAs/AlGaAs. $`S`$ is defined by the relation $`𝐄=ST`$, where $`𝐄`$ is the electric field, $`T`$ is the temperature gradient and the current density $`𝐉`$ is zero. We examine the diffusion, $`S^d`$, and the phonon-drag, $`S^g`$, contributions to $`S`$. $`S^d`$ is due to the hole diffusion along $`T`$ while $`S^g`$ is due to the momentum transfer from 3D acoustic phonons through the hole-phonon coupling. We examine two samples with hole densities $`P_s`$: 0.93 1015m-2 and 1.25 1015m-2 and mobilities close to 30 m2/Vs. Hereafter we refer to the sample with the lower $`P_s`$ as Sa1 and the one with the higher $`P_s`$ as Sa2. The 2D hole layers are grown in the (311) direction. The complexity of the valence band in p-type GaAs/AlGaAs  makes the calculation of $`S`$ a difficult task. However, because the 2DHGs have low $`P_s`$ we can make the following assumptions to simplify our analysis. We assume that only the top heavy hole subband is occupied, that it is isotropic and spin splitting is not important . The value of the in-plane effective mass $`m^{}`$ is $`0.3m_e`$ which is in good agreement with the experiment. The Fermi temperatures $`T_F`$ for Sa1 and Sa2 are 8.6 K and 11.6 K, and consequently for 0.2 K $``$ T $``$ 1.2 K the 2DHGs are degenerate.

## II Theory

The diffusion contribution to the thermopower $`S`$ for a degenerate 2DHG is given by :

$$S^d=(p+1)\frac{\pi ^2k_B^2T}{3|e|E_F},$$
(1)
where $`p=(ln\tau /lnE)_{E_F}`$ with $`\tau `$ being the hole transport lifetime and $`E`$ the hole energy (with $`E_F`$ the Fermi energy). The value of $`p`$ depends on the type of scattering.

The phonon-drag contribution $`S^g`$ is calculated by using a refined formula which is based on Cantrell and Butcher’s paper  and includes non-degeneracy effects and screening of the hole-phonon interaction:

$$S^g=\frac{2\tau _F}{\sigma }\underset{m}{}_0^{\mathrm{}}_{\mathrm{}}^{\mathrm{}}𝑑q𝑑q_zq^2C(𝐐)_0^{\mathrm{}}𝑑uf^0(u^2+\gamma )[1f^0(u^2+\gamma +\mathrm{}\omega _𝐐)],$$
(2)
where $`\tau _F`$ is the hole transport lifetime at $`E_F`$, $`\sigma `$ is the hole conductivity, $`f^0`$ is the Fermi-Dirac distribution function, and $`\omega _𝐐`$ is the frequency of phonons with wave vector $`𝐐=(𝐪,q_z)`$ and mode $`m`$. Moreover: $`u^2=E\gamma `$ where the expression of $`\gamma `$ is given in reference 5. Finally, $`C(𝐐)`$ is:

$$C(𝐐)=\frac{|e|(2m^{})^{1/2}l_p\mathrm{\Xi }^2(𝐐)N^0(𝐐)Q|Z_{11}(q_z)|^2}{16\pi ^3\mathrm{}k_BT^2\rho ϵ^2(q)},$$
(3)
where $`l_p`$ is the phonon mean free path, $`N^0`$ is the Bose-Einstein distribution function, $`\rho `$ is the density of the material, $`ϵ(q)`$ is the dielectric function given by Gold and Dolgopolov , and $`|Z_{11}(q_z)|^2`$ accounts for the finite thickness of the 2DHG . Finally, $`\mathrm{\Xi }(𝐐)`$ is the ‘effective’ acoustic potential describing the hole-phonon coupling. In GaAs $`\mathrm{\Xi }^2(𝐐)`$ accounts for both deformation potential and piezoelectric coupling. For the longitudinal branch and for each of the transverse branches $`\mathrm{\Xi }^2(𝐐)`$ is : $`\mathrm{\Xi }_d^2+[(eh_{14})^2A_l/q^2]`$ and $`(eh_{14})^2A_t/q^2`$, respectively. Here, $`\mathrm{\Xi }_d`$ is the deformation potential constant, $`h_{14}`$ is the piezoelectric constant, and $`A_l`$, $`A_t`$ are the anisotropy factors given in reference 5.

## III Results and Discussion

Figures 1(a) and 1(b) show the measured (circles) and the calculated (solid lines) values of S in Sa1 and Sa2, respectively. The straight lines correspond to $`S^d`$ and the dashed lines to $`S^g`$. We see that $`S^g`$ becomes dominant for $`T>0.3`$ K. $`S^d`$ is fitted by the lines 40T $`\mu V/K`$ for Sa1 and 30T $`\mu V/K`$ for Sa2. Then from Eq. (1) we calculate $`p=0.2`$ for both Sa1 and Sa2. The small value of $`p`$ implies a weak energy dependence of $`\tau `$ which is in good agreement with mobility data in 2DHGs similar to those we examine here .

$`S^g`$ is calculated by using Eq. (2). The phonon mean free paths $`l_p`$ are determined from the measured thermal conductivity $`\lambda `$ (not shown here) by using the formula : $`l_p=(\lambda /T^3)15\mathrm{}^3\overline{v}_s^2/2\pi ^2k_B^4`$, where $`\overline{v}_s^3`$ is the average inverse cube speed of sound for the three acoustic modes in GaAs. The data for $`\lambda `$ show a $`T^3`$ dependence and $`l_p`$ is 1.6 mm for Sa1 and 1.4 mm for Sa2. The values of the other material parameters used here are the standard ones for GaAs . The usual unknown in the $`S^g`$ calculations is $`\mathrm{\Xi }_d`$. Here we use $`\mathrm{\Xi }_d=12.5`$ eV. However, we find that the piezoelectric contribution to $`S^g`$ is dominant over the deformation potential one at all the temperatures considered. The former is $`60\%`$ of the total $`S^g`$ at $`T=1.2`$ K and increases to $`95\%`$ at $`T=0.2`$ K. Consequently, the uncertainty in the value of $`\mathrm{\Xi }_d`$ does not effect our results and, practically speaking, the calculation of $`S^g`$ does not involve any adjustable parameters. The good agreement between the theoretical and experimental values of $`S^g`$ gives us confidence in the validity of our theoretical considerations and suggests the extension of the experiments and the calculations of $`S^g`$ to higher temperatures where the deformation potential coupling becomes important and $`\mathrm{\Xi }_d`$ can be determined from the data.

Finally, Figures 2(a) and 2(b) depict the ratio $`S/\lambda `$ for Sa1 and Sa2, respectively. The circles are the experimental values and the crosses the theoretical predictions. At $`T<0.3`$ K where $`S^d`$ dominates we expect $`S/\lambda `$ to vary as $`T^2`$ which is observed in Figure 2. At higher T both experiment and theory show a maximum in $`S/\lambda `$. This is a Kohn resonance occurring when the dominant phonon wave vector  $`\overline{q}=5k_BT/\mathrm{}\overline{v}_s`$ becomes equal to $`2k_F`$, where $`k_F`$ is the Fermi wave number. The temperatures at which we expect the maximum are 0.8 K for Sa1 and 0.9 K for Sa2 which are in good agreement with the data.

In conclusion, we have calculated $`S`$ in two p-type GaAs/AlGaAs layers and found a good agreement with the experiment. $`S^g`$ is dominant for $`T>0.3`$ K. We suggest an extension of the experiments to $`T>1`$ K where comparison with the theory can determine the deformation potential constant $`\mathrm{\Xi }_d`$.

## Acknowledgements

M.T. and P.N.B. wish to acknowledge the United Kingdom Engineering and Physical Sciences Research Committee for financial support.


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# Confusion errors in astrometry and counterpart association

## 1 Introduction

Fainter is (usually) better when it comes to star and galaxy counts. However, there are fundamental limits to faint imaging from confusion which cannot be overcome by increasing exposure times alone. The sea of unresolved sources fainter than the detection limit creates a noise in the sky, which does not improve with more data.

Many of the issues associated with this confusion noise have been discussed before (eg, Scheuer 1957; Condon 1974; Franceschini 1982; Hacking & Houck 1987; Barcons 1992), however the large number of present-day observations that are or soon will be pushing this confusion limit suggests a new discussion. In particular, in recent years there has been a concerted effort to produce very deep, multi-wavelength studies of blank sky in order to identify extragalactic sources as comprehensively as possible. These studies have been very successful, identifying populations of radio-, submillimeter-, infrared-, visual- and x-ray-bright galaxies and associating them with their counterparts in other bands (Djorgovski et al 1995; Williams et al 1996; Hogg et al 1996; Rowan-Robinson et al 1997; Richards et al 1998; Hughes et al 1998; Barger et al 1998; Eales et al 1999; Aussel et al 1999; Elbaz et al 1999; Gardner et al 2000; Brandt et al in preparation; Dickinson et al in preparation). Some of the faintest sources in some of the most crowded fields (in the sense of number of sources per resolution element) have not shown clearly distinguished counterparts at other wavelengths (Hughes et al 1998; Smail et al 1998; Barger et al 1999b). This raises the question “could confusion be playing a role?”

This paper is a first attempt at characterizing position shifts due to confusion in astronomical images. Simulated images of crowded fields are presented, made in the most optimistic way: no photon noise, a perfectly understood gaussian point spread function or beam shape, pointlike sources, a power-law number–flux relation of known slope, and no angular clustering. Even with these optimistic inputs, the resulting images show that it is impossible to accurately measure positions and fluxes of sources that are more than an order of magnitude brighter than the flux level corresponding to one source per beam (a beam being one resolution element in the image). Recent work making use of the limit “one source per beam” (eg, Blain et al 1998) is therefore overly optimistic.

The standard rule-of-thumb is that confusion becomes important at 1/30 of a source per beam. It is possible to get information from the statistics of the background noise fainter than the level of 1/30 source per beam (eg, Scheuer 1957; Condon 1974), but in terms of identifying and measuring individual sources, 1/30 is regarded as the limit. This paper tests the rule-of-thumb for confusion-induced astrometry errors, which are particularly important for deep, multi-wavelength studies, in which counterpart identification across multiple data sets is important. Astrometric shifts due to confusion have been predicted and observed in the context of microlensing data (Goldberg 1998; Goldberg & Woźniak 1998) and are expected to limit future stellar astrometry experiments (Yu et al 1993; Rajagopal & Allen 1999).

For the purposes of this paper a “beam” is taken to be the solid angle of the $`1\sigma `$-radius circle of the gaussian point spread function, or $`\mathrm{\Omega }_{\mathrm{beam}}=\pi \sigma ^2`$. Note that for a gaussian, $`\sigma \theta _{\mathrm{FWHM}}/2.35`$ where $`\theta _{\mathrm{FWHM}}`$ is the angular full width at half-maximum of the point spread function. The number of sources per beam $`s/b`$ at a given flux level $`S`$ is the integrated number of sources $`N(>S)`$ in an image brighter than flux $`S`$ divided by the number of beams in the solid angle of the image or $`(\mathrm{\Omega }_{\mathrm{image}}/\mathrm{\Omega }_{\mathrm{beam}})`$.

