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The study aims to update the well-settled issue in literature of rate of return on investment in higher education in Europe. The proposed approach slightly modifies the existing methodology based on the Mincer equation, using an updated set of data for the period 2014–2016 from the European Central Bank's ‘Household Finance and Consumption Survey’. The results obtained, ranging between 13% and 21%, are higher compared to historical records for the years 1996–2013. As for the microeconometric estimates of the Mincer-type equation, they are sound and comparable, although showing higher margins in relation to the recent figures. Thus, they may suggest an increasing trend in valuation and importance of human capital based on high school degree, especially for the Central–Eastern European Union countries, resulting probably from rapid economic and cultural convergence.

The types of inequality problems in Indonesia are very diverse, one of which is the rate of return on investment in education. To date, this problem has not been resolved by the government. The existence of this imbalance is thought to have a negative effect on the level of welfare of an area where the rate of return is relatively lower. This study aims to see the magnitude of the rate of return on education investment for each district and city in Indonesia. In addition, an analysis of the spatial effect of returns on education investment is also carried out on the level of welfare of an area in adjacent areas. Using the Mincer model to measure the rate of return for each region, the results show that the rate of return on investment in education in all districts and cities in Indonesia varies widely, ranging from 1% to 11%. Also, spatial analysis using the Spatial Autoregressive model shows that any increase in the percentage of return on investment in education in a certain area will decrease the level of welfare in the surrounding area. The proper regulations specifically related to equality of benefit after getting the education and the ease of migration are needed to overcome each region's negative spillover effect.

The rate of return (profitability) is the category that allows evaluation of financial, production and other costs of the enterprise. The detailed analysis of return ratios enables to regulate the enterprise financial system and has a positive effect on its financial performance. The article considers the method of the rate of return assessment and suggests the ways to increase it. The case of the medium-sized agro-industrial company was used. Based on the financial performance of the enterprise, the range of the rate of return indicators was calculated, such as fixed assets, rate of return on current assets and on equity capital, gross profit margin, operating and net profit margin. Based on the calculations, the authors show that the rate of return of the enterprise increased, and a high efficiency of operations was observed. However, at the same time, there are tasks to be solved. One of them is to introduce a payment schedule. The analysis of the financial effect of the payment schedule introduction showed that it increased the current rate of return of the enterprise by 10%.

Purpose: The aim of the article is to examine the selected determinants of the expected rate of return on human capital. Methodology: We conducted an anonymous survey of expected salaries among the Accounting and Controlling students at the Cracow University of Economics, which provided a unique setting for the analysis. On the basis of collected data for the cost of living and the cost of professional education for every participant, we used the human capital model developed by Dobija to compute the perceived level of the human capital of each individual. Then, we compared the expected salaries with the perceived levels of human capital and computed expected rates of return on human capital. The following research methods are used: literature review, statistical tests, econometric modeling. Findings: On the sample of 754 respondents, we found that male students expect a higher rate of return on their human capital than female students, while older students expect a lower rate of return on human capital than younger students. Research limitations: Only one field of study was used to measure the determinants of the expected rate of return on human capital. Originality: We contribute to the salary expectations and human capital literature by identifying a significant gender salary expectations gap that holds even after considering individually assessed costs of living and professional education. Our findings are consistent with the well-known observation that women tend to expect lower salaries than men.

Financing educational programmes in Less Developed Countries (LDCs) is at the cross-roads. The clamour for socialization of higher education in the face of large number of uncmployeci university graduates vis-a-vis dearth of adequate manpower to feed the development aciivities deserves consideration in a clearer perspectivc. The relatively high incidence of unemployment points out thc econotnic waste involved in using scarce resource. Moreover, for each occupation there is an optimum amount of formal schooling. Thus in some cases, labour productivity declines as schooling increases.

