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A key question for understanding the cross-section of expected returns of equities is the following: which factors, from a given collection of factors, are risk factors, equivalently, which factors are in the stochastic discount factor (SDF)? Though the SDF is unobserved, assumptions about which factors (from the available set of factors) are in the SDF restricts the joint distribution of factors in specific ways, as a consequence of the economic theory of asset pricing. A different starting collection of factors that go into the SDF leads to a different set of restrictions on the joint distribution of factors. The conditional distribution of equity returns has the same restricted form, regardless of what is assumed about the factors in the SDF, as long as the factors are traded, and hence the distribution of asset returns is irrelevant for isolating the risk-factors. The restricted factors models are distinct (nonnested) and do not arise by omitting or including a variable from a full model, thus precluding analysis by standard statistical variable selection methods, such as those based on the lasso and its variants. Instead, we develop what we call a Bayesian model scan strategy in which each factor is allowed to enter or not enter the SDF and the resulting restricted models (of which there are 114,674 in our empirical study) are simultaneously confronted with the data. We use a Student-t distribution for the factors, and model-specific independent Student-t distribution for the location parameters, a training sample to fix prior locations, and a creative way to arrive at the joint distribution of several other model-specific parameters from a single prior distribution. This allows our method to be essentially a scaleable and tuned-black-box method that can be applied across our large model space with little to no user-intervention. The model marginal likelihoods, and implied posterior model probabilities, are compared with the prior probability of 1/114,674 of each model to find the best-supported model, and thus the factors most likely to be in the SDF. We provide detailed simulation evidence about the high finite-sample accuracy of the method. Our empirical study with 13 leading factors reveals that the highest marginal likelihood model is a Student-t distributed factor model with 5 degrees of freedom and 8 risk factors. [ABSTRACT FROM AUTHOR]

State, public, academic, and special libraries are conducting and publishing the results of studies aimed at showing the value of their services and resources. Librarians must be prepared and proactive so when asked to justify budget allocations they have the tools to show their library's value and understand the importance of expressing value in terms familiar to the administrators. By identifying stakeholders and obtaining their buy in, librarians can turn data into evidence of the organization's return on investment (ROI) in the library. ROI is a powerful tool to use when establishing credibility, accountability, and evidence demonstrating the library's value. [ABSTRACT FROM AUTHOR]

This article investigates whether branch network expansions by Japanese regional banks influence their management performances positively at a time when management environments surrounding regional financial institutions have become increasingly severe due to the population decreases and shrinkage of regional economies. Specifically, the effects of numbers of regional bank branches on their credit businesses and profits are empirically examined. The results indicated that regional banks with more branches can increase their loans and bills discounted as well as their small and mid-sized enterprises loans and bills discounted. Thus, establishing more branches is effective in increasing the total sum of loans and bills discounted by each bank because regional banks with many branches can make contact with more customers. On the other hand, return on assets and return on equity of regional banks with more branches were found to be lower. Therefore, regarding the cost performance of regional banks, establishing too many branches and maintaining branch networks that are too large can have negative effects on regional banks. [ABSTRACT FROM AUTHOR]

We have raised executive management's awareness, and expectations of the strategic role of information systems technology. Teams of managers are commonly involved in workshops or planning processes designed to identify such applications. Conceptual frameworks to assist in such "idea-generation" sessions are widely cited in the literature and used in practice. Less well understood is the process used to evaluate the sustainability of proposed applications. We present a framework for evaluating sustainability based on the competitor's anticipated response time, differences among competitors, and the potential of the application to preempt competitive responses. Such an analysis is proposed as an evaluation tool for intended strategic applications of information technology. [ABSTRACT FROM AUTHOR]

In this paper, the problem of whether the left tail and the right tail of a distribution share the same extreme value index (EVI) is addressed and we propose two different test statistics. The first one is based on the result of the joint asymptotic normality of the two Hill estimators for the EVIs of both tails. And therefore, we can construct a quotient-type test statistic, which is asymptotic χ2(1) distributed after some standardization. The second test statistic proposed in this paper is inspired by the two-sample empirical likelihood methodology, and we prove its non parametric version of Wilk's theorem. At last, we compare the efficiencies of our two test statistics and the maximum likelihood (ML) ratio test statistic proposed by Jondeau and Rockinger (2003) in terms of empirical first type error and power through a number of simulation studies, which indicate that the performance of the ML ratio test statistic is worse than our two test statistics in most cases. [ABSTRACT FROM AUTHOR]