## 2 Method and analysis

Four $`512\times 512`$ pixel artificial images were made with sources randomly distributed over the image (and in fact over an area larger than the image so that image edges are realistic). The sources were randomly assigned fluxes in power-law distributions $`d\mathrm{log}N/d\mathrm{log}S=\beta `$ where $`\beta =1.50`$, $`1.00`$, $`0.75`$, and $`0.50`$, one value of $`\beta `$ per image. Positions were randomly assigned and were not quantized onto the pixel grid. The point-spread function was chosen to be perfectly gaussian with $`\theta _{\mathrm{FWHM}}=4`$ pixels, so that it is well sampled. Each image contains $`\mathrm{\Omega }_{\mathrm{image}}/\mathrm{\Omega }_{\mathrm{beam}}=2.88\times 10^4`$ beams. The artificial source catalogs were truncated at $`s/b=3`$ sources per beam, ie, at much higher angular density than the $`s/b1/30`$ sources per beam rule-of-thumb. The four artificial images are shown in Figure 1

No noise was added to the images; the sources are not extended beyond the gaussian beam shape; and the sources were not given any angular clustering. The artificial images represent high optimism.

The background levels in the four images were fit by sigma-clipping (ie, iteratively removing outlier pixels) at 3-sigma and they were subtracted from the images. Although the input background levels were zero, the fit levels are above zero for all of the images because of the integrated flux from all the unresolved sources. In almost all real observations but especially at wavelengths longer than the near-ultraviolet (ground-based) or visual (space-based), images contain large DC levels from sky emission or telescope thermal emission so the true background (or, more accurately, foreground) is unknown and must be fit by a procedure similar to the sigma-clipping used here. For $`\beta 1.0`$, the background levels do not converge, in the sense that the background light is dominated by the faintest sources, and in these artificial images the background level is just set by the depth to which the artificial source catalogs are simulated. However, experiments involving changing this depth show that the confusion noise or level of background modulation in the artificial images has converged.

Note that the sigma-clipping background estimation technique is equivalent to (although less subjective than) estimating the background from regions of the image that appear empty or blank.

At each location of a source in the artificial source catalog, a centroid is found in the artificial image in a box of side length $`2\theta _{\mathrm{FWHM}}`$ centered on the artificial source location in the catalog. These centroids are what will be referred to as the “measured” positions.

The catalog was trimmed to only “isolated sources”: The source positions measured by centroiding are in general shifted from the true positions in the artificial source catalog; sometimes this is because there is a brighter source nearby that is blending with the fainter source of interest, sometimes this is just because the source is projected onto the roiling sea of unresolved, fainter sources. Only the latter effect is properly an effect of confusion noise. For this reason, sources with measured positions closer than $`2\theta _{\mathrm{FWHM}}`$ from a brighter source were dropped from the analysis that follows. This restriction to “isolated” sources (excluding faint sources found to be near brighter sources) removes many of the largest deviations of measured from true positions, especially for the artificial images with $`\beta <1`$, where bright sources dominate.

The centroid errors for the isolated sources, in units of the beam’s half-width at half maximum (HWHM) are shown in Figure 2 as a function of the source density, or number of sources per beam $`s/b`$. Really these are measured as a function of flux, but since source density increases with decreasing flux limit, the quantities are interchangeable; each point is plotted at the source density $`s/b`$ which would be found in a source catalog made down to a limit equal to that source’s flux. A running median and a running 90 percent level are also shown. The results are dramatic. For $`\beta =1.5`$, which is the typical count slope for submillimeter sources or nearby stars, measured source positions are occasionally (10 percent of the time) displaced from their true source positions by a significant fraction of the half-power point of the beam at $`s/b=1/40`$; such displacements are common at $`s/b=1/20`$. These problems are alleviated as the counts become less steep; at $`\beta 0.75`$ (the typical count-slope for faint visual and infrared sources), the worst 10 percent of positions are displaced by the HWHM at $`s/b=1/17`$. Recall that these numbers (and Figure 2) are computed only for isolated sources, as defined above.

Crowding-induced centroid shifts have been observed in some microlensing events: As a faint lensed star becomes brighter, its apparent position shifts towards its true position because confusion noise becomes less important (Goldberg 1998; Goldberg & Woźniak 1998).

For each measured source, the gaussian beam shape is fit to the peak in a square box of side length $`2\theta _{\mathrm{FWHM}}`$ centered on the measured centroid. This provides a measured flux. The measured and true fluxes are compared in Figure 3. Again the results are shown in terms of source density rather than flux level. The flux errors become bad at roughly the same source per beam levels as the position errors. Note also that at the faint end there is a bias in the median flux error, caused by the subtraction of a finite background from the images. This bias will exist in all observations that are analyzed after background subtraction (all visual and near-infrared images) and all observations made with chopping (many infrared and submillimeter images).

## 3 Discussion of assumptions

As has been emphasized, this study makes use of very optimistic assumptions about the properties of the imaging data. An experiment was performed to test one of these assumptions: the perfectly gaussian beam. An image was made by “beam switching” with a nod of $`3\theta _{\mathrm{FWHM}}`$ so that the beam consists of a central positive gaussian flanked by two negative gaussians of half the power but the same FWHM separated by angles of $`\pm 3\theta _{\mathrm{FWHM}}`$ on either side. These parameters were chosen to roughly match typical submillimeter observing strategies (eg, Eales et al 1999). In these artificial beam-switched images, at constant source density, the median positional errors are typically $`30`$ percent worse at $`\beta =1.5`$ and a factor of $`3`$ worse at $`\beta =0.75`$, relative to the images made with the single gaussian beam. Pure gaussian beam may therefore be an unrealistically optimistic assumption, although it is close to correct for atmosphere-limited visual and near-infrared observations.

The assumption of point-like or non-extended sources is overly optimistic in ground-based and space-based optical imaging, where recent data is not, by and large, confusion limited. It is probably not a problem for recent submillimeter observations, which have a beam with $`\theta _{\mathrm{FWHM}}15`$ arcsec. Unfortunately, a proper treatment of the effects of finite source sizes involves modeling distributions of sizes, radial profiles and shapes, all as a function of flux; this is outside the scope of this work.

The assumption that sources are unclustered is probably optimistic for virtually all deep imaging observations. Clustering becomes important whenever the angular correlation length is larger than or on the order of the beam size (eg, Barcons et al 1992), which is true for virtually all optical and near-infrared imaging. This condition is probably also met for the submillimeter sources, although at present the numbers of sources are too small for a direct measurement. Again, a full treatment requires parameterization of the angular clustering and its dependence on flux.

The assumption of power-law number–flux relation must be incorrect in detail, in the sense that the integrated flux from sources in a power law diverges either at the faint or bright end (or both). In particular, the $`\beta =1.5`$ models presented here diverge in terms of total flux (although not in terms of fluctuations) at the faint end. Experiments of varying the depth to which the artificial source catalogs go have not shown significant changes in the error distributions. The errors are not dominated by the very faintest sources; they are dominated by the sources with fluxes which fall between the flux of the source in question and the level at which there is $`s/b1`$ source per beam. It is the number–flux relation in this region only which is important to the confusion noise.

## 4 Detected sources

Perhaps the single most unrealistic assumption is that the true source positions are known in advance; ie, the measurement of centroid shifts, above, was performed by taking centroids in the vicinities of the true source positions. This assumption is extremely optimistic, because in a real astronomical project, sources are usually detected ab initio, with no prior knowledge of their positions.

To test the influence of this optimistic assumption, sources were detected in the the simulated images with DAOPHOT (Stetson 1987) and matched, after detection, to the true source positions. This matching is not unique; since position shifts are large, there are many faint “detected” sources which could potentially be matched with each of the faint “true” source positions, and vice versa. To reduce this ambibuity, the detected source flux can be compared with the true flux. Figure 4 shows the positional errors between detected and true sources as a function of detected source density.

The detected sources were matched to the true source positions by taking, for each detected source, the closest true source with its flux between 0.67 and 1.33 of the detected source flux. This choice is admittedly arbitrary, but it represents a cut equivalent to something like 3-sigma. At bright limits, the flux cut does not affect the results, but at faint levels, where for every detected source there are several true source candidates, this cut does affect the positional errors. Figure 4 shows that the positions obtained by detection with no prior information are indeed worse than those obtained with the a priori knowledge. This further strengthens the statement that the confusion effects shown in this paper are in fact far less severe than in any real astronomical experiment.

## 5 Discussion of recent data

The deepest recent ground-based visual and near-infrared observations of blank sky are not confusion limited (eg, Djorgovski et al 1995; Hogg et al 1997). However, since they are in the region of $`s/b=1/50`$ sources per beam, it does not make sense to perform deeper imaging until wide-field, ground-based adaptive optics can be used. Radio imaging has been confusion limited for some time (eg, Condon 1974) so investigators are usually careful to truncate analyses before confusion noise becomes destructive. In all these fields of astronomy, telescope time is better spent increasing field area than depth. Although until the launch of Chandra essentially all deep x-ray imaging was confusion limited (eg, Barcons 1992), present-day space-based x-ray and optical imaging is not yet at the confusion limit (Williams et al 1996; Brandt et al in preparation). This may change with planned future instrumentation and exposures.

Unfortunately, several recent publications on faint mid-infrared and submillimeter sources have ignored confusion as a possible source of error and are beyond the confusion limit. This is particularly serious since the number count slopes are very steep ($`2.0<\beta <1.5`$) both observationally and according to simple models (Hughes et al 1998; Blain et al 1998; Barger et al 1999a; Aussel et al 1999; Elbaz et al 1999). One $`850\mu \mathrm{m}`$ study shows sources to $`s/b1/11`$ (Hughes et al 1998) and others show sources to $`s/b1/50`$ (Smail et al 1998; Eales et al 1999). The ISO counts at $`15\mu \mathrm{m}`$ have been pushed to $`s/b1/25`$ (Aussel et al 1999). The fact that a significant fraction of the submillimeter sources show no striking visual counterparts is not at all surprising; the submillimeter positions will be shifted from their true positions by more than the HWHM or 7.4 arcsec. The authors generally consider only a region of radius $`\theta _{\mathrm{HWHM}}/(S/N)`$ where $`(S/N)`$ is the estimated signal-to-noise ratio of the detection; these radii are generally 2 to 4 arcsec (Hughes et al 1998; Smail et al 1998; Barger et al 1999b). The results of the analysis presented here suggests that these authors should be looking in a region a factor of 4 to 10 larger in solid angle.

It might be hoped that confusion is not so destructive because perhaps the true mid-infrared and submillimeter source number–flux relations are not nearly as steep as what is measured and modeled. However, if so, many of the faintest reported sources must truly be spurious. One phenomenological model (Barger et al 1999a) shows the number–flux relation flattening just below the faintest detected sources, but it does not flatten quickly enough to solve the confusion problem. Future imaging efforts would be better spent increasing field area than exposure times, and counterparts ought to be sought in large error boxes.

A recent comprehensive review (Blain et al 1998) estimates the flux levels at which future ground- and space-based infrared through radio surveys will become confusion limited, using the incorrect criterion of $`s/b=1`$ source per beam. Their limiting flux levels become more realistic when multiplied by a factor of $`10`$ to $`30`$ to bring the surface densities down to the confusion noise limits presented here.

Another area in which deep imaging in crowded fields is necessary is studies of the Galactic center (eg, Eckart & Genzel 1997; Genzel et al 1997; Ghez et al 1998). In these studies, accurate astrometry is needed not just for identifying counterparts at other wavelengths, but also for measuring proper motions, on the basis of which the central black hole mass is estimated. Current analyses of the Galactic center go to more crowded depths than $`s/b=10`$ sources per beam in the central $`1\mathrm{arcsec}^2`$. It may be important for the Galactic center investigators to show that the large proper motions they observe are truly the motions of individual bright stars and not seriously affected by many small motions in the underlying sea of unresolved sources. If the detected motions have a significant confusion-induced component, it can be predicted that the stellar accelerations will deviate significantly from their gravitational expectations. This prediction may already have been falsified, at least at bright levels (Ghez et al 2000).