Productivity benefits of health technologies are ignored in typical economic evaluations from a health payer’s perspective, risking undervaluation. We conduct a productivity-based cost-benefit analysis from a societal perspective and estimate indirect costs of adult pneumococcal disease, vaccination benefits from the adult 13-valent pneumococcal conjugate vaccine (PCV13 Adult), and rates of return to PCV13 Adult for a range of hypothetical vaccination costs. Our context is Turkey’s funding PCV13 for the elderly and for non-elderly adults with select comorbidities within the Ministry of Health’s National Immunization Program. We use a Markov model with one-year cycles. Indirect costs from death or disability equal the expected present discounted value of lifetime losses in the infected individual’s paid and unpaid work and in caregivers’ paid work. Vaccination benefits comprise averted indirect costs. Rates of return equal vaccination benefits divided by vaccination costs, minus one. Input parameters are from public data sources. We model comorbidities’ effects by scalar multiplication of the parameters of the general population. Indirect costs per treatment episode of inpatient community-acquired pneumonia (CAP), bacteremia, and meningitis – but not for outpatient CAP – approach or exceed Turkish per capita gross domestic product. Vaccination benefits equal $207.02 per vaccination in 2017 US dollars. The rate of return is positive for all hypothetical costs below this. Results are sensitive to herd effects from pediatric vaccination and vaccine efficacy rates. For a wide range of hypothetical vaccination costs, the rate of return compares favorably with those of other global development interventions with well-established strong investment cases.

This study aims to study the macroeconomic factors that affect the rate of return of securities in the transport and service category of the Stock Exchange of Thailand. The category comprises three groups: media services, tourism, hotel and recreation and transport and logistics. The study employs quarterly data from 2001 to 2019 estimated with the ARDL bounds testing approach. The results reveal that media services, tourism, hotel and recreation and transport and logistics groups in the tourism and service category were cointegrated with stock exchange volume (in thousands of shares), exchange rate, gold bullion price, interest rate and diesel oil price. This study also found the long-term equilibriums of the macroeconomic factors deviated from the short-run to long run for three groups. The gold bullion price factor is a major factor in determining the long run. This study suggests that the gold bullion price is an alternative indicator for investment. Investors in the transport and logistics group should focus on the exchange rate, the gold bullion price, the interest rate and the diesel oil price before investment. Investors should consider the level of the exchange rate before investing in the media service group in the Stock Exchange of Thailand while investors in the tourism, hotel and recreation group of the Stock Exchange of Thailand should be recognize the stock exchange volume.

In this article, we evaluate the rate of return to government efforts to promote broadband. Specifically, we estimate the impact of USDA's broadband loan and grant programs on the average payroll per worker using zip code level data from the Zip Code Business Patterns for the period from 1997 to 2007. Our results indicate that two of the smaller broadband programs (the Pilot loan program and the broadband grants program) likely had no effect on local payroll per workers. On the other hand, the largest program in terms of funding and coverage (the current broadband loan program) likely had a positive impact. Our estimate implies that a $1 per capita increase in a particular zip code's one‐time receipt of the current program broadband loan results in a $0.92 increase in payroll per worker annually. Our calculated point estimates of the benefit: cost ratios for this broadband program range from 1.98 to 2.99, depending on assumptions about the time frame over which benefits accrue. However, the confidence intervals are wide enough to include the possibility that the costs outweigh the benefits.(JEL L86, J30, O18)

Purpose Young people experience lower employment, income and participation rates, as well as higher unemployment, compared to adults. Theory predicts that people respond to labor market information. For more than 50 years, researchers have reported on the patterns of estimated returns to schooling across economies, but the estimates are usually based on compilations of studies that may not be strictly comparable. The authors create a dataset of comparable estimates of the returns to education. Design/methodology/approach The data set on private returns to education includes estimates for 142 economies from 1970 to 2014 using 853 harmonized household surveys. This effort holds the constant definition of the dependent variable, the set of controls, sample definition and the estimation method for all surveys. Findings The authors estimate an average private rate of return to schooling of 10%. This provides a reasonable estimate of the returns to education and should be useful for a variety of empirical work, including critical information for youth. Originality/value This is the first attempt to bring together surveys from so many countries to create a global data set on the returns to education.

Undertaking a pharmacy education is an investment in human capital. Candidates trade off present versus future costs and benefits. They make this investment with the expectation of earning enough income throughout their worklives to make their undertaking financially worthwhile. Whether or not this occurs is determined by the rate of return. The aim of the current study was to construct a theoretical model to estimate the rate of return to a pharmacy education investment. Specifications for model assumptions, inputs, and outputs are discussed. The outputs are the rates of return, the inputs are the costs and benefits of a pharmacy education, and the assumptions illustrate the circumstances of the individual or group for whom the model is built. The rate of return is the annual percentage that equates the streams of benefits and costs over the investment span. The higher the value of the rate of return to a pharmacy education is, the more profitable is the investment. This theoretical model may be used to estimate the financial viability of pharmacy and compare it to the viability of other professions or to the viability of pharmacy among various locations.