The analysis of the determinants of differences in wages across workers has traditionally relied on the estimation of average earnings functions. In this article, we propose a new theoretical model where it is the workers who decide the amount they wish to invest in human capital, taking into account the costs of acquiring those skills, for the purpose of maximizing earnings. In this model, both human capital and marginal productivity are likely to be influenced by the individual’s (unobserved) characteristics such as ability or motivation, potentially giving rise to endogeneity problems. In this context, the empirical implementation of our theoretical model allows us, under certain assumptions, to obtain consistent estimates even under the assumption of endogeneity. We present an empirical application to the education sector using data from the Spanish Structure of Earnings Survey 2010. Our results show that females and workers in the private education sector face more difficulties in achieving their maximum potential wage. [ABSTRACT FROM AUTHOR]

Many small-scale irrigation systems are characterized by low yields and deteriorating infrastructure. Interventions often erroneously focus on increasing yields and rehabilitating infrastructure. Small-scale irrigation systems have many of the characteristics of complex socio-ecological systems, with many different actors and numerous interconnected subsystems. However, the limited interaction between the different subsystems and their agents prevents learning and the emergence of more beneficial outcomes. This article reports on using Agricultural Innovation Platforms to create an environment in which irrigation scheme actors can engage, experiment, learn and build adaptive capacity to increase market-related offtake and move out of poverty. [ABSTRACT FROM PUBLISHER]

We empirically examine whether firms make investment decisions in anticipation of recessions and subsequently perform better. Using a large quarterly dataset of fixed asset investments for U.S. firms during 1984–2012, we show that not all firms efficiently adjust their investment decisions in anticipation of a recession. However, we find that pre-acting firms that properly adjust their investment decisions (i.e., underinvest) before a recession outperform re-acting firms that fail to make proper investment decisions (i.e., overinvest) before a recession in subsequent returns on assets, returns on investments, and market-adjusted return measures. [ABSTRACT FROM AUTHOR]

Research question:This paper focuses on estimating the net regional economic impact of a UK Premier League football club. The drivers of local economic effects, factors constraining impacts, and the return on public investment for peripheral regions are considered. Research methods:Financial information from a UK Premier League team (Swansea City Football Club) and a spectator spending survey are used. The wider regional economic effects are assessed using a bespoke Input–Output model of the Welsh economy, incorporating a tourism satellite account. Results and findings:The net regional economic impact of Swansea City Football Club was estimated at £46 m of gross value-added and 216 jobs. Game attendee spending impacts are estimated to be close to zero once the spending of Swansea City Football Club fans at away matches outside the region is considered. The substantial broadcast television income is an important a source of external financial flows to the home region. Implications:This paper adds to the evidence base on the economic impacts of regular season-based sport in peripheral regions. The research identified a substantial return on the public investment in the stadium infrastructure due to the redistribution of significant Premier League television revenues to the regional economy. [ABSTRACT FROM AUTHOR]

We investigate the relationship between expected returns and liquidity measures in Borsa Istanbul. To do so, we gather a wide range of illiquidity measures that can be applied to the market. Firm-level cross-sectional regressions indicate that there is a positive relationship between various illiquidity measures and one- to six-month ahead stock returns. Findings of the article are robust after using different sample periods and controlling for well-known priced factors, such as market beta, size, book-to-market ratio and momentum. The portfolio analysis reveals that stocks that are in the highest illiquidity quintile earn 7.2%–19.2% higher risk-adjusted annual returns than those in the lowest illiquidity quintile. The illiquidity premium is stronger for small stocks and stocks with higher return volatility and it increases (decreases) during periods of extremely low (high) market returns. [ABSTRACT FROM PUBLISHER]

The cost of using private finance is at the centre of the public private partnerships (PPPs) debate, but until now most works considered only the direct financial costs such as the loan interest rate and the shareholders return on equity and were based on various secondary sources. This paper focuses on seven shadow toll deals closed in Portugal between 1999 and 2002 and reports the financial costs of the PPP model considering also the associated transaction costs and is based on detailed information included in each concession's financial base case. The transaction costs include financial costs such as banking fees, due diligence costs and the impact of all cash distribution traps, such as reserve accounts or minimum-level of debt ratios. The PPP financial costs were then compared with the costs arising from raising public debt through a government or a public agency bond. Our analysis shows that the PPP ‘true' financing costs are, on average, 370 basis points above the cost of raising public debt and that the ‘transaction costs' account for around 40% of that financial premium. [ABSTRACT FROM PUBLISHER]