## 6 Conclusions

For typical faint imaging in the visual and near-infrared, in which number counts have the form $`d\mathrm{log}N/d\mathrm{log}S=S^\beta `$ with $`\beta 0.75`$, the confusion limit rule-of-thumb that imaging should not be pursued much fainter than $`s/b1/30`$ sources per beam is essentially correct, both for obtaining good positions and good photometry. Optimistic simulations show that positions and fluxes of sources more numerous than this condition are likely to have large uncertainties. When number counts are steep, with Euclidean $`\beta =1.5`$ or steeper, the problem is even more severe and a better rule-of-thumb is something like $`s/b1/50`$.

Source identifications in one set of imaging data based on detections in another set will be affected by these confusion-induced astrometry errors. It is essential that surveys working near the confusion limit perform realistic simulations (which include the sources well faint of any detection limits) in order to draw conservative positional error boxes for source identification.

Gerry Neugebauer and Tom Soifer drummed the “30 beams per source” rule-of-thumb into my head. Useful comments, code and information came from Tal Alexander, John Bahcall, Roger Blandford, Tom Chester, Judy Cohen, Jim Condon, Daniel Eisenstein, Tom Jarrett, Wayne Landsman, Bruce Partridge, Eric Richards, Douglas Scott and Ian Smail. Financial support was provided under Hubble Fellowship grant HF-01093.01-97A from STScI, which is operated by AURA under NASA contract NAS 5-26555. This research made use of the NASA ADS Abstract Service.


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# Stock Market Speculation: Spontaneous Symmetry Breaking of Economic Valuation

## 1 Introduction

There is a growing interest in understanding the divergence in the stock market between“New Economy” and “Old Economy” stocks, between technology and almost everything else. Over the past two years, stocks in the Standard & Poor’s technology sector have risen nearly fourfold, while the S&P 500 index has gained just 50%. And without technology, the benchmark would be flat. In January 2000 alone, 30% of net inflows into mutual funds went to science and technology funds, versus just 8.7% into S&P 500 index funds. As a consequence, the average price-over-earning ratio P/E for Nasdaq companies is above 200 (corresponding to a ridiculous earning yield of $`0.5\%`$), a stellar value above anything that serious economic valuation theory would consider reasonable. It is worth mentioning that the very same concept and wording of a “New Economy” was hot in the minds and mouths of investors in the 1920’s. The new technologies of the time were General Electric, ATT and other electric and communication companies, and they also exhibited impressive price appreciations of the order of hundreds of percent in a 18 month time intervals before the 1929 crash.

Another noteworthy phenomenon is the anomalous occurrence of large sudden losses (not necessarily always associated with the ‘new economy’ stocks). For instance, three of the ten largest companies in terms of their capitalization on the US market have recently seen their stock price crash. IBM (P/E $`30`$) dropped 33% from a top of 133.31 on 14-Sep-99 to a low of 90.25 on 5-Nov-99 and during that period dropped 15% from 107 on 20-Oct-1999 to 91 on 21-Oct-1999 in one day (see figure 1), due to announcement by IBM executives of lower than expected earnings, that surprised Wall Street. This 33% drop corresponds to a market capitalization loss of about $73 billion. Lucent Technologies (P/E $`100`$, P/d $`900`$), the telephone equipment giant, dropped 28% from a close of 72.375 on 5-Jan-2000 to a close of 52 on 6-Jan-2000 (see figure 2) after the telephone equipment maker warned that its first-quarter earnings will fall short of expectations, surprising investors. This 28% drop corresponds to a market capitalization loss of about $56 billion. Procter & Gamble (P/E $`22`$), the Cincinnati-based maker of Tide laundry detergent and Crest toothpaste, dropped 30% from 87.44 on 6-Mar-2000 to 61 on 7-Mar-2000 leaving the stock at its lowest since April 1997 (see figure 3) after it caught analysts and investors off guard with a profit warning that sent its stock and those of other consumer products makers in the United States and overseas plummeting. This 30% drop corresponds to a market capitalization loss of about $22 billion.

These enormous events are outliers in the following sense. As seen on figure 4, which shows the (complementary) cumulative distribution of negative daily returns $`(p(t)p(t1))/p(t1)`$ expressed in percent, for the three compagnies IBM, Lucent technology and Procter & Gamble for the period from 1st January 1995 to 27 March 2000, most of the negative returns can be consistently described by an exponential distribution, qualified as a straight line in this semi-logarithmic representation , with a typical negative return approximately equal to $`3\%`$. However, the three recent dramatic daily losses on these three companies stand out very clearly off the tail of the exponential distributions. Extrapolating the exponentials, this leads to an average repeat time of about a century for the IBM 15% drop, and of the order of thousands of centuries for the two other events. This confirms the picture found for the Dow Jones index  that there exists special times where extraordinary events occur, suggestive of some amplification of an instability.

These observations and many others, including so-called speculative bubbles and crashes , have led to question the idea, cherished by a long tradition of academic researchers, that markets are efficient and rational, with alternatives such as human psychology and behavior in financial decision making, bounded rationality, agent-based modeling and evolutionary game theory being actively investigated. Here, we advance the novel idea that there is a deep connection between firm-foundation pricing and speculative phases: they can be seen as two phases of the same dynamics separated by a bifurcation or “phase transition”. If the risk-adjusted expected growth rate is large enough, we find that a novel speculative-like regime can spontaneously appear which can sustain large price values. This regime is characterized by a large sensitivity with respect to expectations, which may explain the observed large reactions of the market.

An important consequence of our proposed theory is that “speculation” is not a distinct “animal” but rather the “mutation” of normal (approximately) rational behavior. We do not imply that all speculative behaviors can be fully quantitatively understood from our approach; rather, we envision the speculative phase emerging from the spontaneous price symmetry breaking as the nucleus for speculation blossoming with imitation and behaviorial processes.

In section 2, we summarize the firm-foundation theory and discuss its consequences. In section 3, we present the concept of price parity symmetry and show how, together with the firm-foundation theory, it leads to the concept of a critical bifurcation to a spontaneous symmetry breaking regime and suggest the existence of a “speculative phase” linked to the fundamental valuation phase. Section 4 proposes a simple dynamical extension of the firm-foundation theory that captures both regimes and leads to observable predictions. Section 5 analyses finite time-horizon effects and the effect of future prices on expectation of growth. Section 6 concludes.

## 2 Equilibrium economic valuation: effect of expected dividend growth

The “firm-foundation” theory asserts that a stock has an intrinsic value determined by careful analysis of present conditions and future prospects. Developed by S. Eliot Guild  and John B. Williams , it is based on the concept of discounting future dividend incomes. In the words of Burton G. Malkiel , discounting refers to the following concept: “rather than seeing how much money you will have next year (say $1.05 if your put $1 in a saving bank at 5% interest), you look at money expected in the future and see how much less it is currently worth (thus next year’s 1$ is worth today only about 95c, which would be invested at 5% to produce $1 at that time).” In practice, the intrinsic value approach is a quite reasonable idea which is however confronted with slippery estimations: the investor has to estimate future dividends, their long-term growth rates as well as the time-horizon over which the growth rate will be maintained. Notwithstanding these problems, this approach has been promoted by Irving Fisher  and Graham and Dodd  so that generations of Wall Street security analysists have been using some kind of “firm-foundation” valuation to pick their stocks.

Consider a company paying a dividend $`d`$ per share at regular time intervals $`\tau `$, $`2\tau `$, … Let $`r`$ be the fixed risk-free interest rate (the “price of money”) paid by investing one unit of wealth over a time $`\tau `$. The time discount factor per unit time $`\tau `$ is thus $`1/(1+r)`$: one unit of weath at time $`t=\tau `$ is worth $`1/(1+r)`$ at present $`t=0`$.

In the firm-foundation equilibrium economic theory , the equilibrium price $`p`$ of a share is the present expected discounted value of all future payoffs:

$$p=d+\frac{d}{1+r}+\frac{d}{(1+r)^2}+\mathrm{}=(1+r)\frac{d}{r}.$$
(1)
This standard result expresses a no-arbitrage condition as the instantaneous return $`d/p`$ obtained by owning the stock is essentially equal to the risk-free rate. The price-over-dividend ratio $`p/d`$ is

$$\frac{p}{d}=\frac{1+r}{r}.$$
(2)
The price-over-earning ratio uses the company’s earning (total revenues minus expenses after tax). The price-over-dividend ratio is function of the company’s strategy of how much of the earnings should be distributed to the share holders in the form of dividends rather than reinvested in the company or used to pay debts. Earnings and dividends are empirically correlated and exhibit parallel evolutions but they have different explanatory and predictive powers of price returns. Lamont  has shown recently that the price-over-dividend ratio forecasts excess returns of stocks: high dividends forecast high returns. In contrast, high earnings forecast low returns. One interpretation is that dividends measure the permanent component of stock prices, due to managerial behavior in setting dividends because they help measure the future dividends. The level of earnings is a good measure of current business conditions: a more favorable economy implies larger earnings, for which investors require lower future returns as risk premia, hence larger earnings predict smaller returns.

Let us now consider the possibility for the dividend to grow as a function of time at the fixed rate $`r_d`$, as a result of increased productivity and other factors. $`r_d`$ has to be understood as the expected growth rate of future dividends. Usually, growth forecasts are performed on the company’s growth, in terms of its earnings. We shall assume for simplicity that both dividends and earnings have statistically the same growth rate. Equation (1) is then changed into

$$p=d+d\frac{1+r_d}{1+r}+d\frac{(1+r_d)^2}{(1+r)^2}+\mathrm{}=(1+r)\frac{d}{rr_d}.$$
(3)
The price-over-dividend ratio is then changed into

$$\frac{p}{d}=\frac{1+r}{rr_d}.$$
(4)
This is the celebrated valuation formula of Gordon and Shapiro .

Expression (4) accounts for the impact on the stock price of the expected dividend payout $`d`$, the growth rate $`r_d`$ and the market interest rate $`r`$. The last important ingredient is the degree of risk. There is no unique measure of risk. For our purpose, risk embodies several components, such as market price and earning volatilities as well as growth rate uncertainty and variability. To quantify the impact of these risks on the value $`p`$ of a stock, we shall adopt the pragmatic procedure in which the growth rate $`r_d`$ is adjusted for risk by replacing it by $`r_d^{}=r_dR`$, where $`R`$ is an aggregate risk level. In the spirit of a quality ratio $`r_d/R`$, such as the Sharpe ratio, $`R`$ renormalizes $`r_d`$. Errors in estimating $`R`$ will increase the uncertainties on $`r_d^{}`$ already present due to the large uncertainties in the growth rate $`r_d`$. Expression (4) is thus replaced by

$$\frac{p}{d}=1+\frac{1+r_dR}{1+r}+\frac{(1+r_dR)^2}{(1+r)^2}+\mathrm{}=\frac{1+r}{r+Rr_d}.$$
(5)
In accordance with intuition, the price-over-dividend increases with dividend and with the rise of expected dividend due to a positive growth rate, i.e. with the expectation that future gains will grow. This expression (5) reveals interesting perhaps less intuitive phenomena. When the risk-adjusted dividend growth rate $`r_d^{}=r_dR`$ is not small compared to the risk-free interest rate $`r`$, (5) shows that the price $`p`$ can be many times larger than the valuation formula (1) would lead us to believe. Take for instance, $`r=5\%`$, $`r+R=15\%`$ and $`r_d=14.5\%`$. Expressions (2) and (5) give respectively $`\mathrm{P}/\mathrm{d}=21`$ and $`210`$. In this framework, large price-over-dividend ratios express the large expected growth rate of future earnings. This valuation formula (5) may actually form the basis for a partial rationalization of some large observed price-over-dividends and probably also price-over-earning ratios. This is particularly true for the “new economy” based on high-growth information- and internet-based companies that are expected to develop large future earnings. What (5) teaches us is that their pricing may actually be not as much irrational as often believed but rather reflects the high future growth of the expected earnings. The new emphasis is not so much on the present dividend $`d`$ but on its future risk-adjusted growth rate $`r_d^{}`$. This view has been expounded by many workers (see intuitive presentations in  and ).