The purpose of the article is to analyse the impact of various financial ratios used to evaluate a company’s liquidity and solvency on the rates of return on the shares of companies listed on the Warsaw Stock Exchange. In the context of developing countries, the relationship between liquidity and solvency on the one hand and the return on equity on the other is still not clear. Poland is the most economically developed country in Central and Eastern Europe. A thorough analysis is necessary to take appropriate action and introduce adequate regulations in the country, as well as to create the foundation for researching other economies in this region. In addition, this article includes new estimators that have not yet been taken into account but that may affect the rates of return, which will contribute to the literature on the subject and to the development of knowledge on the volatility of returns on shares. In the study, we have calculated the time-varying beta coefficients of the capital asset pricing model (CAPM) model and analysed portfolios based on three liquidity ratios and four solvency ratios, which were computed using the CAPM, Fama–French and Carhart models. The empirical study described in the article focuses on companies listed on the Warsaw Stock Exchange in the period from 1 January 1999 to 30 June 2013. Regressions were estimated by the least-squares method and by quantile regression. Based on the results, it was found that listed companies at risk of bankruptcy are able to meet their short-term liabilities. Liquidity and solvency measured by financial ratios significantly affect the sensitivity of the rate of return on shares to the risk factors expressed in the CAPM, Fama––French and Carhart models.

In Capital in the Twenty-First Century, Thomas Piketty (2014) explains growing income inequality via the difference between the rate of return on capital and the growth rate of the economy: the “r ...

When a commodity market relies upon a regulated network service industry—e.g., telecommunications, electricity, or natural gas transmission—economic efficiency in that commodity market is a crucial consideration for regulatory design. This is because insufficient infrastructure investment relative to network demand results in congestion. The extraction of associated rents has distortionary effects on commodity spot market prices. Greater regulatory flexibility in network pricing can alleviate such issues by cultivating the incentives needed for stakeholders to invest in transmission capacity. To illustrate this effect I derive and numerically solve stylized optimality conditions for access and usage prices for a gas pipeline operator under alternative regulatory models. My results have general implications for regulation in network infrastructure industries, as energy and telecommunications markets are expected to expand considerably over the coming decades.

Taking into account the current trends and opportunities in the financial markets of developing countries, the subject of the research is to analyse, test and quantify the impact of the holiday effect on the daily return rates from investing activities for the observed financial markets of Slovenia, Croatia and Hungary. The aim of the research is to gain a concrete, empirically tested and quantified knowledge of the capabilities and effectiveness of autoregressive conditional heteroscedasticity (A.R.C.H.) and generalized autoregressive conditional heteroscedasticity (G.A.R.C.H.) models, in order to quantify the impact of the holiday effect on the rates of return from investing activities in the observed financial markets. The time period covered by the research is 2003–2016, where the length of the research time horizon makes possible model effectiveness testing in the periods before, during and after the global financial crisis. The methodology also includes S.I.C.–A.I.C. (Schwarz and Akaike) model selection criteria and a number of tests suitable for or adapted to the specific characteristics of financial markets in developing countries. The research results confirm the role and importance of the application of econometric models in order to quantify the risks of investing activities in the financial mar- kets of developing countries.

Electricity distribution prices have steeply increased in Finland since 2015. This research investigates the returns from the Finnish low-voltage electricity distribution business and compares them to returns from three European industry indices. The within-industry distribution of returns is also studied. The Finnish rate of return regulation model used is presented together with the level of allowed returns by the model, four changes to the model are proposed, and the effect of the four proposed changes on the returns allowed by the model are investigated. The results show that the returns of the Finnish DSOs are very high absolutely and comparatively. There is a ca. ten percent segment of the industry that is not very profitable, while ninety percent of the Finnish DSOs have high or very high returns. The proposed changes to the regulation model are shown to have a remarkable effect on the return level. A change limiting the return for equity only would bring down the return to a level that can typically be expected of a return from a natural monopoly company. The results are relevant to the ongoing process of legal and regulatory changes taking place in Finland and for decision-makers and regulators everywhere.