The importance of cloud computing is acknowledged both at national and entrepreneurial level. Its potential in business has been already described in many studies (Dillonet al., 2010; Bayraket al., 2011; Nuseibeh, 2011; Repschlaegeret al., 2013). However, many European countries do not exploit it much in spite of many positive responses made by respected consulting companies. The reasons for this are a very low level of changes in companies, ignorance of opportunities of the given technology and, consequently, an inability to count the return of investment. Therefore, the aim of this article is to introduce a tool for the investment evaluation of cloud computing, which corresponds to the needs of the European business environment and to the properties of this technology. Furthermore, the cost Benefit Analysis (CBA) method is explored. This method is adjusted for cloud computing on the basis of companies’ requirements, which were collected from quantitative and qualitative surveys and from the interviews with experts in cloud computing from academic and business environments. In addition, individual stages of the CBA method used in cloud computing are described. [ABSTRACT FROM PUBLISHER]

This article estimates and tests the smooth ambiguity model of Klibanoff, Marinacci, and Mukerji based on stock market data. We introduce a novel methodology to estimate the conditional expectation, which characterizes the impact of a decision maker’s ambiguity attitude on asset prices. Our point estimates of the ambiguity parameter are between 25 and 60, whereas our risk aversion estimates are considerably lower. The substantial difference indicates that market participants are ambiguity averse. Furthermore, we evaluate if ambiguity aversion helps explaining the cross-section of expected returns. Compared with Epstein and Zin preferences, we find that incorporating ambiguity into the decision model improves the fit to the data while keeping relative risk aversion at more reasonable levels. Supplementary materials for this article are available online. [ABSTRACT FROM PUBLISHER]

The equity premium, return on equity minus return on risk-free asset, is expected to be positive. We consider imposing such positivity constraint in local historical average (LHA) in nonparametric kernel regression framework. It is also extended to the semiparametric single index model when multiple predictors are used. We construct the constrained LHA estimator via an indicator function which operates as “model-selection” between the unconstrained LHA and the bound of the constraint (zero for the positivity constraint). We smooth the indicator function by bagging, which operates as “model-averaging” and yields a combined forecast of unconstrained LHA forecasts and the bound of the constraint. The local combining weights are determined by the probability that the constraint is binding. Asymptotic properties of the constrained LHA estimators without and with bagging are established, which show how the positive constraint and bagging can help reduce the asymptotic variance and mean squared errors. Monte Carlo simulations are conducted to show the finite sample behavior of the asymptotic properties. In predicting U.S. equity premium, we show that substantial nonlinearity can be captured by LHA and that the local positivity constraint can improve out-of-sample prediction of the equity premium. [ABSTRACT FROM PUBLISHER]

Research in multiple internal rate of return (MROR) has mainly focused on three areas: uniqueness, conditions where MROR occur, and solutions to MROR. In an attempt to solve for MROR, researchers have assumed that the occurrence of MROR is prevalent and thus a solution is direly needed. This article examines the probability that positive MROR would occur when variation is incorporated into the cash flow and the probability of getting positive MROR when multiple sign-change cash flow is generated. Results show that the probability of positive MROR occurring in multiple sign-change cash flows is relatively low and potentially a rare event. [ABSTRACT FROM PUBLISHER]

Using a panel data set of 200,000+ Chinese firms constructed by merging the Chinese census of manufacturing firms for 2000-2005, we compare the performance of Chinese state-owned enterprises (SOE s) and private firms in terms of rates of return, productivity, growth, costs, and investment. Using panel regressions, we find that Chinese industrial state-owned enterprises are, indeed, less efficient than private firms and pay less attention to costs, inventories, accounts receivables, investment, employee welfare, financing, and administration. We find that this adversely affects their performance. The findings are consistent with the soft-budget constraint hypothesis. [ABSTRACT FROM AUTHOR]