What happens when the risk-ajusted growth rate $`r_d^{}`$ becomes larger than $`r`$, so that the valuation formula (5) gives a meaningless negative price? In the economic literature, this regime is known as the growth stock paradox . This is the question addressed in the sequel.

Note that the valuation problem has been posed in 1938 by Von Neumann  who demonstrated that, in an economy with balanced growth, the growth rate is always identical to the interest rate and thus equal to the discounted rate. Zajdenweber  then points out that the value of a share is, as a consequence, always infinite as seen from (3). The intuition is that when $`r_d^{}`$ becomes equal to (and this is all the more true when it is larger than) $`r`$, the price of money is not enough to stabilize the economy: it becomes favorable to borrow money to buy shares and earn an effective rate of return, which is positive for all values of the dividend. This is exactly what happened on the US market in the rally preceeding the Oct. 1929 crash . Note that a negative $`rr_d^{}`$ is similar to a negative interest rate $`r`$ in absence of growth and risks: it leads to an arbitrage opportunity since you can borrow $1 now, keep it under your mattress, and give back $`\$1\times (1|r|)`$ at a later time, pocketing $`100|r|`$ cents in the process. Another well-known situation of negative $`rr_d^{}`$ is when the inflation rate is larger than the interest rate. Tax laws which tax the nominal income and ignore inflation reduce the effective $`r`$ even more. Here again, you lose money by keeping it.

The valuation formula (3) can be easily generalized to account for arbitrary time-varying dividends and rates

$$P/d=1+a_1+a_1a_2+\mathrm{}+a_1a_2\mathrm{}a_n+\mathrm{},$$
(6)
where $`a_n`$ is the global “discount” factor $`(1+r_dR)/(1+r)`$ at year $`n`$ in the future, taking into account a possible variation of the risk-free interest rate and of the risk-adjusted dividend growth rate (which can be negative). The sum of products given in the r.h.s. of (6) has been studied in a variety of contexts (see  for a review) including a mechanism for Pareto distributions of cities  and in relation with ARCH(1) processes . The asymptotic behavior of expression (6) is well-understood:

* for $`\mathrm{ln}a<0`$, where the brackets denote the expectation with respect to the distribution of $`a_n`$, $`p/d`$ is finite and is distributed with a power law tail with exponent depending sensitively on the distribution of the $`a_n`$’s . This is reminiscent of the fat tail character of price returns (see  for the relation between prices and price returns in this context) and of the sensitivity of prices to external news that may be seen to impact the estimation of the risk-adjusted growth rate $`r_d^{}`$.
* For $`\mathrm{ln}a>0`$, the sum grows on average exponentially fast with the number of terms (time horizon) with an average growth rate equal to $`\mathrm{ln}a`$, while exhibiting large fluctuations. This regime is qualitatively the same as that seen in (5) for $`\frac{1+r_dR}{1+r}>1`$, i.e. $`r<r_dR`$.
* The critical transition point $`\mathrm{ln}a=0`$ is in general also characterized by a growth as the number of terms included increases, but this growth is sub-exponential and depends on details of the distribution and on correlations .

## 3 Spontaneous price valuation

### 3.1 Negative prices and price parity symmetry

Expressions (3) and (5) have no meaning for $`r_d^{}>r`$, as the price become negative which makes no apparent sense. This argument that prices should always remain positive was actually at the basis of the rejection of Bachelier’s seminal random walk model of prices  in favor of Samuelson’s random walk model of the logarithm of prices , which has become the paradigm in economic and finance modeling.

Actually, it makes perfect sense to think of negative prices. We are ready to pay a (positive) price for a commodity that we need or like. However, we will not pay a positive price to get something we dislike or which disturb us, such as garbage, waste, broken and useless car, chemical and industrial hazards, etc. Consider a chunk of waste. We will be ready to buy it for a negative price, in order words, we are ready to take the unwanted commodity if it comes with cash. This exchange of waste for income is the basis for the industry of waste management. Nuclear waste from some countries such as Japan for instance are shipped to La Hague reprocessing complex in France, which is ready to store the unwanted wastes for income. The Japanese are thus paying a price to get rid of their waste, that is to say, La Hague is paying a negative price to get the nuclear waste commodity! As a matter of fact, this exchange of wastes is at the basis of a huge business for the present and future management of industrial and nuclear waste that counts in hundreds of billions of dollars. A less obvious example is the case of electricity companies which sell surplus electricity in exceptional cases for negative prices; it is expensive for them to shut down a power plant and to restart it again (R. Weron, private communication). Stauffer humoristically points out (private communication) that the page charges some authors pay to the journals to get rid of their manuscripts are a nice example of negative prices. Actually, this is not correct but this example illustrates the intricacy of the concept: authors pay to get published, not get rid of their paper but to buy fame, i.e. cash leaves the authors but fame comes to them (hopefully), hence the positivity of the price.

In sum, we pay a positive price for something we like and a negative price for something we would rather be spared of (i.e. we pay a (positive) price to get rid of it or we need a remuneration to accept this unwanted commodity). This concept is illustrated in figure 5.

In the economy, what makes a share of a company desirable? Answer: its earnings, that provide dividends, and its potential appreciation that give rise to capital gains. As a consequence, in absence of dividends and of speculation, the price of share must be nil. There is thus a natural

$$pp\mathrm{parity}\mathrm{symmetry},$$
(7)
where both positive and negative prices quantify our liking or disliking of the commodity. The earnings leading to dividends $`d`$ thus act as a symmetry-breaking “field”, since a positive $`d`$ makes the share desirable and thus develop a positive price. It is clear that a negative dividend, a premium that must be paid regularly to own the share, leads to a negative price, i.e. to the desire to get rid of that stock if it does not provide other benefits. Andersen et al.  have also used the price, rather than its logarithm, to develop a fundamental framework of price patterns.

For a share of a company that is neither providing utility nor a waste, there is no intrinsic value for it if it does not give you more buying power for something you desire. Hence, its price is $`p=0`$ for $`d=0`$. We can allow for both positive and negative price fluctuations, but there is a priori nothing that breaks the symmetry (7).

We stress that the price symmetry (7) is distinct from the gain/loss symmetry of stock holders, before the advent of limited liability companies in the middle of last century. With the present limited liability of stock holders, owning a stock is akin to hold an option: gain is accrued from dividend and capital gains; on the downside, losses are limited at the buying price of the stock. This asymmetry, which is a relatively recent phenomenon and led to the full development of capitalism, is conceptually distinct from the symmetry (7) of prices.

These considerations can be summarized by the following analogy between valuation and physical phase transitions (liquid-gas or paramagnetic-ferromagnetic) as, for instance, examplified by the canonical Ising model :

$`\mathrm{price}p`$ $``$ $`\mathrm{order}\mathrm{parameter}`$
$`\mathrm{riskless}\mathrm{interested}\mathrm{rate}\mathrm{above}\mathrm{risk}\mathrm{adjusted}\mathrm{dividend}\mathrm{growth}\mathrm{rate}rr_d^{}`$ $``$ $`\mathrm{reduced}\mathrm{control}\mathrm{parameter}`$
$`{\displaystyle \frac{p}{d}}`$ $``$ $`\mathrm{susceptibility}\chi `$
$`\mathrm{dividend}d`$ $``$ $`\mathrm{external}\mathrm{field}H.`$
In this analogy, the price equation (3) becomes

$$p=\chi H.$$
(8)
Notice again that the positive value of the price is associated with the positivity of the dividend. Expression (8) takes the standard form for the dependence of the order parameter as a function of the external field $`H`$ within linear response theory . The coefficient of proportionality $`\chi `$ is seen to diverge as the control parameter $`rr_d^{}`$ approaches $`0`$

$$\chi (rr_d^{})^\gamma ,\mathrm{with}\mathrm{the}\mathrm{standard}\mathrm{mean}\mathrm{field}\mathrm{value}\gamma =1.$$
(9)
### 3.2 Speculation and spontaneous price symmetry breaking

This analogy suggests a very natural interpretation of the regime where the risk-ajusted dividend growth rate $`r_d^{}`$ becomes larger than the risk-free rate $`r`$: for negative reduced control parameter, the price $`p`$ can become non-zero even in absence of dividend by a mechanism known as “spontaneous symmetry breaking” (SSB).

SSB is one of the most important concept in modern science that underpins our present understanding of the universe and of its interactions. Its basic principle can be illustrated by a very simple dynamical system

$$\frac{dp}{dt}=(\mu \mu _c)p\frac{p^3}{p_s^2}.$$
(10)
This equation possesses the parity symmetry (7), since both $`p`$ and $`p`$ are solution of the same equation. A solution respecting this symmetry obeys the symmetry condition $`p=p`$ whose unique solution $`p=0`$ is called the symmetry-conserving solution. For $`\mu <\mu _c`$, $`p`$ is attracted to zero and the asymptotic solution $`p(t+\mathrm{})`$ is zero, which as we said is the only solution respecting the parity symmetry. However, a solution of (10) may not always respect the parity symmetry of its equation. This occurs for $`\mu >\mu _c`$ for which the asymptotic solution is

$$p(t+\mathrm{})=\pm p_s(\mu \mu _c)^{\frac{1}{2}},$$
(11)
where $`p_s`$ gives the characteristic scale of the amplitude of p. Notice that there are now two distinct solutions, each of them being related to the other by the action of the parity transformation $`pp`$: the set of solutions respects the parity symmetry as an ensemble but each solution separately does not respect this symmetry. This phenomenon is called “spontaneous symmetry breaking” (SSB). More generally, the concept of SSB describes the situation in which a solution has a lower symmetry than its equation. Expression (10) shows that the parameter $`\mu `$ controls the symmetry breaking. The so-called “super-critical bifurcation” diagram near the threshold $`\mu =\mu _c`$ synthetizing the transition from a symmetric solution $`p=0`$ to a SSB solution is shown in figure 6.

The SSB concept takes its full meaning in presence of a very small external “field” $`H`$ such that (10) is transformed into

$$\frac{dp}{dt}=H+(\mu \mu _c)p\frac{p^3}{p_s^2}.$$
(12)
For $`\mu <\mu _c`$, the stationary solution of (12) is given by (8). In constrast, in the SSB regime $`\mu >\mu _c`$, $`p`$ jumps from $`p_s(\mu \mu _c)^{\frac{1}{2}}`$ to $`p_s(\mu \mu _c)^{\frac{1}{2}}`$ when $`H`$ goes from positive to negative as illustrated in figure 7: any infinitesimal field is enough to flip abruptly the order parameter $`p`$ from one of its two symmetry-broken solutions to the other. We refer to  for general references and pedagogical introductions and examples. It will never be sufficiently stressed how important is this concept of SSB: for instance, it is invoked to unifying fundamental interactions: weak, strong and electromagnetic interactions are now understood as the result of a more fundamental spontaneous symmetry broken interaction . In another sweeping application, particles and matter in this universe seem to be the spontaneous symmetry-broken phases of a fundamental vacuum state , similarly to the non-vanishing price emerging in the SSB phase $`\mu >\mu _c`$ out of the symmetry-conserved “vacuum” solution $`p=0`$. Critical phase transitions are also understood as SSB phenomena .