This study aims to identify the determinates of the rate of return on deposits in Islamic banks. The study, according to the best of my knowledge, is the first study to investigate the factors affecting the rate of return in Islamic banks using cross-country data with a large sample of banks and for a prolonged period. To achieve its aim, the author used data from almost all Islamic banks in the world for a 20-year period (1989-2008). The data were analyzed using a two-way fixed-effect model. The empirical results demonstrate that capital adequacy (default risk), credit risk, age, economic growth, and concentration significantly and negatively influenced the return on deposits in Islamic banks. The results also suggest that foreign ownership, size, inflation, and oil prices had significant and positive effects on the rate of return. Moreover, the results indicated that deposit insurance (positive), interest rates (positive), and deposit growth (negative) are not determinants of the rate of return in Islamic banks.

I propose a fast and parsimonious way to estimate the implied rate of return on common equity of single stocks and indexes, resulting from the combination of two easily computable ratios.

India's rising income inequality to large extent is caused by the enormous difference in learning outcomes after completion of education. Decomposition analysis of India's current state of inequality points out that rural income inequality causes this outcome. The interstate difference in mean income and the urban-rural gap of mean income within states are often held responsible for giving rise to India's current state of income inequality. Intra-state income inequality is no less responsible. Non-farm sector has been expanding rapidly and within that category service sector is expanding. Service sector works need skills in various trades. Thus, unskilled and semi-skilled workers are left out in this new pattern. Formal employment is also characterized by duel wage structure. Income disparity or earning differential has its roots embedded in education delivery system in particular and human capital formation in general. The state must create opportunities for growth for all through provisioning of universal quality education and healthcare.

We compare the predictive performances of AR- t -GARCH and recent QAR-Beta- t -EGARCH models. We compare predictive performances for those days when an extreme value is observed, and also for the trading day after each day when an extreme value is observed. We use a historical dataset from the adjusted Dow Jones Industrial Average (DJIA) index. We assume that the forecast users of this study are DJIA options investors. We find that AR- t -GARCH dominates QAR-Beta- t -EGARCH on each day when an extreme value is observed, and QAR-Beta- t -EGARCH dominates AR- t -GARCH on the trading day after each day when an extreme value is observed.

How to measure a project's implied rate of return has long been an unresolved problem, except for some special cases. This paper derives return on present cost (ROPC) as the correct measure of an investment project's implied rate of return. The IRR is a biased measure except for projects classified as simple projects, and this bias is likely to be substantial in many real-world applications. Thus while net present values should be used to determine whether to accept/reject projects, I recommend that analysts use ROPC in place of the IRR as a measure of a project's true rate of return.

This paper shows that the notion of rate of return is best understood through the lens of the average-internal-rate-of-return (AIRR) model, first introduced in Magni (2010a). It is an NPV-consistent approach based on a coherent definition of rate of return and on the notion of Chisini mean, it is capable of solving the conundrums originated by the rate-of-return notion and represents a unifying theoretical paradigm under which every existing measure of wealth creation can be subsumed. We show that a rate of return is underdetermined by the project’s cash-flow stream; in particular, a unique return function (not a unique rate of return) exists for every project which maps depreciation classes into rates of return. The various shapes a rate of return can take on (internal rate of return, average accounting rate of return, modified internal rate of return etc.) derive from the (implicit or explicit) selection of different depreciation patterns. To single out the appropriate rate of return for a project, auxiliary assumptions are needed regarding the project’s capital depreciation. This involves value judgment. On one side, this finding opens terrain for a capital valuation theory yet to be developed; on the other side, it triggers the creation of a toolkit of domain-specific and purpose-specific metrics that can be used, jointly or in isolation, for analyzing the economic profitability of a given project. We also show that the AIRR perspective has a high explanatory power that enables connecting seemingly unrelated notions and linking various disciplines such as economics, finance, and accounting. Some guidelines for practitioners are also provided.

The importance of investment in Research and Development (R&D) in the energy sector is indisputable especially considering the benefits of new technologies to sustainability, security and environmental protection. However, the nature and potential of various energy technologies that are capable of improving the energy and environmental conditions globally is a challenging task for governments and policy makers that have to make decisions on the allocation of funds in R&D. To do so, the optimal resource allocation to R&D should be determined by estimating the social rate of return for R&D investments. This paper aims to estimate the social rate of return of R&D on various energy applications and technologies such as energy efficiency, fossil fuels, renewable energy sources, and nuclear for the G7 countries. The results show that primarily R&D investment on Energy Efficiency technologies and Nuclear are the ones that yield high social benefits for all G7 countries while exactly the opposite holds for Fossil fuels.