Pairs trading is a simple and popular relative value trading strategy. This article deals with the most common implementation of the method based on a distance criterion. It demonstrates the high sensitivity of the return to changes in the length of the formation period and shows that a reasonable modification of this parameter may lead to generate positive excess returns which are robust to data snooping. This empirical result underlines the difficulty in understanding pairs trading returns, dynamics and sources of profitability through time. [ABSTRACT FROM AUTHOR]

This paper estimates the effects of human capital skills largely created through education on life's chances over the life cycle. Qualifications as a measure of these skills affect earnings, and schooling affects private and social non-market benefits beyond earnings. Private non-market benefits include better own-health, child health, spousal health, infant mortality, longevity, fertility, household efficiency, asset management and happiness. Social benefits include increased democratisation, civil rights, political stability, reduced crime, lower prison, health and welfare costs, and new ideas. Individual benefits enhance community-wide development. New ‘narrow’ social rates of return using UK Labour Force earnings correct for institutional costs, longitudinal trends and ability. The paper's objective, however, is to estimate these earnings plus non-market outcomes comprehensively without overlaps and also relative to costs. Non-market outcomes are measured by averaging regression coefficients from published studies that meet scientific standards. New UK ‘narrow’ social rates of return average 12.1 per cent for short-cycle and 13.6 per cent for bachelor's programmes. Augmented with non-market effects on life chances, they are over twice that. Short degrees are found effective for regional development and have potential for developing countries. [ABSTRACT FROM PUBLISHER]

The measurement of economies of scale in the tourism industry has not been done to this point, as tourism is not a specific industry according to international statistical standards. Among many industries related to tourism, four sectors (accommodation, transport, retail trade and recreational services) across six states and two territories from 1997 to 2007 are studied as they contribute nearly 70% of tourism output in Australia. By comparing regression results from the Cobb–Douglas (C–D) production function and the translog production function, we find that there is evidence of increasing returns in transport, retail trade and recreational services at the industry level. However, accommodation is characterized by constant returns to scale at the industry level. As accommodation is responsible for the biggest share of tourism output, this suggests that overall the tourism sector is not characterized by increasing returns. We also find that the degrees of returns to scale from the C–D and translog production functions are different and that the imposition of input share also influences the empirical results. Both of these factors stress the importance of model specification to the measurement of economies of scale. [ABSTRACT FROM AUTHOR]

This study examines the target federal funds rate-Certificate of Deposit (CD) rate link over two time periods. The first period is 16 May 2000 to 31 July 2007 and the second is 1 August 2007 to 31 July 2009. August 2007 begins the initial stages of the financial crisis. A time-series analysis compares the two time periods. The results reveal a breakdown in the typical target–CD rate linkage in August 2007. For the 2-year period after August 2007 banks remained resilient to lower CD rates. This resiliency confirms the noted tightening of credit and bank uncertainty. During the 2-year period banks maintained firm CD rates as a way to attract funds in a period of growing uncertainty even with the target and other short-term rates falling. [ABSTRACT FROM AUTHOR]

We examine the influence of anti-takeover provisions on valuation, stock return and operating performance using data from an extensive sample of publicly listed Nordic companies during the time period of 1999-2004 (similar to Gompers, Ishii, and Metrick 2003 [Corporate governance and equity prices. The Quarterly Journal of Economics 118: 107-55] in the US). We collected data from nine of the most commonly used provisions. The results suggest that anti-takeover provisions have a negative impact on valuation, no effect on stock return, and a positive influence on operating performance. Analysing the influence of each reveals dual-class stock to be the single most important provision dummy contributing to the negative valuation, though the discount decreases over the years. [ABSTRACT FROM AUTHOR]

Many studies have shown that the correlation of stock portfolio returns is higher during market downturns, while very few of them offer an explanation for the causes of such an asymmetry. This article examines potential fundamental causes for the phenomenon. We find that such an asymmetry is caused by the following sources during market downturns: increasing common fundamental risk, higher correlation of individual fundamental risk and more sensitive loadings of these risk factors. We also find that these fundamental factors can only partially explain the asymmetric correlation. Possible mechanisms for these sources to drive the asymmetry are also discussed in the article. [ABSTRACT FROM AUTHOR]