To come back to the valuation problem, we thus propose that, for $`r<r_d^{}`$, assets acquire a spontaneous valuation as a result of this spontaneous symmetry breaking mechanism. When $`rr_d^{}`$ become negative, money is not a desirable commodity. You lose money by keeping it. Other commodities become valuable in comparison with money, hence, the spontaneous price valuation in absence of dividend. We thus propose that, for $`rr_d^{}<0`$, the price becomes spontaneously positive (or possibly negative depending on initial conditions or external constraints) and this spontaneous valuation is nothing but the appearance of a speculation regime: investors do not look at or care for dividends; the increase of price is self-fulfilling. And the interpretation of speculation (defined as price higher than fundamental $`=0`$ here) is a spontaneous symmetry-breaking around the value $`p=0`$.

According to our theory, the regime $`r<r_d^{}`$ is a self-sustained growth regime where prices become unrelated to earnings and dividends: prices can go up independently of the dividends due to the “spontaneous symmetry breaking” where a company’s share acquires spontaneously value without any earning. This situation is similar to the spontaneous magnetization of iron at sufficiently low temperature which acquires a spontaneous magnetization under zero magnetic field. This regime could be relevant to understand regimes of bubbles as well as regimes as can be seen in the present “new economy” where prices increase resulting in high price-over-dividend without apparent economic rationalization.

## 4 A simple extension of pricing theory to the critical and spontaneous valuation regime

The question we now address is how to determine the price at and below the “critical point” $`r=r_d^{}`$ for which the standard equilibrium economic approach fails.

In order to make further progress in the quantification of these different phases, we propose first to cure the nonsensical valuation expression (3) by extending the description into a dynamical framework. Building on the price symmetry (7), it is natural to consider a Taylor expansion around the neutral value $`p=0`$ to obtain the simplest possible dynamical equation for price evolution that embodies these previous elements. The following Langevin equation has the same structure as (11)

$$T\frac{dp}{dt}=d\frac{rr_d^{}}{1+r}p\frac{p^3}{p_0^2}+\eta ,$$
(13)
where $`p_0`$ is a numerical coefficient with “dimension” of price. Expression (13) embodies four contributions. The first term $`d`$ in the r.h.s. is simply stating that price is driven up by earning. A comparison with (12) shows that $`d`$ indeed plays the role of the external field breaking the symmetry $`pp`$. The second term $`\frac{rr_d^{}}{1+r}p`$ is limiting this appreciation by the discounting process such that the price would converge at long times to the equilibrium value (3). Note that it correspond to a growth of the price only if $`r_d^{}r`$ is positive, i.e. the growth rate is larger than the discount rate. The third term $`p^3/p_0^2`$ is such that it is negligible as long as the price is not too large: $`p_0`$ quantifies what is meant by “large.” When the price become very large as for instance when $`rr_d^{}`$, its growth becomes limited by nonlinear feedback effects. We choose a cubic term as the first relevant non-linear term, as it is the first one keeping the symmetry $`pp`$. In the spirit of a Taylor expansion in powers of $`p`$, expression (13) thus contains a constant term (which, as already said, breaks the $`pp`$ symmetry), a linear and a cubic term. Higher order terms can easily be incorporated but are less important. The fourth term in the r.h.s. of (13) is a noise with covariance $`\eta (t)\eta (t^{})=D\delta (tt^{})`$, which accounts for the stochastic structure of pricing on stock market. The constant $`T`$ in the l.h.s. is a time scale characterizing the reaction time of the price with respect to a change of any of the terms in the r.h.s. It is typically of the order of seconds in liquid markets. In the physical literature, equation (13) is well-known and has been studied in different contexts, for instance as a noisy mean-field time-dependent Landau theory for critical phenomena or as the noisy normal form of supercritical bifurcations in dynamical system theory.

Equation (13) has not been derived on the basis of direct economic reasoning but uses instead 1) symmetry arguments and 2) the constraint that it recovers the firm-foundation valuation formula for $`r>r_d^{}`$. Direct derivations from standard valuation settings give different equations where the constant term $`d`$ is usually given a negative sign to account for the fact that, at equilibrium, the value of the stock is not changed by the dividend payment $`p(t^+)=p(t^{})d`$, where $`t`$ is the time of dividend payment and the superscripts refer to the time just before and after the dividend payment. It is important to realize that expression (13) accounts for both economic valuation due to growth and for the impact of dividend and growth rate on the psychological appreciation of the value of the stock by investors. In other words, the symmetry-based equation (13) somehow automatically embodies a mixture of economic and psychological ingredients. This is indeed necessary for this equation to describe both the standard firm-foundation and the speculative regimes. Deriving (13) from first principles will require to include a blend of economic and psychological factors. We hope to report on this in a future communication. Similarly to phase transitions in the physical sciences, we realize here again the power of symmetry-derived effective equations, in contrast to microscopically-derived equations which are much more prone to miss important contributions. For instance, we have seen that a purely economically-based valuation equation leads to the growth stock paradox , which cannot be solved without enlarging the theory as we do with (13).

The consequences of equation (13) are the following. At $`r=r_d^{}`$, the apparent divergence of the price given by (3) is replaced by a non-analytic dependence of the equilibrium price as a function of dividend (neglecting the noise term):

$$pd^{1/\delta },\mathrm{where}\delta =3\mathrm{at}r=r_d.$$
(14)
This one-third power law dependence of the price thus predicts a much faster increase of the price as a function of earnings than the usual linear dependence (3) for small $`d`$’s as illustrated in figure 8. Indeed, expression (14) has an infinite slope for $`d0`$. Expression (14) is a characteristic signature of the critical point $`r=r_d^{}`$. Close to the critical point, changes in expected dividends thus lead to large price movements. This has recently been seen on IBM, Lucents and Procter & Gamble, discussed in the introduction.

We can retrieve (14) by assuming a co-integration of $`d`$ and $`rr_d`$ parameterized by

$$rr_d^{}=c\left(\frac{d}{p_0}\right)^\alpha ,\mathrm{where}0\alpha 1,$$
(15)
valid for small $`d`$ and $`rr_d^{}`$. This expression implies that, as $`rr_d^{}0`$, the price can remain well-behaved if $`d`$ also goes to zero with the appropriate relationship. This is seen by plugging the expression (15) into (3) which yields

$$p=(1+r)p_0^\alpha d^{1\alpha }.$$
(16)
This retrieves the conceptual content of (14) and quantitatively gets the same exponent with the choice $`\alpha =2/3`$.

For $`r<r_d^{}`$ such that the expected risk-adjusted growth of earnings is faster that the riskless interest rate, the prices tend to grow spontaneously even without visible earning ($`d0`$). This is the regime of “spontaneous valuation”, similar to the “spontaneous symmetry breaking” discussed in the previous section. This may explain the present frenzy on “growth companies” which have apparently ridiculously high price-over-dividend ratios. In this case, we see that the equilibrium price is set by

$$pp_0(r_d^{}r)^{1/2},$$
(17)
independently of earnings $`d`$ for small $`d`$’s as seen in figure 7. The rational for paying a high price without earning is that any possible future non-zero earnings will grow sufficiently fast so that it will become valuable. This is the regime of speculation.

The general stationary solution of (13) that combines the two regimes (14) and (17) takes the form

$$p=p_0(r_d^{}r)^{1/2}f\left(\frac{d/p_0}{(r_d^{}r)^{\delta /2}}\right),$$
(18)
where the function $`f(x)1`$ for small $`x`$ and $`f(x)=x^{1/\delta }`$ for large $`x`$. The first condition ensures that (18) retrieves (17) for small or vanishing dividends. The second condition allows to retrieve (14) at or very close to the critical point. The specific functional form of the cross-over of $`f(x)`$ at intermediate values of $`x`$ depends on higher order terms that have been dropped out of this description.

The noise term $`\eta `$ in (13) ensures that the price $`p(t)`$ is stochastic. The correlation of price returns can be explicitely calculated and takes the form

$$\mathrm{return}(t)\mathrm{return}(t^{})=\frac{D(1+r)}{2|rr_d^{}|}\mathrm{exp}\left[\frac{|tt^{}|}{\tau }\right],$$
(19)
where the correlation time is

$$\tau =T\frac{1+r}{|rr_d^{}|}.$$
(20)
In agreement with empirical observations, returns are correlated only over a very short time scale proportional to $`T`$ (since we have neglected the effect of transaction costs, $`T`$ is of the order of the typical time for a trade, i.e. seconds), except when $`r`$ approaches $`r_d^{}`$ for which the correlation time can be longer. The mathematical divergence of the correlation time (20) is very difficult to observe in practice because the amplification factor $`1/|rr_d^{}|`$ really kicks off $`\tau `$ when $`|rr_d^{}|`$ is quite close to $`0`$. If $`T=10`$ seconds, say, and $`|rr_d^{}|=5\%`$, (20) gives $`\tau 3`$ minutes. $`|rr_d^{}|`$ needs to be of the order of $`1\%`$ or smaller for the correlation time to be of the order of $`15`$ minutes or larger. This suggests the following interpretation: when investors estimate the risk-ajusted growth rate in the range of the risk-free interest rate, pockets of predictability can be created. Inversely, it is sometimes argued by operators and managers of funds that the market exhibits “pockets of predictability”. Such non-stationary structures could be attributed to a particular risk and growth estimation by investors collectively at some particular times.

## 5 Market instabilities and finite time horizons

### 5.1 Amplification of price variations by correlations between dividend and its growth rate

The previous framework allows us to cast some light on apparent anomalies and on surprising market behavior. According to (1), the announcement of an expected drop of dividend should lead to a proportional drop in price. Amplification of the drop occurs if the drop in dividend is also seen as an expected drop in future growth of dividends. Then, equation (3) applies and leads to a large amplification if $`r_d^{}`$ moves away from $`r`$. Consider for instance the $`30\%`$ Procter & Gamble crash on 7-Mar-2000. P&G said it expected fiscal third-quarter earnings per share to be down 10 to 11 percent from the year-ago quarter, compared with its prior forecast for a rise of 7 to 9 percent. Thus, the expected earnings dropped by $`1720\%`$. According to (1), the price should have dropped by a maximum of $`20\%`$. The extra $`10\%`$ can be rationalized by an amplification coming from a downward revision of the expected earning growth rate $`r_d`$. Taking $`r=5\%`$ and a change of only $`0.5\%`$ in the expected $`r_d^{}`$ is enough to account for the additional $`10\%`$. This illustrates quantitatively the large susceptibility expressed by (8,9).