Firms that sponsor a defined benefit pension plan are suspected of managing earnings through the choice of the expected long-run rate of return to pension assets. However, data on this rate show it to be quite persistent with more than 50% of firms leaving their ERR unchanged from one year to the next. To capture this persistence, I model the rate using a first-order autoregression. Asset allocation information is included in the model. Endogeneity bias is addressed by estimating the dynamic panel data model using a system GMM estimator. No evidence of earnings management, measured by the relative size of the pension plan to net income and by acquisition activity, was found.

The transition from a short-term cost-plus tariff regulation to either a long-term rate-of-return or long-term price cap regulation in Russia started in 2009 and was completed in 2012, causing substantial changes in investment over the course of the reform. We estimate panel data of 46 Russian electricity distribution entities with a dynamic investment model using the system generalized method of moments and addressing potential endogeneity issues. We show that, despite the noncredible regulatory policy, the transition from short-to long-term regulation had a positive and significant effect on the investment rate of regulated entities. The specific long-term regulation design applied in Russia from 2008 to 2017 (either rate-of-return or price cap) had no effect on the investment rate. These results are important for the introduction of changes in regulatory frameworks in developing countries.

This study analyzes a renewable energy (RE) support scheme recently introduced in Russia and compares it to the most frequently applied policy measures, feed-in tariff (FiT) and feed-in premium (FiP) schemes. In particular, we present an analytical formulation of the problem set-up and study optimal investment timing and capacity choice employing a real options approach. In addition, we conduct detailed sensitivity analyses to highlight how different policies shape investment behavior. The contributions of this paper include modeling the Russian RE support mechanism in a dynamic programming framework that allows us to show that such a RE support design offers a strong case for transferring market risks away from the investor and has potential for a unique combination of effectiveness and cost efficiency. Post-print / Final draft

Real estate—housing in particular—is a less profitable investment in the long run than previously thought. We hand-collect property-level financial data for the institutional real estate portfolios of four large Oxbridge colleges over the period 1901–1983. Gross income yields initially fluctuate around 5%, but then trend downward (upward) for agricultural and residential (commercial) real estate. Long-term real income growth rates are close to zero for all property types. Our findings imply annualized real total returns, net of costs, ranging from approximately 2.3% for residential to 4.5% for agricultural real estate.

Building upon Magni (2011)’s approach, we propose a new rate of return measuring a project’s economic profitability. It is called the intrinsic rate of return (IROR). It is defined as the ratio of project return to project’s intrinsic value. The IROR approach decomposes the NPV into project scale and economic efficiency. In particular, NPV is found as the product of the project’s total invested capital and the excess rate of return, obtained as the difference between the IROR and the minimum attractive rate of return (MARR). This approach provides correct project ranking and is capable of managing time-varying costs of capital. In case of levered projects, shareholder value creation is captured by the equity IROR, which we call Intrinsic Return On Equity (IROE) (net income divided by total equity capital invested). If the project is unlevered, the IROE and the IROR lead to the same decision; if the project is levered, and the nominal value of debt is not equal to the market value of debt, the IROE should be preferred to project IROR.

We extend Easton's (2007) review of the literature on accounting-based estimates of the expected rate of return on equity capital, which we refer to as the ERR. We begin by reiterating the reasons why accounting-based estimates are used. Next, we briefly review the recent literature that focuses on improving forecasts of expected earnings by either (i) removing predictable errors from analysts’ forecasts of earnings or (ii) developing cross-sectional regression-based estimates of earnings using prior-period financial data. In the remainder of our review we discuss a recent debate on methods for evaluating estimates of the ERR. We highlight the key points in the debate so that the reader will find it easier to form an independent view of the relative merits of the proposed methods.