In many finance and economics courses as well as in practice, the concept of risk aversion is reduced to the standard deviation of returns, whereby risk-averse investors prefer to minimize their portfolios' standard deviations. In reality, the concept of risk aversion is richer and more interesting than this, and can easily be conveyed through theoretical or applied examples. The authors offer an example of a 2-asset choice problem in which risk-averse investors ought to prefer the asset with not only a higher standard deviation but also a lower expected return. A corresponding survey of 131 respondents confirmed this preference. [ABSTRACT FROM AUTHOR]

The papal encyclical Caritas in Veritate affirms the dignity of work and unions but also calls for new perspectives in an era of hyper-globalism. The North American understanding of unions, common to both critics and advocates, is insufficient. It does not recognize that the labor union is a primarily economic institution; instead, unions tend to be cast as either political organizations or social institutions. Caritas in Veritate implores us to have public conversations using moral language. Unions ought not to be about merely rights, redistribution, or social support. They are about stewarding human capital, ensuring its potential is realized, and providing a fair return on investment. [ABSTRACT FROM AUTHOR]

This paper evaluates Nordhaus's neoclassical complaints about the Stern Review from the vantage point of classical growth theory. Nordhaus criticizes the Stern Review because it uses a discount rate that is well below the market rate of return on capital. From the perspective of classical growth theory, Nordhaus's belief in choosing preference parameters for the social planner based on observed market rates of return is equivalent to assigning the preferences of the capitalist agents to the social planner. This equivalence is an implication of the Cambridge Theorem, which interprets the Ramsey equation as the saving function of the capitalist agents. [ABSTRACT FROM AUTHOR]

In a recent paper Chandra & Sandilands (2006) put forward three contentious propositions concerning the 'mechanics' of the process of economic growth: these propositions are to the effect (1) that 'pecuniary external economies' should not be considered instances of market failure; (2) that economies of scale are of little importance in accounting for increasing returns, increasing returns being, it is alleged, attributable to other factors such as external economies or 'industrial differentiation'; and (3) that increasing returns are not 'sector specific', implying that particular sectors should not therefore be singled out for special promotion. This note investigates the arguments advanced by Chandra & Sandilands in support of these propositions, and finds that no convincing case is made for any of them. In particular, we stress the invalidity of Chandra & Sandilands' contention that increasing returns are largely independent of economies of scale. [ABSTRACT FROM AUTHOR]

The article discusses whether a lottery ticket is a good investment based on using elementary mathematics and economics. It presents a mathematical model of a lottery drawing which considers ticket sales and the size of jackpot. Using Portfolio theory and Kelly criterion, it examines whether the drawings with positive expected rates of return or the good bets is a good investment. It concludes that lotteries are still too risky to make good investments even with good expected rate of return.

Abstract: This paper assesses the effect of three major soccer teams’ wins on the returns of the Istanbul Stock Exchange (ISE). We argue that the effect of soccer wins on ISE returns increases with the fanaticism of the teams’ supporters. [Copyright &y& Elsevier]

This article examines panel data evidence to investigate the linkage between insurer performance proxied by investment yield and several economic and firm-specific factors in the United Kingdom life insurance industry. The empirical results indicate that investment yield is positively related interest rate level, but negatively related to interest rate changes, reinsurance dependence, assets held to cover linked liabilities and instability of asset structure. [ABSTRACT FROM AUTHOR]

Calculating the expected rate of return to their own college degree and comparing it to those of students with other majors can be an interesting and fruitful project for students in a labor economics course. Data from the surveys of the National Association of Colleges and Employers (not all that well known but available in most college career-planning and placement offices) allow students to use current starting salary offers reported for about 80 different major fields and another 80 types of occupations (first jobs) to estimate the financial payoffs to their college training. In this article, the author discusses the various steps, data sources needed, and caveats for students and instructors working this exercise. [ABSTRACT FROM AUTHOR]

We find a statistically significant increase in adjusted correlation between portfolio returns during the Russian financial crisis period, especially during the peak of the crisis. We also find that commercial bank and Savings & Loan Institutions (S&L) portfolios lost market value significantly with events, starting with the debt moratorium and ruble devaluation on 17 August 1998. Much of the significant losses were driven by smaller size portfolios of financial institutions. The greater losses were incurred by commercial banks, and most importantly, by smaller commercial banks, S&Ls and investment banks in the third sub-period following the debt moratorium. We also found a form of contagion effect on the portfolio of smaller banks. Moreover, International Monetary Fund help or bailout has been perceived ineffective contributing to any recovery from crisis in Russia. [ABSTRACT FROM AUTHOR]

