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Considerable effort has been devoted to indicate the critical determinants of acquisition premiums. However, the determinants of mergers and acquisitions (M&A) premiums are not yet fully understood. This research paper empirically examines the effect of stock return volatility on mergers and acquisitions premiums through real options value of bidder and target firms. With a sample of 2,559 completed M&A deals in the US during 1986-2016, we find that bidder firms tend to pay more premiums for the targets that have more future real option value and higher risk. To be more specific, when targets have more real options measured as high Research and Development (R&D) to market value, high sales growth rate, and low leverage ratio, the relationship between target return volatility and acquisition premiums is stronger. This study contributes not only to the literature regarding the determinants of mergers and acquisitions premiums but also to the literature of real options value. Keywords: Mergers and acquisition premiums, acquisition premiums, stock return volatility, real options, growth options

This paper investigates the impact of financial liberalization on the relationship between consumption and total wealth (i.e., the sum of asset wealth and human wealth). Financial liberalization is persistent and may signal changes in expected future consumption growth rates and/or in rates of return on wealth that, through the inter-temporal budget constraint, affect the current consumption-wealth ratio. We estimate the long-run relationship between consumption, total wealth and financial liberalization by state space methods using quarterly US data. The results show that the trend in the consumption-wealth ratio is well-captured by our baseline liberalization indicator. We find that the increase in this indicator over the sample period has increased the consumption-wealth ratio with about ten to sixteen percent. Investigating the responsible channel, additional estimates show that financial liberalization has predictive power for aggregate consumption growth rather than for returns, a result that supports an incomplete markets interpretation of the link between liberalization and the consumption-wealth ratio.

We explore the long-run relationship between income risk, inequality, and the macroeconomy in an overlapping-generations model in which households face uncertain streams of labor income and returns on their savings. To manage those risks, households can apportion their savings to a bond, whose return is safe and identical across households, and a productive asset, whose return is uncertain and can differ persistently across households. We find that greater polarization in households’ labor income and returns on their savings generally accentuates households’ demand for risk-free assets and the compensation they require for bearing risk, leading to higher measured income and wealth inequality, a lower risk-free real interest rate, and higher risk premiums. These findings suggest that the factors behind the observed rise in inequality over the past few decades might have contributed to the observed fall in the risk-free real interest rate and widening gap between the risk-free real interest rate and the rate of return on capital. We also find that the magnitude of the decline in the risk-free real interest rate and offsetting rise in risk premiums depend importantly on the source of income polarization, with the effects being especially large when greater inequality is caused by increased dispersion in returns on risky assets. Thus, the macroeconomic implications not only depend on the amount of inequality, but also the source of this inequality.

We study access to banking and how it is related to banks’ rate of return on investments and the distribution of income. We develop our empirical framework through a theoretical supply-side model of bank deposit services with a consumer population heterogeneous in income. We use this model to show how decreases in the interest rate margin and higher income disparities lead to an increase in the proportion of unbanked. Using localized US household data from 2009, 2011, 2013 and 2015 we find strong empirical evidence for the predictions of the model. We then structurally estimate our model to estimate the value of having a checking account relative to alternative financial services and to quantify the effects of actual changes in the interest rate margin and the distribution of income that occurred in the aftermath of the 2008 financial crisis.

Given overall lack of gender diversity in the venture capital and entrepreneurship industry shown in Calder-Wang and Gompers (2017) we ask: What promotes greater gender diversity in hiring? Does diversity lead to better firm performance and higher investment returns? In this paper, using a unique dataset of the gender of venture capital partners’ children, we find strong evidence that when partners have more daughters, the propensity to hire female partners increases. Moreover, our instrumental variable results suggest that increased gender diversity improves deal and fund performance. Lastly, the effects are primarily driven by the gender of senior partners’ children.

The paper justifies the possibility of estimating wage premiums that higher study education graduates may receive based on the administrative data from the Polish Graduate Tracking System. The data on wages in the year preceding the admission to a given study cycle were used, along with the data from the year after graduation. For the first first-cycle full full-time study programme, the average growth in wages in relation to every each subsequent year of education ranged from 20% to 40% depending on the area of study under which a given field of study was classified. For full-time second second-cycle studies, the rate of return was 50%–60%. In the case of part-time studies, these growth rates were considerably lower.

This paper examines the relationship between household consumption and financial literacy. The economic framework is a simple life-cycle model of consumption in which financial literacy affects the rate of return on assets. The theoretical predictions are that, for plausible values of the intertemporal elasticity of substitution, financial literacy is positively related to both the level of consumption and consumption growth. We empirically test these theoretical predictions with Dutch data from the LISS household panel. Our results provide evidence in favour of a positive association between non-durable consumption, and in particular food consumption, and financial literacy. No evidence is, however, found in favour of an association between consumption growth and financial literacy.

We study how a capital income tax and a wealth tax affect an investor's valuation of a company's stock in an efficient international capital market. Using a one-period model, a model of infinite horizon where the asset generates a future cash flow that is a martingale, and a finite horizon model where we abandon the martingale assumption, we find that a wealth tax and/or a capital income tax do not lead investors to value an investment differently from untaxed investors. Investors who seek a higher pre-tax rate of return due to capital taxes harm their own wealth.