This paper shows how the expected rate of return (ERR) on equity may be estimated using only published accounting results, based on the information dynamics of reported earnings. As accounting-based valuation models conditional upon financial statement articulation lead to a rank deficient system of estimating equations, the paper introduces a nonlinear constraint on the articulation that allows the information system simultaneously to produce an estimate for the ERR by iteration, together with predictions for the key clean surplus forecasts of net earnings, net dividend, and the book value of equity. Further decomposition produces estimates of expected capital gain, expected earnings, and the expected change in equity book value, and by rearrangement, the expected change in unrecorded goodwill. The clean surplus relation is maintained in the forecast variables. Exploratory data methods are used to examine the nonlinear relationship between components of the accounting-based ERR and realized stock returns. Findings show that realized returns are higher (lower) than estimated ERR in expansionary (recessionary) periods, with evidence of a stronger returns impact in recessionary periods. For the large majority of firms, realized returns revert to the estimated ERR, and the time-varying accounting components are strongly related to future realized stock returns, consistent with time variation in the ERR around a long-run average. Predicted earnings and dividends provide useful additional information on short-run variations in the ERR.

According to human capital theory, people invest in education to accumulate human capital, enhance personal productivity, and in return receive higher life-cycle earnings profiles. Education is a form of human capital investment and accumulation. The formulation and identification of human capital may be quite diverse and usually results in different estimation methods for the rate of return to education. This article is focused on approaches to the measurement of the returns of private investments in human capital in Lithuania. We focused attention on studying human capital investment accumulation through the rate of return on higher education. The aim of the research is to estimate the private rate of return to education in Lithuania and compare calculated data with analogical data in other countries. In the first part of the paper the concept of “human capital” is defined, before estimating the returns to human capital. Further, the research methodology is presented. One of the main ways to calculate the rate of returns to investment in education, which is used in empirical practice, is the full-discounting or elaborate method, which consists in calculating the internal rate of return, and it was this method which was employed. Results indicate that the rate of return for males is relatively higher than for females. The average estimated rate of return to higher education is 13 percent; with the estimated return for females being 12,5 percent; and for males 14,9 percent. After comparing Lithuania‘s and other European countries‘ rates of return on investment in human capital, it is seen that rate of return in Lithuania is similar to that of Spain.

While business masters degrees are popular with students wishing to enhance their career prospects, there is little evidence available on the private rate of return to these degrees in Australia. Furthermore, there is little evidence about the effects of the huge growth in graduates in recent decades and changing business conditions on the profitability of a business masters degree from an individual's point of view. This is despite the expectation that there would be significant consequences of the changes in demand and supply to the relative income of higher degree holders. This paper presents estimates of the rate of return in Australia associated with the completion of business masters degrees over the period 2001 and 2011. The results show that for the average person, there are incentives to complete these degrees, and the private rate of return compares favourably with the real long term real bond rate. However, the profitability of an investment in a business masters has fallen significantly over time.

What is the aggregate real rate of return in the economy? Is it higher than the growth rate of the economy and, if so, by how much? Is there a tendency for returns to fall in the long run? Which particular assets have the highest long-run returns? We answer these questions on the basis of a new and comprehensive data set for all major asset classes, including housing. The annual data on total returns for equity, housing, bonds, and bills cover 16 advanced economies from 1870 to 2015, and our new evidence reveals many new findings and puzzles.

We introduce a theoretical and empirical method of studying equilibrium-consistent volatility models. We implement it with the market portfolio’s return, which is central to financial risk management. Within an equilibrium framework, we study two families of such models. One is deterministic volatility, represented by current popular models. The other is in the “constant elasticity of variance” family, in which we propose new models. Theoretically, we show that, together with constant expected returns, the latter family tends to have better ability to forecast. Empirically, our proposed models, while as easy to implement as the popular ones, outperform them in three out-of-sample forecast evaluations of different time periods, by standard predictability criteria. This is true particularly during high-volatility periods, whether the market rises or falls.

The economic rate of return (ERR) is a measure of the profitability of a revenue generating investment based on a single external discount rate which is the hurdle rate or the minimum attractive rate of return (MARR). In this paper, we will highlight on the practical and reasonable interpretation of the (ERR) as a reinvestment rate of the present worth of costs. We shall give the usual mathematical definition of the (ERR) and derive an alternative, more useful, and applicable definition in terms of the benefit-cost ratio. We will also investigate the behavior of the (ERR) function in terms of the (MARR) as a variable. A relationship between the (ERR) and the internal rate of return (IRR) will be established. Finally, the applicability of the (ERR) method as an economic analysis method will be demonstrated.

In recent years, academic studies have been converging towards the view that foreign aid promotes aggregate economic growth. We employ a simulation approach to: (i) validate the coherence of empirical aid-growth studies published since 2008; and (ii) calculate plausible ranges for the rate of return to aid. Our results highlight the long run nature of aid-financed investments and the importance of channels other than accumulation of physical capital. We find the return to aid lies in ranges commonly accepted for public investments and there is little to justify the view that aid has had a significant pernicious effect on productivity.