This paper focuses on developing economic theory on the interrelation between information technology investment components. Three functional forms to model the joint effects between components of investment on firm accounting profitability are identified and empirically tested. The results suggest that the complementarities between components of IT investment can be best modeled by using the multiplicative functional forms, providing a framework to model the joint effects of different factors that impact firm profitability. [ABSTRACT FROM AUTHOR]

We examine the relative effects of rational and irrational investor sentiments on Dow Jones Industrial Average and S&P500 returns. The impact of rational sentiments on stock market returns is found to be greater than that of irrational sentiments. There are immediate positive responses of stock market returns to irrational sentiments corrected by negative responses in the upcoming periods. There are positive effects of past stock market returns on irrational sentiments but not on rational sentiments. The results support the economic fundamentals-based arguments of stock returns. Evidence in favour of irrational sentiments is consistent with the view that investor error is a significant determinant of stock returns. [ABSTRACT FROM AUTHOR]

The effectiveness of revenue management systems has diminished in recent years due to the systems' inability to address the increasing complication of online deal-seeking behavior. To restore their efficiency, one must first understand the changes in advanced-booking behavior and their implications. This study expands the consumer booking model by addressing the impact of time-before-the-date-of-stay and exploring the implication for the hotel's pricing/marketing strategies. The findings underscore the urgent need for empirical research on timing by showing that the predictions of the advanced-booking model, and consequently the effectiveness of RM systems, depend on the actual patterns over time. [ABSTRACT FROM AUTHOR]

The Alaska North Slope oilfield is a potential candidate for the gas-to-liquid (GTL) technology. With over 38 Tcf of natural gas occurring on the slope, gas gathering for a GTL facility will be relatively easy. GTL fuels are environmentally friendly (sulfur free) with better ignition and burning properties than conventional petroleum products from crude oil. Evaluating the options of transporting GTL products through the existing Trans-Alaska Pipeline System (TAPS) together with crude oil, either as a blend of crude oil and GTL (commingled) or as alternate slugs of each product (batching), is the main focus of this study. Economic evaluation model was employed using Rate of Return analysis to identify the most favorable mode of transportation of the GTL products. Batching, using modern tracking and sensor techniques, was found to be a more economic mode, yielding the highest rate of return on the investment. [ABSTRACT FROM AUTHOR]

Previous studies in the field of the momentum effect have defined winner and loser portfolios only by using deciles, quintiles or triciles. This article overcomes this limitation by investigating the magnitude of momentum gains for various sizes of winner and loser portfolios. It is found that beyond the first few extreme winners and losers, there is a continuous decline of momentum gains for larger number of shares portfolios. Maximum momentum returns, at the magnitude of 2.09% per month, emerge when only the 40 top and bottom performing shares are employed. This study also shows that for large portfolios, it is not essential for investors to sell the loser portfolio short, since its influence on momentum returns is insignificant. Overall, this article supports the existence of the momentum effect and even shows that investors can take a better advantage of the continuation in share prices than previously reported. [ABSTRACT FROM AUTHOR]

This article aims at enhancing current understanding of the history of investment evaluation criteria based on discounting. Their emergence constitutes a challenging issue for scholars devoted to the history of financial economics, as well as to fundamental tools of economic analysis. Their history is analysed in a comparative perspective, starting with the neglected contribution of Duvillard as a reference case. More than two centuries ago, this French language scholar developed, by an optimizing analytical machinery, a financial measure technically similar to Modified Internal Rate of Return (MIRR). In order to assess his theoretical contribution in a comparative perspective, the author will try to briefly account for the different contexts where the financial measure has been invented twice. This approach, indeed, is concerned with the institutional changes and the theoretical developments they fostered. It analyses concepts such as time preference, techniques such as discounting and issues such as the ‘reinvestment problem’. On the one hand, the Past (especially around the eighteenth century) and Duvillard's contribution is explored. On the other hand, the Present is reconstructed (in particular the late Fifties and later), especially the recent debate that re-invented the MIRR. This article will conclude with some comparative results. [ABSTRACT FROM AUTHOR]