### 5.2 Finite time horizon

The formulas (1,3,18) assume that investors have an infinite time horizon. In practice, humans are mortal and have a time horizon to estimate the value of a company of the order of years to ten years or more. It is thus interesting to quantify the effect of this finite-time effect, as it also allows us to get finite prices even in the phase $`rr_d^{}`$, using the firm-foundation valuation theory. The simplest model is to assume that the earnings grow from year $`0`$ to year $`Y`$ at the fixed growth rate $`r_d`$ and then stay constant at the value attained at year $`Y`$. The valuation formula (3) is then changed into

$`p/d`$ $`=`$ $`1+{\displaystyle \frac{1+r_d^{}}{1+r}}+{\displaystyle \frac{(1+r_d^{})^2}{(1+r)^2}}+\mathrm{}+{\displaystyle \frac{(1+r_d^{})^Y}{(1+r)^Y}}+{\displaystyle \frac{(1+r_d^{})^Y}{(1+r)^Y}}\left({\displaystyle \frac{1}{1+r}}+{\displaystyle \frac{1}{(1+r)^2}}+\mathrm{}\right)`$ (21)
$`=`$ $`K{\displaystyle \frac{1+r}{r}}+{\displaystyle \frac{1+rK(1+r_d^{})}{rr_d^{}}},`$
where

$$K=\left(\frac{1+r_d^{}}{1+r}\right)^Y.$$
(22)
Figure 9 shows that a $`p/d`$ of 200 can be reach for instance with a growth rate $`r_d^{}=30\%`$ with $`r=5\%`$ and a time horizon $`Y9`$ years or $`r_d^{}=20\%`$ with $`r=4\%`$ and a time horizon $`Y10`$ years. For much more moderate growth rate $`r_d^{}=10\%`$, a similar $`p/d`$ requires a small discount rate $`r=3\%`$ and a longer time horizon $`Y>20`$ years. This set of curves also show the large sensitivity of the price-over-dividend ratio with respect to changes in $`rr_d^{}`$ as well as time horizon $`Y`$, especially for the larger growth rates. For $`r_d^{}=20\%`$, we see the impact of an increase of discount rate from $`3\%`$ to $`4\%`$: a major crash of more than $`30\%`$ in the stock price.

### 5.3 Delayed expectations

Our theory also rationalize the real estate speculative bubbles for which rents ($`d`$) had not increased significantly, but investors and buyers thought that the price would grow without end. This spontaneous over-valuation can be make more precise by the following future expectation equation:

$$\frac{dp}{dt}=\widehat{r}p(t+T(t)).$$
(23)
Expression (23) expresses that the price increment has the usual proportionality dependence on price in the growth regime, however not on present but on the future price at a time $`T(t)`$ in the future. If $`T(t)`$ is fixed, it is easy to solve this equation and find that $`p(t)`$ grows exponentially but with a growth rate $`\rho `$ larger than $`\widehat{r}`$ given by the solution of the equation

$$\rho =\widehat{r}e^{\rho T},$$
(24)
obtained by looking at exponentially growing solutions in (23). Since the exponential is always larger than $`1`$ for positive arguments $`\widehat{r}T`$, this shows that $`\rho `$ is always larger than $`\widehat{r}`$ for positive $`T`$ as shown in figure 10: the expectation of future growth projected a time $`T`$ in the future enhanced the price growth rate. It is easy to solve iteratively this equation. There is a bifurcation point: for $`\widehat{r}T>1/e`$, $`\rho `$ develops an imaginary part, i.e. the growth becomes oscillatory. If the optimism of investors increases, we can capture this increase by a larger horizon time $`T`$ and get a further accelerating growth rate of the price. In this model, more confidence in the long term growth and thus in the long term horizon directly translates into an accelerating growth rate as since in figure 10. Many variations of this model (23) can be developed that we leave for a future report.

## 6 Concluding remarks

We have proposed a simple theoretical framework to account for paradoxical behavior of the “new economy”, based on the valuation of dividend growth rate. The basic concept is as follows. If the dividend $`d`$ is small, the price is large only when we take into account all the discounted future earnings with a large growth rate $`r_dr`$. The corresponding divergence of the price occurs only if investors have an infinite horizon. For a finite time horizon, say ten years, the price will be finite but will exhibit a sensitive dependence on the estimation of the risk-adjusted earning growth rate $`r_d^{}`$ and of the horizon up to which this growth rate will be sustained, as seen in the previous section. A move of the Federal Reserve to increase its basic rate $`r`$ will have a strong effect in certain region of the parameter space as it will bring back the price to lower $`p/d`$ ratio.

The simple valuation equation (3) and its generalizations (14,17) and (18) accounts for a number of stylized facts observed during speculative bubbles:

* the sentiment that the “run” will last indefinitely;
* the large increase in the price-over-dividend ratio;
* each speculative move has had its “growth companies”; in 1857, the railways; in 1929, the utilities (electricity production); in the 1960’s, the office equipment companies (e.g. IBM) and the rubber companies (car makers); today, we have the internet, software, banks and investment companies. These companies have a fast growth rate (usually larger than 30% per year) and investors thus expect a large growth rate $`r_d`$ of their earnings.
* Speculative phases are often stopped by successive increase of the discount rate; this occurred in 1929 (increase fom 3.25% up to 6%), in 1969, and in 1990 in Japan (increase from 2.5% to 6%).
* The high sensitivity of valuation close to the critical point $`rr_d^{}=0`$ and the spontaneous speculative valuation below it suggest that crashes and rallies can also be interpreted as reassessments of expected risk-ajusted returns and their growth rates.

This leads to the following avenue for future research: new technologies, such as internet, wireless communication, wind power, etc. should be compared to old technologies, such as cars, shipping, mining, etc. We expect that stocks in the new technology class have high prices and low earnings and thus high price-over-dividend and price-over-earning ratios, while stocks in the old technology class have lower prices and higher earning and then lower price-over-dividend and price-over-earning ratios. If one goes back in time, present “old technology” was new technology and a similar pattern of high price-over-dividend and price-over-earning ratios should be seen. This is an interesting empirical investigation that we intend to report on in future work.

I acknowledge stimulating discussions with and suggestions from D. Darcet, A. Johansen, W.I. Newman, B. Roehner and D. Zajdenweber. I thank A. Johansen for bringing my attention to the three company crashes discussed here.


text:
# UT-STPD-2/00 FISIST/2-2000/CFIF Yukawa Unification, 𝑏→𝑠𝛾 and Bino-Stau Coannihilation

## Abstract

The minimal supersymmetric standard model with universal boundary conditions and “asymptotic” Yukawa unification is considered. The full one-loop effective potential for radiative electroweak symmetry breaking as well as the one-loop corrections to the charged Higgs boson, $`b`$-quark and $`\tau `$-lepton masses are included. The CP-even Higgs boson masses are corrected to two-loops. The relic abundance of the lightest supersymmetric particle (bino) is calculated by including its coannihilations with the next-to-lightest supersymmetric particle (lightest stau) consistently with Yukawa unification. The branching ratio of $`bs\gamma `$ is evaluated by incorporating all the applicable next-to-leading order QCD corrections. The bino-stau coannihilations reduce the bino relic abundance below the upper bound from cold dark matter considerations in a sizable fraction of the parameter space allowed by $`bs\gamma `$ for $`\mu >0`$. Thus, the $`\mu >0`$ case, which also predicts an acceptable $`b`$-quark mass, is perfectly compatible with data.

It is well-known  that the assumption that all three Yukawa couplings of the third family of quarks and leptons unify “asymptotically” (i.e., at the grand unified theory (GUT) mass scale $`M_{GUT}10^{16}\mathrm{GeV}`$) naturally restricts the top quark mass to large values compatible with the present experimental data. Such a Yukawa unification can be obtained by embedding the minimal supersymmetric standard model (MSSM) in a supersymmetric (SUSY) GUT with a gauge group such as $`SU(4)_c\times SU(2)_L\times SU(2)_R`$, $`SO(10)`$ or $`E_6`$ which contain $`SU(4)_c`$ and $`SU(2)_R`$. Assuming that the electroweak Higgs superfields $`H_1`$, $`H_2`$ and the third family right-handed quark superfields $`t^c`$, $`b^c`$ form $`SU(2)_R`$ doublets, we obtain  the “asymptotic” Yukawa coupling relation $`h_t=h_b`$ and, hence, large $`\mathrm{tan}\beta m_t/m_b`$. Moreover, if the third generation quark and lepton $`SU(2)_L`$ doublets (singlets) $`Q_3`$ and $`L_3`$ ($`b^c`$ and $`\tau ^c`$) form a $`SU(4)_c`$ 4-plet ($`\overline{4}`$-plet) and the electroweak Higgs $`H_1`$ which couples to them is a $`SU(4)_c`$ singlet, we obtain $`h_\tau =h_b`$ and the successful “asymptotic” mass relation $`m_\tau =m_b`$ follows.

The simplest and most restrictive version of MSSM with gauge coupling unification is based on the assumption of radiative electroweak symmetry breaking with universal boundary conditions from gravity-mediated soft SUSY breaking. The tantalizing question is then whether this scheme is compatible with exact “asymptotic” unification of the three third family Yukawa couplings. A positive answer to this question would be very desirable since it would lead to a simple and highly predictive theory. This issue has been systematically studied in Ref..

A significant problem, which may be faced in trying to reconcile Yukawa unification and universal boundary conditions, is due to the generation of sizeable SUSY corrections to the $`b`$-quark mass . The sign of these corrections is opposite to the sign of the MSSM parameter $`\mu `$ (with the conventions of Ref.). As a consequence, for $`\mu <0`$, the tree-level value of $`m_b`$, which is predicted from Yukawa unification already near its experimental upper bound, receives large positive corrections which drive it well outside the allowed range. However, it should be noted that this problem arises in the simplest realization of this scheme. In complete models correctly incorporating fermion masses and mixing, $`m_b`$ can receive extra corrections which may make it compatible with experiment. Also, small GUT threshold corrections to gauge coupling unification can help to reduce $`m_b`$. (For a brief discussion of the possibilities to remedy the $`m_b`$ problem encountered in the $`\mu <0`$ case and some relevant references see Ref..) So, we do not consider this $`b`$-quark mass problem absolutely fatal for the $`\mu <0`$ case.

Be that as it may, it is certainly interesting to examine the alternative scenario with $`\mu >0`$ too. The $`b`$-quark mass receives negative SUSY corrections and can easily be compatible with data in this case. This scheme, however, is severely restricted by the recent experimental results  on the inclusive decay $`bs\gamma `$ . It is well-known that the SUSY corrections to the inclusive branching ratio BR($`bs\gamma `$), in the case of the MSSM with universal boundary conditions, arise mainly from chargino loops and have the same sign with the parameter $`\mu `$. Consequently, these corrections interfere constructively with the contribution from the standard model (SM) including an extra electroweak Higgs doublet. However, this contribution is already bigger than the experimental upper bound on BR($`bs\gamma `$) for not too large values of the CP-odd Higgs boson mass $`m_A`$. As a result, in the present context with Yukawa unification and hence large $`\mathrm{tan}\beta `$, a lower bound on $`m_A`$ is obtained  for $`\mu >0`$. On the contrary, for $`\mu <0`$, the SUSY corrections to BR($`bs\gamma `$) interfere destructively with the SM plus extra Higgs doublet contribution yielding, in most cases, no restrictions on the parameters.

An additional constraint results from the requirement that the relic abundance $`\mathrm{\Omega }_{LSP}h^2`$ of the lightest supersymmetric particle (LSP) in the universe does not exceed the upper limit on the cold dark matter (CDM) abundance implied by cosmological considerations ($`\mathrm{\Omega }_{LSP}`$ is the present energy density of the LSPs over the critical energy density of the universe and $`h`$ is the present value of the Hubble constant in units of $`100\mathrm{km}\mathrm{sec}^1\mathrm{Mpc}^1`$). Taking both the currently available cosmological models with zero/nonzero cosmological constant, which provide the best fits to all the data, as equally plausible alternatives for the composition of the energy density of the universe and accounting for the observational uncertainties, we obtain the restriction $`\mathrm{\Omega }_{LSP}h^2\stackrel{_<}{_{}}0.22`$ (see Refs.). Assuming that all the CDM in the universe is composed of LSPs, we further get $`\mathrm{\Omega }_{LSP}h^2\stackrel{_>}{_{}}0.09`$.