Scholars argue that multinational corporations tend to locate their investments in countries with lower employment protections to avoid potential future exit costs if an unfavourable event occurs. Yet, empirical results are highly inconsistent. The main objective of this study is to examine the causal relationship between rate of return on foreign investment income and employment labour protection (ELP) by employing one-step system generalized method of moments system. Strict ELP affects location choice of investments through the profit maximization appetite of foreign investors. Thus, contrary to previous studies investigating the effect of labour standards on foreign investment inflows, this study deals relationship between rate of return on foreign investment income and ELP in the host country. The study found robust evidence that ELP has no significant effect on rate of return on investment income; however, market size, GDP growth rate, openness, investment profile and inflation do indeed have a positive effect. The important implication is that the reductions in employment protection rules do not affect the location choice of foreign investors through the cost–benefit analysis on their investments.

Explicit discounted cash flow methods are used in many countries to assess the value of real estate investments or their likely rate of return given a particular price. These are typically supplemented by simpler models for the purpose of estimating market value, leading to debate about different approaches. A parallel situation exists in the case of UK development sites: both cash flow appraisals and simpler residual valuations are used to assess site values. Yet debate here has been limited, even though traditional residual valuations involve steps that depart from project appraisal practices used in mainstream capital budgeting. We explore the relationship between the profit and interest allowances used in traditional residual valuations and the internal rates of return that they appear to imply. Published residual valuations typically allow for profit through use of a simple proportionate relationship between required profit and the cost or final value of a scheme. They also show limited variation in their profit assumptions, but this implies large differences in expected IRRs. Simulated examples then illustrate the implications of applying standard profit-on-cost rates to schemes of different lengths and with different levels of land value. Findings for project duration, in particular, are noteworthy since they indicate that lower IRRs are implied for longer projects, though this relationship is not necessarily rational.

Brown coal is one of the dominant local strategic raw materials in Europe, used, to a large extent, in the power-generating industry. The current situation, where the price of gas and electricity precludes the efficient use of gas sources, leads to the extraction of older sources, chiefly brown coal ones. In tandem with a turning away from nuclear power, brown coal is experiencing a renaissance and the issue of brown coal price setting is, and will be, relevant. This paper deals with a proposal of a new method for determining the base price, consisting of defining the reference fuel chain for electricity and heat production based on brown coal. It builds on the notion that the degree of risk of the involved parties should be reflected in the modified amount of revenue per capital invested. The resulting price is then an economically justified price which encourages a respect for the specific features of the market in question and set the base price of the commodity in a way that is acceptable for both the extractive and the productive components of the fuel chain.

This article analyzes the World Bank's experience with project evaluation for a sample of 1, 015 projects by comparing estimated rates of return at appraisal with reestimated rates of return when construction works are completed, usually 5 to 10 years after appraisal. The analysis highlights the high degree of uncertainty in project analysis. A wide range of variables has been introduced to explain the observed divergence in appraisal and reestimated rates of return, but only a relatively small part of the divergence can be explained, even with the benefit of hindsight. Project analysis thus has to cope with a large degree of uncertainty, which the traditional methods of project evaluation and selection have not been able to reduce.

PurposeThis paper aims to analyze the effects of investors’ sentiment, return and risk series on one to another of selected exchange rates. The empirical analysis consists of a time-varying inter-dependence between the observed variables, with the focus on spillovers between the variables.Design/methodology/approachMonthly data on the index Sentix, exchange rates EUR–USD, EUR–CHF and EUR–JPY are analyzed from February 2003 to December 2019. The applied methodology consists of vector autoregression models (VAR) with Diebold and Yilmaz (2009, 2011) spillover indices.FindingsThe results of the empirical research indicate that using static analysis could result in misleading conclusions, with dynamic analysis indicating that the financial of 2007-2008 and specific negative events increase the spillovers of shock between the observed variables for all three exchange rates. The sources of shocks in the model change over time because of variables changing their positions being net emitters and net receivers of shocks.Research limitations/implicationsThe shortfalls of this study include using the monthly data frequency, as this was available for the authors, namely, investors are interested to obtain new information on a weekly and daily basis, not only monthly. However, at the time of writing this research, we could obtain only monthly data.Practical implicationsAs the obtained results are in line with previous literature and were found to be robust, there exists the potential to use such analysis in the future when forecasting risk and return series for portfolio management purposes. Thus, a basic comparison was made regarding the investment strategies, which were based on the results from the estimation. It was shown that using information about shock spillovers could result in strategies that can obtain better portfolio value over time compared to basic benchmark strategies.Originality/valueFirst, this paper allows for the spillovers of shocks in variables within the VAR models in all directions. Second, a dynamic analysis is included in the study. Third, the mentioned spillover indices are included in the study as well.

