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In 2014, FERC adopted a new theory of capital markets for the purpose of setting authorized returns-on-equity: that all observed dividends and interest rates were anomalous and therefore unreliable indicators of the returns necessary for investors to hold the stocks and bonds of transmission owners. The new theory, used to justify higher authorized ROEs, rejected evidence of fundamental conditions in capital markets and explicitly adopted arguments by investor-owned utilities regarding unreliable markets. After a judicial remand, FERC abandoned the new theory, but consumers in New England and the Midwest were arbitrarily charged hundreds of millions of dollars over several years due to unjust and unreasonable rates for transmission service. [ABSTRACT FROM AUTHOR]

This paper aims to carry out a preliminary analysis of the arbitrage pricing theory in Argentine capital market, with special emphasis on inflation as a variable of interest for an emerging country, an underdeveloped financial market, and a period under analysis with inflationary trends and exchange market intervention. To that end, we work with a theoretical-empirical method. In order to formulate the model, we make a theoretical approach to the subject, based mainly on scientific articles that examine the relationship between the rate of return on assets and inflation. We focus our empirical analysis in an econometric study of the shares' performance of 19 companies listed on Argentinian capital market in the 2005-2014 period, and the associations with variables of interest, especially macroeconomic ones, also including some control tests with microeconomic variables. The main findings are robust about the effect on firms' performance of the following explanatory variables: risk-free interest rate, market performance, temporary effects of "hinge" periods and sector effects. However, the results are not determinant in reference to the effect of the inflation and the exchange rate variables on stocks' performance. [ABSTRACT FROM AUTHOR]

As measured by Gini coefficients, fractile inequalities, and tail power laws, wealth is distributed less equally across people than are labor earnings. We study how luck, attitudes that shape saving decisions, and growth rates of labor earnings balance each other in ways that simultaneously shape joint distributions across people of labor earnings, age, and wealth together with an equilibrium rate of return on savings that plays a pivotal role in balancing contending forces. Strong motives for people to save and for firms to demand capital raise an equilibrium interest rate enough to make wealth grow faster than labor earnings. That makes cross-sectional wealth more unevenly distributed and have a fatter tail than labor earnings, as in US data. [ABSTRACT FROM AUTHOR]

We analyze the conduct of fiscal policy in a financially integrated union in the presence of financial frictions. Frictions create a wedge between the return to investment and the union interest rate. This leads to an over-spending externality. While the social cost of spending is the return to investment, governments care mostly about the (depressed) interest rate they face. In other words, the crowding-out effects of public spending are partly "exported" to the rest of the union. We argue that it may be hard for the union to deal with this externality through the design of fiscal rules, which are bound to be shaped by the preferences of the median country and not by efficiency considerations. We also analyze how this overspending externality—and the union's ability to deal with it effectively—changes when the union is financially integrated with the rest of the world. Finally, we extend our model by introducing a zero lower bound on interest rates and show that, if financial frictions are severe enough, the union is pushed into a liquidity trap and the direction of the spending externality is reversed. At such times, fiscal rules that are appropriate during normal times might backfire. [ABSTRACT FROM AUTHOR]

This study uses an ex-post evaluation method to estimate the optimal external funding level that maximizes the benefit of agro-pastoral enterprises supported by the youth program for the Promotion of Entrepreneurship in Agro-pastoral Activities (PEA-Youth Program) in the Centre region of Cameroon. The Linear Programming (LP) model recommends a personal contribution between 238,510 and 995,000 FCFA for each enterprise. It also recommends full use of start-up/subsidized credit (1,200,000 FCFA) for each activity, which can be justified by its zero interest rate (0%) as compared to the productive credit (15% interest rate) whose use(<1,500,000 FCFA) is recommended for short cycle activities (poultry, maize) and not recommended for long cycle activities (piggery, plantain, cassava production). The results of LP rotation restriction are similar to the profitability results using the economic rate of return (ERR) and suggest monoculture as profitable to only one activity (plantain), while the four remaining enterprises (maize, piggery, poultry, cassava) could be profitable if undertaken simultaneously or in association. Hence, the PEA-Youth Program should consider funding several activities at the same time, increasing the level of subsidized credit for short cycle agro-pastoral enterprises whereas productive credit should instead be revised downwards or eliminated completely for long cycle activities. [ABSTRACT FROM AUTHOR]

The rate of wealth accumulation is discussed, and an expression for a momentary rate of capital return is presented. An expected value of the wealth accumulation rate is produced. The return rates depend on any yield function. Three different yield functions are applied, two of them published in the literature, and a third one parametrized using a comprehensive growth model. A common economic objective function, as well as a third known objective function, are applied and compared with the clarified wealth accumulation rate. While direct optimization of wealth appreciation rate always yields best results, procedures gained by maximizing the internal rate of return are only slightly inferior. With external discounting interest rate, the maximization of net present value yields arbitrary results, the financial consequences being at worst devastating. [ABSTRACT FROM AUTHOR]