Longer life expectancy and lower fertility rates will lead to an ageing population in most Western countries. This is thought to make earnings-based defined-benefit pay-as-you-go pension schemes unviable in the near future. Some economists suggest shifting towards a capitalized funded system grounding their proposal on the following advantages: (i) it raises national saving, thus leading to a faster rate of accumulation and a larger per capita income; (ii) it offers a higher rate of return on savings; (iii) it is immune to demographic shifts. In this paper we explore the fundamentals of these advantages, and conclude that the theoretical basis supporting them is very weak. We base our theoretical standpoint on the Sraffian-based capital critique and the theory of endogenous money. Additionally, we defend a parametric reform of a standard PAYG using figures that correspond to the Spanish economy for the period 2001–70. [ABSTRACT FROM AUTHOR]

This study extends the empirical evidence by analysing the reaction of monthly stock returns to the unexpected portion of CPI inflation rate and by capturing the asymmetric shocks to volatility of unexpected inflation in five MENA countries. Both Threshold GARCH and Exponential GARCH are used to catch the news affect that unexpected inflation may have on stock returns. Results document a negative and strongly significant relationship between unexpected inflation and stock returns in MENA countries. Results also indicate that the stock markets of the listed MENA countries do not feel the high up and down movements in the markets and as such the volatilities. The asymmetric news effect is absent. [ABSTRACT FROM AUTHOR]

A strong pre-holiday effect is revealed in this study of Hong Kong stock returns. Importantly, the effect does not appear to be modulated by day-of-the-week effects, which themselves are highly volatile and inconsistent across various sub-periods. As documented in earlier studies for the 1970s and 1980s, a Chinese Lunar New Year (CLNY) effect has been highly significant in explaining Hong Kong's overall pre-holiday return effect. Re-examination of the issue here indicates that the effect has continued throughout the last 15 years. More tellingly, after controlling for Hong Kong holidays, a pre-US holiday return effect is absent from Hong Kong returns for the 1990–2005 sub-period despite its significance between 1975 and 1990. Besides confirming earlier evidence of an inherited US holiday effect in Hong Kong returns during the 1970s and 1980s, it is instructive to note that the waning US pre-holiday effect, as documented in various studies since, can be viewed through the prism of Hong Kong returns. While the US pre-holiday effect appears to have been purged, Hong Kong's own holiday effect, other than that relating to the CLNY, has generally weakened. Finally, despite the persistence of a strong CLNY pre-holiday daily return effect, a ‘seasonal’ run-up in stock returns in the weeks prior to the CLNY is less apparent than hitherto. [ABSTRACT FROM AUTHOR]

This is a pioneering effort to test in 14 countries the relationship between stock market returns and their forecast volatility derived from the symmetric and asymmetric conditional heteroscedasticity models. Both weekly and monthly returns and their volatility are investigated. An out-of-sample testing methodology is employed using volatility forecasts instead of investigating the relation between stock returns and their in-sample volatility estimates. Expected volatility is derived from the ARCH( p ), GARCH(1,1), GJR-GARCH(1,1) and EGARCH(1,1) forecast models. Expected volatility is found to have a significant negative or positive effect on country returns in a few cases. Unexpected volatility has a negative effect on weekly stock returns in six to seven countries and on monthly returns in nine to eleven countries depending on the volatility forecasting model. However, it has a positive effect on weekly and monthly returns in none of the countries investigated. It is concluded that the return variance may not be an appropriate measure of risk. [ABSTRACT FROM AUTHOR]

In this paper sectoral production functions are estimated with a two digit disaggregation for eight European countries corresponding to the period 1978-1992, distinguishing between internal economies of scale and intersectoral external effects. In order to avoid the possibility that the regressions, carried out by way of panel data techniques, are spurious, the integration order of each variable has been identified using unit root. Similarly, the Hausman procedure has been applied to test the exogeneity of the variables and determine whether the most appropriate estimations should be SUR or three stage least squares. [ABSTRACT FROM AUTHOR]

This paper estimates the current economic impact and future potential of cold-water marine finfish aquaculture in Maine. Salmon farming currently accounts for nearly 86% of the total value of state production. In 2001, 13,202 mt of Atlantic salmon, Salmo salar, were produced in Maine, generating US$63.7 million in revenue and an additional US$32.7 million in indirect and induced economic activity. In addition, alternative cold-water finfish species are under evaluation for commercial aquaculture including haddock Melanogrammus aeglefinus, Atlantic cod, Gadus morhua, and Atlantic halibut,Hippoglossus hippoglossus. Important constraints to culture of alternative species are identified through an ex-ante assessment of the early culture of haddock. Overall, capital formation is the most important constraint due to high risk and uncertainty on the rate of return to investment. [ABSTRACT FROM PUBLISHER]