Although an adequate risk sharing is considered essential for the value for money of Private Finance Initiatives (PFIs), research has not yet considered if the market concentration of equity holders influences the return of projects in which they invest. Basing on a comprehensive dataset of 706 UK PFIs, our analysis suggests that the equity market concentration influences the return on projects and, therefore, the price paid by the public sector to remunerate its private partners. Furthermore, the return on PFIs is correlated to the power exercised by the central lobby investors, mainly financial ones. Since the recent evolution of the PFI policy requires a greater involvement of equity holders, policymakers should take into consideration the market concentration risk that can significantly impact on the value for money of such projects.

Internal rate of return (IRR) is a widely used tool in ranking capital budgeting projects and eventual accept or reject decisions. In this paper, we consider an investment decision involving a sustainable, energy efficient, greenhouse gases (GHG) reducing asset and incorporate the value of carbon emission allowances for the investing company. These allowances create cash flows that may be characterized by significant volatility and uncertainty. The methodology developed in this paper allows decision makers to integrate their knowledge of carbon trading markets and the cash flows that result from sale of emissions credits. The novel methodology utilizes a Bayesian model for IRR that uses Gibbs sampler. Analysis of the results shows that IRR is influenced by volatility and uncertainty of carbon credit cash flows. Ignoring those uncertainty characteristics and simply using the expected values of cash flows can result in significantly inaccurate investment rate of returns. When compared to deterministic IRR calculations, the results show that the occurrence of very high and very low cash flows affects IRR positively, whereas higher variability of cash flow distribution affects IRR of GHG-reducing asset negatively. In other words, frequent large or small cash flows are preferred over fluctuating cash flows. The results may also provide a rationale for the existence of an anomalous consumer behavior known as the energy efficiency gap.

This paper analyzes the dynamic effects of rate-of-return regulation on firms’ emissions compliance behavior when the price of emissions permits is uncertain. The paper shows that uncertainty regarding the price of permits would motivate a regulated firm to adopt a more self-sufficient strategy and would reduce the cost-effectiveness of emission allowance trading. When allowance transactions are treated as capital investments, uncertainty could reverse the classic Averch-Johnson effect, so that a regulated firm would purchase fewer permits in the ex ante period than its unregulated counterpart. These results are driven by the asymmetric impact of a price change on the expected marginal value of allowances under rate-of-return regulation. A wider variation in the permit price and a decline in the regulated rate of return would amplify the asymmetry. These results have implications for the efficiency of the proposed global carbon trading system.

A growing number of developing countries are investing in a variety of social programs to improve the welfare of their people, particularly those who are poor and vulnerable. In fact, these programs have become an important pillar of economic development policies. According to a World Bank report The State of Social Safety Nets 2015, as many as 1.9 billion people are beneficiaries of safety net programs; of which, 44 % receive in-kind transfers, 37 % receive cash based transfers, and the remaining 19 % receive other forms of benefits such as fee waivers.

Life insurance policies are no longer seen solely as a means of insuring life. Due to many new features introduced by life insurers, they are seen in the new light of serving savings and even investment purposes besides the basic purpose of insuring life. The present study discusses the rates of return given by different types of policies, and the effect of mortality on these rates of return across age, sum assured, and maturity period in each type of policy studied.The findings indicate that different types of policies give different rates of return and that mortality does have an effect on the rates of return. Endowment plans have higher rate of return with mortality incorporated, while for unit-linked investment plans, the rate of return is higher when it is treated purely as an investment instrument. The study also revealed that the unadjusted and mortality-adjusted rates of return follow a linear relationship that is very similar to the capital asset pricing model. The study opens a further scope of research by extending the methodology to include other relevant risk factors besides mortality, and for different types of policies across companies.