The LSP is normally the lightest neutralino ($`\stackrel{~}{\chi }`$). In the particular case of Yukawa unification, this neutralino turns out to be an almost pure bino. Its relic abundance has been estimated, for $`\mu >0`$, and shown  to be well above unity, thereby overclosing the universe for all $`m_A`$’s permitted by $`bs\gamma `$. So, the combination of CDM considerations and the data on BR($`bs\gamma `$) seems to rule out the MSSM with $`\mu >0`$, Yukawa unification and radiative electroweak breaking with universal boundary conditions.

It is important to note that, in Refs., the coannihilation  of the LSP with the next-to-lightest supersymmetric particle (NLSP) has been ignored and only the LSP annihilation processes have been taken into account. It is well-known, however, that these coannihilations can be extremely important, if the mass of the NLSP is relatively close to the mass of the LSP, resulting to a considerable reduction of the LSP relic abundance . The question then arises whether, by employing LSP-NLSP coannihilation, one can succeed reducing $`\mathrm{\Omega }_{LSP}h^2`$ below 0.22 for some values of $`m_A`$ allowed by $`bs\gamma `$ in the $`\mu >0`$ case. This would revitalize a part of the available parameter space for $`\mu >0`$ saving the simple, elegant and predictive MSSM with universal boundary conditions and Yukawa unification even in its simplest realization (with no need of extra corrections to $`m_b`$). Although, in this parameter range, the sparticles would be quite massive (due to the lower bound on $`m_A`$ from $`bs\gamma `$) to be of immediate phenomenological interest, we would consider this as a very positive development.

In this paper, we reconsider the constraints from $`m_b`$, $`bs\gamma `$ and the LSP relic density in the context of MSSM with universal boundary conditions and Yukawa unification by incorporating the LSP ($`\stackrel{~}{\chi }`$) and NLSP coannihilation in the calculation of $`\mathrm{\Omega }_{LSP}h^2`$. The NLSP turns out to be the lightest stau mass eigenstate $`\stackrel{~}{\tau }_2`$ and its coannihilation with bino has been studied in Ref. (or ) for large (or small) $`\mathrm{tan}\beta `$. Although our analysis covers both signs of $`\mu `$, our main interest here is to see whether, for $`\mu >0`$, there exists a range of parameters where all these constraints are simultaneously satisfied.

We will consider the MSSM with Yukawa unification described in detail in Ref. and closely follow the notation as well as the renormalization group (RG) and radiative electroweak symmetry breaking analysis of this reference. The only essential improvement here is the inclusion of the full one-loop radiative corrections to the effective potential for the electroweak symmetry breaking which have been evaluated in Ref. (Appendix E). We also incorporate the one-loop corrections to certain particle masses from the same reference and the two-loop corrections to the CP-even neutral Higgs boson masses (see below). In Ref., we used a constant common SUSY threshold $`M_S=1\mathrm{TeV}`$, where the RG-improved tree-level potential was minimized and the parameters $`\mu `$ and $`m_A`$ were evaluated. Also, the MSSM RG equations were replaced by the SM ones below the same scale $`M_S`$. Here, we use a variable common SUSY threshold $`M_S=\sqrt{m_{\stackrel{~}{t}_1}m_{\stackrel{~}{t}_2}}`$, where $`\stackrel{~}{t}_{1,2}`$ are the two stop mass eigenstates. As it turns out, this does not make a very significant numerical difference since the values of $`\mu `$ and $`m_A`$ are found to be pretty stable to variations of $`M_S`$. Despite this fact, it is more appropriate to use a variable SUSY threshold here because of the wide variation of the sparticle spectrum encountered. This variation appears since, in this work, we consider not only relatively small but also quite large values of $`m_A`$. Finally, note that our choice of the SUSY threshold $`M_S`$ minimizes the size of the one-loop corrections to $`\mu `$ and $`m_A`$ and, thus, the errors in the determination of these parameters.

We take universal soft SUSY breaking terms at $`M_{GUT}`$, i.e., a common mass for all scalar fields $`m_0`$, a common gaugino mass $`M_{1/2}`$ and a common trilinear scalar coupling $`A_0`$, which we put equal to zero (we will discuss later the influence of non-zero $`A_0`$’s). Our effective theory below $`M_{GUT}`$ then depends on the parameters ($`\mu _0=\mu (M_{GUT})`$)

$`m_0,M_{1/2},\mu _0,\alpha _G,M_{GUT},h_0,\mathrm{tan}\beta ,`$

where $`\alpha _G=g_G^2/4\pi `$ ($`g_G`$ being the GUT gauge coupling constant) and $`h_0`$ is the common top, bottom and tau Yukawa coupling constant at $`M_{GUT}`$. The values of $`\alpha _G`$ and $`M_{GUT}`$ are obtained as described in Ref..

It was pointed out  that, for every $`m_A`$, the requirement of successful radiative electroweak symmetry breaking with Yukawa unification implies a relation among the GUT parameters $`m_0`$ and $`M_{1/2}`$. This relation combined with any given ratio of the masses of the two lightest SUSY particles (lightest neutralino and stau) leads  to a complete determination of the values of $`m_0`$ and $`M_{1/2}`$ and hence the whole SUSY spectrum for every value of $`m_A`$ (see also Ref.). We will thus use $`m_A`$ and $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}=(m_{\stackrel{~}{\tau }_2}m_{\stackrel{~}{\chi }})/m_{\stackrel{~}{\chi }}`$ as our basic independent parameters. For reasons to become obvious later, we concentrate here on the limiting case with $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$ ($`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}=0`$) where the LSP and NLSP coannihilation is  most efficient. The values of $`m_0`$ and $`M_{1/2}`$ can then be found as functions of $`m_A`$ and are depicted in Fig.1, for $`\mu >0`$, together with the LSP mass ($`m_{\stackrel{~}{\chi }}`$) and the SUSY threshold mass parameter $`M_S`$. Note that these mass parameters are affected very little by changing the sign of $`\mu `$.

We find that the effect of including the full one-loop effective scalar potential from Ref. is not very significant. In particular, the correction to the tree-level value of $`m_A`$ is found to range from about $`7.5\%`$ to about $`1.5\%`$ for $`m_A`$ between 100 and $`700\mathrm{GeV}`$ with only a small dependence on the sign of $`\mu `$. Also, the one-loop radiative correction to the tree-level value of $`\mu `$ turns out to be of the same sign as $`\mu `$ and less than about $`3.5\%`$ in the same range of $`m_A`$.

The values of the unified Yukawa coupling constant $`h_0`$ at $`M_{GUT}`$ and of $`\mathrm{tan}\beta `$ at $`M_S`$ are estimated by using the running top quark mass at $`m_t`$, $`m_t(m_t)=166\mathrm{GeV}`$, and the running tau lepton mass at $`m_Z`$, $`m_\tau (m_Z)=1.746\mathrm{GeV}`$. We also incorporate the SUSY threshold correction to $`m_\tau (M_S)`$ from the approximate formula of Ref.. This correction arises mainly from chargino/tau sneutrino loops, is almost $`m_A`$-independent and has the same sign as $`\mu `$. It is about $`8\%`$, for $`\mu >0`$, leading to a value of $`\mathrm{tan}\beta =55.454.5`$ for $`m_A=100700\mathrm{GeV}`$, while, for $`\mu <0`$, we find a correction of about $`7\%`$ and $`\mathrm{tan}\beta =47.846.9`$ in the same range of $`m_A`$.

The tree-level values which we find for $`m_b(m_Z)`$ are quite close to its experimental upper bound :

$`m_b(m_Z)=2.67\pm 0.50\mathrm{GeV}.`$

The SUSY correction  to the bottom quark mass is known to be very large for models with Yukawa unification. This correction originates mainly from squark/gluino and squark/chargino loops and has sign opposite to the one of $`\mu `$ (in our convention). Thus, for $`\mu <0`$, the corrected $`m_b(m_Z)`$ will certainly be outside the experimentally allowed range. For $`\mu >0`$, however, this large negative correction may easily make $`m_b(m_Z)`$ compatible with data. Indeed, using the approximate formula of Ref., we find that, for $`\mu <0`$, the correction is about $`27.2\%23.8\%`$ for $`m_A=100700\mathrm{GeV}`$, which added to a tree-level value of $`m_b(m_Z)3.41\mathrm{GeV}`$ leads to an unacceptably large $`m_b(m_Z)`$. For $`\mu >0`$, the tree-level value of $`m_b(m_Z)`$ is equal to about $`3.13\mathrm{GeV}`$ and the SUSY correction, to be subtracted from it, about $`26.6\%24.7\%`$ for $`m_A=100700\mathrm{GeV}`$. The resulting bottom quark mass is then perfectly acceptable in this case. Note that the variation of the tree-level value of $`m_b(m_Z)`$ with the sign of $`\mu `$ is due to the SUSY corrections to $`m_\tau `$ considered in calculating $`\mathrm{tan}\beta `$.

We incorporate in our calculation the two-loop corrections to the CP-even neutral Higgs boson mass matrix by employing the program FeynHiggsFast . The tree-level mass of the lightest neutral CP-even Higgs boson is very close to $`m_Z`$ for all $`m_A`$’s considered here. Two-loop corrections, however, increase its value, $`m_h`$, considerably. The lower experimental bound on $`m_h`$, say equal to $`105\mathrm{GeV}`$, corresponds to $`m_A104\mathrm{GeV}`$. The value of $`m_h`$ increases rapidly with $`m_A`$ reaching about $`115\mathrm{GeV}`$ at $`m_A=120\mathrm{GeV}`$. After this, the growth of $`m_h`$ slows down drastically and this mass soon enters into a plateau with $`m_h122\mathrm{GeV}`$. The difference between the two-loop and the tree-level value of the heavier CP-even neutral Higgs boson mass $`m_H`$ is insignificant for values of $`m_A`$ bigger than about $`120\mathrm{GeV}`$. For smaller $`m_A`$’s, this difference increases reaching about $`10\%`$ of the tree-level value of $`m_H`$ at $`m_A100\mathrm{GeV}`$. Finally, we also include the one-loop corrections to the charged Higgs boson mass using the formalism described in the appendices of Ref. but without the neutralino and chargino contributions since, as it turns out, these contributions are relatively unstable as we change the scale $`M_S`$. Presumably, higher order corrections will alleviate this instability. It is, certainly, reassuring for our procedure that similar results are obtained by using the approximate formula of Ref.. We find that one-loop corrections increase the tree-level value of the charged Higgs boson mass $`m_{H^+}`$. This increase ranges from $`7\%`$ to $`5\%`$ of the tree-level value as $`m_A`$ changes from 100 to $`700\mathrm{GeV}`$.

To study the constraints imposed by $`bs\gamma `$ on the parameter space of our model, we follow the analysis of Ref.. We consider the SM contribution to the inclusive branching ratio BR($`bs\gamma `$) from a loop with a $`W`$-boson and top quark ($`t`$), the contribution from loops with charged Higgs bosons (with mass corrected to one-loop) and $`t`$ and the dominant SUSY contribution arising from loops with charginos and stop quarks. The SM contribution, which is factorized out in the formalism of Ref., includes the next-to-leading order (NLO) QCD  and the leading order (LO) QED  corrections. The NLO QCD corrections  to the charged Higgs boson contribution are taken from the first paper in Ref.. The SUSY contribution is evaluated by including only the LO QCQ corrections  using the formulae in Ref.. NLO QCD corrections to the SUSY contribution have also been discussed in Ref., but only under certain very restrictive conditions which never hold in our case since the lightest stop quark mass is comparable to the masses of the other squarks and the gluinos. Also, the charginos are pretty heavy. We, thus, do not include these corrections in our calculation. (Moreover, as pointed out in Ref., the available NLO QCD corrections to the SUSY contribution are not applicable to models with large values of $`\mathrm{tan}\beta `$, which is our case here.) The results, evaluated with central values of the input parameters and the renormalization and matching scales, are depicted in Fig.2 for both signs of $`\mu `$, $`A_0=0`$ and $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$ (see below). The charged Higgs contribution, added to the one of the SM, raises the predicted value of BR($`bs\gamma `$) above the experimental upper bound $`4.5\times 10^4`$  for not too large values of $`m_A`$. The SUSY contribution, which becomes less important as $`m_A`$ increases, interferes constructively or destructively with the other two contributions for $`\mu `$ positive or negative respectively.