Interest rates are currently very low in the countries. In these countries bonds are issued with low or negative yields. In this paper, I empirically investigate the factors that affect the price of bonds. I follow international arbitrage pricing theory to determine the relationship between factors and the price of bonds. The international arbitrage pricing theory applies a multi-linear regression model. The regression model is used for emerging markets and developing markets separately. I have a unique data set of 46 countries. The main data are the monthly returns on government bonds in the period 2010 - 2015. Exchange risk influences the bond prices. Currency movements can bring further yield for investors. [ABSTRACT FROM AUTHOR]

Litigating return on equity disputes exposes public utilities to substantial uncertainty in today’s market and regulatory environment. Anomalous capital market conditions have led some regulators to modify their approaches to assessing ROE and to consider alternative metrics. [ABSTRACT FROM AUTHOR]

We evaluate the liquidity preference hypothesis (LPH) for the term structure of interest rates in a different way. Instead of using bond returns as traditional approaches, we use interest rate surveys with market expectations in order to evaluate LPH. This approach allows us to disentangle the effect of the changes in interest rate expectations from the liquidity premium. We found empirical support for the LPH with Brazilian data using both traditional and survey methods. However, the evaluation with interest rate surveys gives a higher statistical confidence level than the traditional approach when we perform tests for term premium monotonicity. [ABSTRACT FROM AUTHOR]

The 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act called for a government study of the regulatory options for on-line Peer-to-Peer lending. On-line P2P sites, most notably for-profit sites Prosper.com and LendingClub.com, offer individual "investors" the chance to lend funds to individual "borrowers." The sites promise lower interest rates for borrowers and high rates of return for investors. In addition to the media attention such sites have generated, they also raise significant regulatory concerns on both the state and federal level. The Government Accountability Office report produced in response to the Dodd-Frank Act failed to make a strong recommendation between two primary regulatory options--a multi-faceted regulatory approach in which different federal and state agencies would exercise authority over different aspects of on-line P2P lending, or a single-regulator approach, in which a single agency (most likely the new Consumer Financial Protection Bureau) would be given total regulatory control over on-line P2P lending. After discussing the origins of on-line P2P lending, its particular risks, and its place in the broader context of non-commercial lending, this paper argues in favor of a multi-agency regulatory approach for on-line P2P that mirrors the approach used to regulate traditional lending. [ABSTRACT FROM AUTHOR]

Abstract: This paper provides estimates of the impact of higher education qualifications on the earnings of graduates in the U.K. by subject studied. We use data from the recent U.K. Labour Force Surveys which provide a sufficiently large sample to consider the effects of the subject studied, class of first degree, and postgraduate qualifications. Ordinary Least Squares estimates show high average returns for women that does not differ by subject. For men, we find very large returns for Law, Economics and Management but not for other subjects. Degree class has large effects in all subjects suggesting the possibility of large returns to effort. Postgraduate study has large effects, independently of first degree class. A large rise in tuition fees across all subjects has only a modest impact on relative rates of return suggesting that little substitution across subjects would occur. The strong message that comes out of this research is that even a large rise in tuition fees makes little difference to the quality of the investment – those subjects that offer high returns (LEM for men, and all subjects for women) continue to do so. And those subjects that do not (especially OSSAH for men) will continue to offer poor returns. The effect of fee rises is dwarfed by existing cross subject differences in returns. [Copyright &y& Elsevier]

Difference between the discount rate on consumption and the rate of return on investment is often taken to prevent the former's being used as a social discount rate. Yet techniques have long been known for incorporating both these rates in a shadow price of investment funds. Assumptions about the proportion of investment revenues saved and reinvested are crucial in determining whether a low discount rate favours or discriminates against long-term environmental values. Even a moderate saving rate may make the shadow price of funds indefinitely large. The conceptually correct discount rate then becomes the growth rate of investment funds, and the relative value of environmental effects becomes zero. Stochastic variation in rate of return makes this result more likely. Such an outcome may be avoided by setting reinvestment to zero, or assuming convergence of rates of return and discount, but no firm justification exists for these stratagems. However, various reasonable assumptions about environmental costs – especially, that they embody an investment element, or require adequate compensation to be paid – may make such costs indefinite also, and therefore capable of standing against indefinite values of investible funds. [Copyright &y& Elsevier]

The purpose of this study is to analyze bank behavior in Chile over time, looking at how their balance sheets and performance move both in the short and long run, and how they react to macroeconomic shocks. The evolution of banking aggregates over an 18 year period (1989-2006), using quarterly data is examined. Techniques common in the real business cycle literature are applied to establish empirical patterns. Robustness tests using several filters are performed. The effects of macro shocks on banking variables are analyzed, both by means of an event study, and by estimating impulse responses with VARs. The results show that credit lags the cycle, demand deposits lead it, both being procyclical, while the capital adequacy ratio (CAR) is countercyclical. In addition, a shock to interest rates reduces loans (total, commercial, consumption), and increases non performing loans (NPL) and the capital adequacy ratio (CAR). A shock to GDP growth has a positive effect on loans, return over equity (ROE), and a negative impact on NPL and CAR. [ABSTRACT FROM AUTHOR]