The well-documented day-of-the-week effect has shown that stock returns on some days of the week are often significantly higher than on other days. To investigate whether improvements in market efficiency may have caused this anomaly to disappear over time, this study examines the day-of-the-week effect in the world's largest developed equity markets over the last 22 years. The results indicate that, during the 1980s, this anomaly was clearly evident in the vast majority of developed markets, but it appears to have faded away in the 1990s. The implications of these findings are that long-run improvements in market efficiency may have diminished the effects of certain anomalies in recent periods. [ABSTRACT FROM AUTHOR]

We examine the relationship between the risk premium on the Center for Research on Security Prices (CRSP) value-weighted index total return and its conditional variance. We propose a new semiparametric model in which the conditional variance process is parametric and the conditional mean is an arbitrary function of the conditional variance. For monthly CRSP value-weighted excess returns, the relationship between the two moments that we uncover is nonlinear and nonmonotonic. [ABSTRACT FROM AUTHOR]

There are two competing views regarding the potential effect of survivorship bias on the assessed persistence in performance of managed fund returns. On the one hand Brown et al. (Review of Financial Studies, 5 , 1992) argue that spurious persistence will be induced, while alternatively Grinblatt and Titman (Journal of Finance, 47, 1992) argue the converse case, namely, that performance reversals or nonpersistence is more likely. The current study applies the non parametric contingency table methodology to the year on year raw returns of a sample of Australian Rollover funds as a means of gauging which of these survivorship bias hypotheses has greater support. Generally, the results show that although there is some evidence of persistence, the dominant pattern is one of reversals in performance, thus supporting the Grinblatt and Titman view. [ABSTRACT FROM AUTHOR]

Examines the portfolio allocation decision within an asset/liability framework. Correlation between portfolio weights and an asset's return and variance; Estimation of allocations to both public and private real estate; Pension plan portfolios.

This paper provides estimates of the amount of income shifted across national borders within the manufacturing operations of US multinational corporations (MNCs) in 1988. It is assumed that each MNC arranges its investments such that, after accounting for income shifting opportunities, the after-tax rate of return on a marginal investment is the same for all its affiliates, regardless of location. It is often alleged that US multinational corporations reduce their taxes by artificially shifting income earned in the United States and other relatively high-tax countries to subsidiaries in low-tax countries. This paper provides estimates of income shifted, by country, between affiliated members of US manufacturing MNCs. Variables for employment, rent, interest expenses, depreciation, the investment tax credit, and spending on advertising and research and development were included to control for factors other than income shifting that could affect tax liabilities. The main shortcoming of the method is obvious: other factors besides income shifting, such as cyclical disturbances, can cause differences in the rates of return.

The issue of credibility and capital mobility in the EMS is re-examined using an alternative methodology, as well as a longer sample period than previous studies. In particular, the dynamic relationship between interest rate differentials and the exchange rate risk premium is emphasized. The relationship between the premium and credibility is then used in order to identify patterns of credibility in ERM countries. Credibility in the case of Italy has declined post-1985, as indicated by the rising exchange rate risk premium. For Denmark, France and Ireland, credibility seems to be increasing up to the currency crisis period and for Belgium and Holland credibility increased early in the period and remained high during the rest of the period. [ABSTRACT FROM AUTHOR]

Building economics is described in the narrow context of methods of capital investment analysis applied to building investments in the United States. The common characteristic of all the methods described is that they consider benefits (savings) and costs over the project's life cycle or study period. Eight steps involved in making an economic evaluation are presented. The process is illustrated with a problem in choosing the economically efficient thermal resistance level of attic insulation. Appropriate applications are described for the following methods: life-cycle cost; net benefits; benefit-to-cost and savings-to-investment ratios; and internal rate of return. Federal and state agencies that use these methods are identified. The role of standards societies and professional organizations in encouraging the use of these methods is described. Three projects in which these methods have been used are examined briefly in terms of methodology to illustrate the use of building economics methods. A description of difficulties in applying the methods concludes the paper. [ABSTRACT FROM AUTHOR]