We see from Fig.2 that the SM plus charged Higgs contribution decreases as $`m_A`$ (or $`m_{H^+}`$) increases and enters into the experimentally allowed range at $`m_A295\mathrm{GeV}`$ corresponding to $`m_{H^+}318\mathrm{GeV}`$ and $`M_S1851\mathrm{GeV}`$. For $`\mu <0`$, inclusion of the SUSY contribution makes the BR($`bs\gamma `$) compatible with data for all values of $`m_A`$ explored here and no useful restrictions on the parameter space are obtained for $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$ and $`A_0=0`$. (We may, though, obtain restrictions for $`m_{\stackrel{~}{\tau }_2}`$’s higher than $`m_{\stackrel{~}{\chi }}`$ and/or $`A_00`$.) For $`\mu >0`$, however, the SUSY contribution increases the discrepancy between the predicted value of this branching ratio and the data. The upper experimental limit on BR($`bs\gamma `$) ($`4.5\times 10^4`$) is reached at $`m_A385\mathrm{GeV}`$ corresponding to $`m_{\stackrel{~}{\chi }}694\mathrm{GeV}`$, $`m_0781\mathrm{GeV}`$, $`M_{1/2}1512\mathrm{GeV}`$ and $`M_S2418\mathrm{GeV}`$. We conclude that, for $`\mu >0`$, $`A_0=0`$ and $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$, $`m_A`$ should be greater than about $`385\mathrm{GeV}`$ for satisfying the constraints from the $`bs\gamma `$ process. It is important to observe that, for values of $`m_{\stackrel{~}{\tau }_2}`$ higher than $`m_{\stackrel{~}{\chi }}`$, charginos become even heavier and the lower bound on $`m_A`$ decreases slightly but it can never become smaller than the bound ($`295\mathrm{GeV}`$) from the SM plus charged Higgs contribution.

The lower bound on $`m_A`$ found by using central values of the input parameters can be considerably reduced if the theoretical uncertainties entering into the calculation of BR($`bs\gamma `$) are taken into account. These uncertainties originating from the experimental errors in the input parameters and the ambiguities in the renormalization and matching scales are known to be quite significant. The SM contribution alone, which is factorized out, generates an uncertainty of about $`\pm 10\%`$. The charged Higgs and SUSY contributions can only increase this uncertainty. In particular, the SUSY prediction for $`\mu >0`$ should not be a line in Fig.2 but rather a band with the appropriate error margin. Consequently, it should intersect the upper experimental bound line at a segment rather than at a point. This segment is found to be from about 300 to $`510\mathrm{GeV}`$ if only the ambiguities from the SM contribution are taken into account. We see that the lower bound on $`m_A`$ is reduced from about 385 to about $`300\mathrm{GeV}`$ at least. Inclusion of the errors from the charged Higgs and chargino contributions can reduce this bound even further. However, we believe that they cannot be reliably calculated at the moment since the NLO QCD corrections to the SUSY contribution are not known in our case. In any case, the lower bound of $`300\mathrm{GeV}`$ on $`m_A`$ is more than adequate for our purpose here, which is to revitalize the MSSM with Yukawa unification, universal boundary conditions and $`\mu >0`$. Note that, for values of $`m_{\stackrel{~}{\tau }_2}`$ higher than $`m_{\stackrel{~}{\chi }}`$ this lower bound on $`m_A`$ decreases slightly but it can never become smaller than the corresponding bound ($`200\mathrm{GeV}`$) derived from the SM plus charged Higgs contribution.

The relic abundance of the LSP ($`\stackrel{~}{\chi }`$), which is a nearly pure bino in our model, can be calculated by employing the analysis of Ref. which is appropriate for Yukawa unification and, thus, large $`\mathrm{tan}\beta `$. The inclusion of coannihilation effects of the LSP with the NLSP, which is the lightest stau mass eigenstate ($`\stackrel{~}{\tau }_2`$), is of crucial importance. These effects can reduce considerably the LSP relic abundance $`\mathrm{\Omega }_{LSP}h^2`$ so as to have a chance to satisfy the upper bound 0.22, derived from CDM considerations, for values of $`m_A`$ consistent with the constraints from $`bs\gamma `$. In order to achieve maximal coannihilation and thus obtain the strongest possible reduction of $`\mathrm{\Omega }_{LSP}h^2`$, we consider the limiting case $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$ (see Ref.). The relevant coannihilation processes and Feynman graphs together with the corresponding analytical expressions can be found in Ref.. Our computation here is, however, more accurate since it includes the one-loop corrections to the parameter $`\mu `$, the $`\tau `$-lepton mass, $`m_A`$, $`m_{H^+}`$ and the two-loop corrections to the CP-even neutral Higgs boson masses. The results are shown in Fig.3 for $`\mu >0`$ and $`A_0=0`$. For comparison, we also include the value of $`\mathrm{\Omega }_{LSP}h^2`$ obtained by ignoring coannihilation effects. Note that these results remain essentially unaltered by changing the sign of $`\mu `$.

From Fig.3, one readily finds that the CDM constraint on the LSP relic density $`0.09\stackrel{_<}{_{}}\mathrm{\Omega }_{LSP}h^2\stackrel{_<}{_{}}0.22`$ is satisfied for $`m_A`$’s between about $`275`$ and $`400\mathrm{GeV}`$ for $`\mu `$ positive, $`A_0=0`$ and $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$. Of course, the upper bound on $`m_A`$ is more general than the lower one since it hold even if the CDM does not solely consist of LSPs. Note that the upper bound on $`m_A`$ ($`400\mathrm{GeV}`$) in the $`\mu >0`$ case corresponds to $`m_{\stackrel{~}{\chi }}724\mathrm{GeV}`$, $`m_0815\mathrm{GeV}`$, $`M_{1/2}1575\mathrm{GeV}`$ and $`M_S2513\mathrm{GeV}`$.

It is obvious, from Fig.3, that the reduction of $`\mathrm{\Omega }_{LSP}h^2`$ caused by the coannihilation effects is dramatic and can bring the LSP relic abundance below 0.22 for $`m_A`$’s in the allowed range from $`bs\gamma `$ considerations in the $`\mu >0`$ case with $`A_0=0`$ and $`m_{\stackrel{~}{\tau }_2}=m_{\stackrel{~}{\chi }}`$. Indeed, at $`m_A300\mathrm{GeV}`$, which is its lower bound if a $`10\%`$ theoretical error is allowed in BR($`bs\gamma `$), $`\mathrm{\Omega }_{LSP}h^20.112`$ (or 3.92 with no coannihilation) and increases with $`m_A`$ reaching 0.22 (or 7.4 with no coannihilation) at $`m_A400\mathrm{GeV}`$, where ($`90\%`$ of) the central value of BR($`bs\gamma `$) is about ($`4\times 10^4`$) $`4.44\times 10^4`$. We see that, for $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}=0`$, $`A_0=0`$ and $`\mu >0`$, there exists a range of $`m_A`$ (at least between 300 and $`400\mathrm{GeV}`$) where both the constraints from $`bs\gamma `$ and CDM can be satisfied. Note that, even with the central value of BR($`bs\gamma `$), this range does not disappear. It only shrinks to the interval between 385 and $`400\mathrm{GeV}`$. The value of $`\mathrm{\Omega }_{LSP}h^2`$ with (without) coannihilation at $`m_A385\mathrm{GeV}`$ is about 0.205 (6.85).

So far we concentrated in the limiting case $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}=0`$ where the coannihilation effects are more efficient and we took, for simplicity, $`A_0=0`$. We will now briefly discuss the effect of allowing general values of these quantities. Obviously, for any given $`m_A`$, the sparticles become heavier as we increase $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}`$. The main effect of this is that coannihilation quickly faints away and the upper bound on $`m_A`$ from CDM considerations rapidly decreases. As a consequence, there exists an upper bound on the parameter $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}`$ beyond which the allowed range of $`m_A`$ disappears. Positive values of $`A_0`$ lead to heavier sparticle masses and, thus, to an increase of $`\mathrm{\Omega }_{LSP}h^2`$ and a slight decrease of BR($`bs\gamma `$). The allowed range of $`m_A`$ again disappears above a positive value of $`A_0`$. Negative $`A_0`$’s bigger than about $`0.5M_{1/2}`$ (generally) produce an insignificant decrease in the sparticle masses and $`\mathrm{\Omega }_{LSP}h^2`$. Lower negative values of $`A_0`$, however, lead again to an increase of the sparticle masses and $`\mathrm{\Omega }_{LSP}h^2`$, which means that a negative lower bound on $`A_0`$ must also exist.

We will not undertake here the difficult task of constructing the region in the $`m_A`$, $`\mathrm{\Delta }_{\stackrel{~}{\tau }_2}`$, $`A_0`$ space which is consistent with the constraints from $`bs\gamma `$ and CDM considerations. This would require not only a detailed study of the theoretical uncertainties in the calculation of BR($`bs\gamma `$), but also inclusion of the uncertainties associated with the particular implementation of the radiative electroweak symmetry breaking, the RG analysis and the radiative corrections to various particle masses. These uncertainties propagated to the sparticle spectrum, $`\mathrm{\Omega }_{LSP}h^2`$ and BR($`bs\gamma `$) can only widen the allowed region in the parameter space. Our main conclusion, which is the viability of MSSM with Yukawa unification, universal boundary conditions and $`\mu >0`$, can only be further strengthened by including these errors.

In summary, we have considered the MSSM based on radiative electroweak symmetry breaking with universal boundary conditions and assumed unification of all three third family Yukawa couplings at the GUT scale. We employed the full one-loop effective potential for electroweak symmetry breaking as well as the one-loop corrections to the charged Higgs boson, $`b`$-quark and $`\tau `$-lepton masses. Also, two-loop corrections to the CP-even Higgs boson masses were taken. We imposed the constraints from $`bs\gamma `$ and CDM in the universe by carefully including in the LSP relic abundance calculation the LSP (bino) and NLSP (lightest stau) coannihilation effects in the case of Yukawa unification (and, thus, large $`\mathrm{tan}\beta `$). The calculation of the branching ratio of $`bs\gamma `$ incorporates all the applicable NLO QCD and LO QED corrections and some of its theoretical errors were taken into account. We found that bino-stau coannihilation drastically reduces the LSP relic density and succeeds to bring it below the CDM upper bound for $`m_A`$’s which are allowed by $`bs\gamma `$ in the $`\mu >0`$ case. This, combined with the fact that, for $`\mu >0`$, the bottom quark mass after SUSY corrections is experimentally acceptable, shows that the simple, elegant and restrictive version of MSSM with Yukawa unification and universal boundary conditions can be perfectly viable. It is important to note that, without bino-stau coannihilation, this model was excluded.

We would like to thank M. Drees and R. Zhang for useful discussions. This work was supported by the European Union under TMR contract No. ERBFMRX–CT96–0090 and the Greek Government research grant PENED/95 K.A.1795. One of us (C. P.) thanks the Greek State Scholarship Institution (I. K. Y) for support.