The existence and magnitude of risk premiums in the Brazilian term structure is not clear, particularly because it's a market in the process of development. Some year ago the Brazilian Central Bank created a system to measure market expectations for economic indicators, including the interest rates, and then give inputs to the inflation target regime. Nevertheless, if the system really represents "actual" expectations is a question to be answered. These are some of the motivations for this paper, together with the relation between the futures market and collected expectations, the risk premium for public debt securities and the relevance of these topics to public debt management. The main contributions are the measurement of the term structure of the risk premium in the Brazilian market, using the Kalman filter, and an estimation of market expectations. Furthermore, we investigate the expectations collected by the Central Bank and cover other minor topics, such as the determinants of the risk premium and the "government" premium. [ABSTRACT FROM AUTHOR]

The article discusses the relationship between monetary policy and the yield curve which can be used to examine the behavior of long-term rates during the occurrence of monetary policy tightening. The response of the yield curve to policy tightening is discussed. The elements of interest rate on any security is identified. The article also offers information on the occurrence of yield curve rotations.

An enterprise information portal (EIP) is viewed as a knowledge community. Activity theory provides a framework to study such a community: members of an EIP conduct specific tasks that are assigned through a division of labor. Each member of an enterprise information portal can undergo three distinct types of learning processes: learning-by-investment, learning-by-doing, and learning-from-others. Through these three types of learning processes, each member achieves specialized knowledge that is related to his or her own task. Cumulative knowledge resulting from the learning processes is considered in terms of two distinct attributes: depth and breadth of knowledge. This paper formulates a mathematical model and defines the goal of an EIP member as maximizing the net benefits of knowledge resulting from individual investment and effort. Numerical examples are provided to analyze patterns of optimal investment and effort plans as well as the resulting accumulated knowledge. The results provide useful managerial implications. In business conditions characterized by high interest rates or high internal rate of returns, it is preferable for members to delay spending their resources for learning. Intensive investment and efforts to obtain knowledge are preferable when the discount rate of costs is high, when knowledge is durable, when the value of knowledge is high, when the initial level of knowledge is high, when the productivity of the learning process is high, and when sufficient knowledge is transferred from other members. On the other hand, the size of the EIP has a positive or negative effect depending on the attribute of knowledge and the productivity of teaming processes. Further properties of the optimal decisions and learning processes are analyzed and discussed. [ABSTRACT FROM AUTHOR]

Patchouli oil is a commercially important essential oil in the flavor and fragrance industry. In this study, a technoeconomic feasibility assessment was conducted to commission a supercritical fluid extraction plant for the extraction of patchouli oil in Singapore. The study revealed that the manufacturing cost for patchouli oil is 53.87 USD/kg for a plant processing capacity of 400,000 kg of raw material/year with the cost of utilities being a major contributing factor to the manufacturing cost. In addition, financial indicators such as net present value, discount cash flow rate of return, return on investment and payback period have been applied to evaluate the profitability of the supercritical fluid extraction plant. The total investment cost for the plant is around 4.77 million USD. Calculation of the discounted cash flow rate of return shows that a maximum interest rate of 26.3% can be loaned from investors and the project would still breakeven. At an interest rate of 5.25%, the return on investment for the project is calculated to be 27.4% and the payback time is estimated to be 5.4 years with a total profit of 5.27 million USD after 10 years. [Display omitted] • Cost estimation and profitability analysis were applied on the SFE of patchouli oil. • Specific cost of manufacturing for patchouli oil was 53.87 USD/kg. • Cost of utilities is the largest contributor in the COM of patchouli oil. • Difference between selling price and patchouli oil COM showed economic feasibility. • Profitability study presented 27.4% ROI and payback time of 5.4 years. [ABSTRACT FROM AUTHOR]

The main purpose of this article is to investigate a speculative trading system with a constant magnitude of return rate. We consider speculative operations related to the exchange rate given as the quotient of the base exchange medium by the quoted currency. An exchange medium is understood as any currency or any precious metal. The unit return is defined as the return expressed in the quoted currency by the amount of base exchange medium. All possible states of the exchange market form a finite elemental space. All knowledge about the dynamics of this market is presented as a prediction table describing the conditional probability distributions of incoming exchange rate changes. On the other hand, in the proposed trading system each speculative operation is concluded in such a way that the gross payment is determined by the given magnitude of unit return. The paper contains an analysis of the following evaluation criteria: annual number of transaction, success probability, expected unit payment, expected unit profit, risk index, unit risk premium, return rate, interest rate, and interest risk premium. Both of these indices can be used to select the effective trading systems. Effectiveness is considered in the local sense and in the global sense. [ABSTRACT FROM AUTHOR]