The purpose of the article/hypothesis: The aim of this article is to examine the effectiveness of trading systems built on the basis of technical analysis tools in 2015–2020 on the DAX stock exchange index. Efficiency is understood as generating positive rates of return, taking into account the risk incurred by the investor, as well as achieving better results than passive strategies. Presenting empirical evidence implying the value of technical analysis is a difficult task not only because of a huge number of instruments used on a daily basis, but also due to their almost unlimited possibility to modify parameters and often subjective evaluation. Methodology: The effectiveness of technical analysis tools was tested using selected investment strategies based on oscillators and indicators following the trend. All transactions were carried out on the Meta Trader 4 platform. The analyzed strategies were comprehensively assessed using the portfolio management quality measures, such as the Sharpe measure or the MAR ratio (Managed Account Ratio). Results of the research: The test results confirmed that the application of described investment strategies contributes to the achievement of effective results and, above all, protects the portfolio against a significant loss in the period of strong turmoil on the stock exchange. During the research period, only two strategies (Ichimoku and ETF- Exchange traded fund) would produce negative returns at the worst possible end of the investment. At the best moment, however, the „passive” investment achieved the lowest result. Looking at the final balance at the end of 2019, as many as four systems based on technical analysis were more effective than the „buy and hold” strategy, and at the end of the first quarter of 2020 – all of them. When analyzing the management quality measures, it turned out that taking into account the 21 quarters, the passive strategy had the lowest MAR index. The Sharpe’s measure is also relatively weak compared to the four leading strategies.

W pracy porównano portfele inwestycyjne budowane na podstawie różnego rodzaju wskaźników tak, aby stworzyć najbardziej efektywne portfele dla odmiennych profili inwestorów w celu porównania efektywności portfeli opartych na podstawowych założeniach maksymalizacji zysku lub ryzyka i portfela opartego na założeniu Markowitza. Badaniem objęto grupę 25 spółek akcyjnych w dwóch okresach, hossy — od października 2016 do lipca 2017 oraz bessy — od stycznia do października 2018 roku. Jako metody badania wykorzystano analizę stóp zwrotu, odchyleń standardowych i wyników osiąganych przez poszczególne portfele. Artykuł pokazuje, że metoda Markowitza nie jest kryterium, które jednoznacznie wskazuje najefektywniejszy portfel inwestycyjny. Wyniki portfeli podlegają indywidualnej interpretacji przez inwestorów i mogą stanowić alternatywę dla typowego podejścia do inwestowania w akcje. Przedstawione wyniki mogą być rekomendacją dla inwestorów podejmujących ponadprzeciętne ryzyko lub wychodzących z założenia, że tylko portfele o dużym odchyleniu standardowym cechują się wyższymi niż średnie stopami zwrotu.

Unlike many other countries, Britain had a weak private rented sector (PRS) in decline for most of the twentieth century. A revival began from the turn of the millennium. The platform for this rebi...

This research specifically incorporates the impact of the disposition effect of trading volume into the model construction to more accurately verify the overconfidence behavior of investors in the Taiwan stock market. Based on the theoretical framework and related literature of overconfidence and disposition behavior, we propose the hypothesis to be test and further uses Taiwan stock price index with a turnover rate and return rate after removing the weekly effect for about ten-year data, and construct a tri-variate VAR-GARCH model to examine the investor overconfidence behavior and disposition effect of Taiwan stock market. The empirical results indicate that investors in the Taiwan stock market do have a tendency to overconfidence and are easily affected by the market environment. According to the risk of market capitalization, overconfident investors are not necessarily inclined to hold higher risk stocks. In addition to overconfidence behavior, investors in the Taiwan stock market also have a significant disposition effect, indicating that investors cannot rationally judge the timing of selling or purchasing their stocks. By recognizing this relationship and analyzing the biased trends from overconfidence and disposition effect in trading volumes and returns, such knowledge can help the investors/practitioners to develop strategies and take appropriate measures.

Human capital highly affects economics productivity. Thus, education plays an important factor in every demographic dividend. This study will estimate the return on education to paid-employment and self-employment in East Java using SAKERNAS 2012. Using Mincerian specification and Sohn model, this study analyzed the baseline model and to analyse further in self-employment. This study will also compare result in East Java with National and other Java province. Results from estimation found that return on education in East Java is generally higher than national, but lower than West Java. As for self-employment, return on education in East Java is lower than paid-employment, but in the lowest magnitude if compared with National and other Java region. Labor market flexibility that analyzed in this study also shows that East Java relatively more flexible. As a matter of opportunity cost, the low return rate of education in East Java demand some adjustment in education and labor market policy to optimize the economic outcome.

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%.

This paper, using the Australian stock market data, examines the investor-herding and risk-profiles link that has implications for asset pricing, portfolio diversification and foreign investments. As investors may herd towards a specific factor, sector or style to combat market conditions for optimizing investment returns, examining such herding can reveal investors' risk profiles. We employ State-Space models for extracting time series of herd dynamics and the proportion of signal explained by herding (PoSEH). The possibility of a leverage effect between market returns and volatility and its implications are discussed. The change in market volatility strengthens PoSEH; its impact is maximum on high return days of stocks. Quantile regression analysis shows that herding and adverse herding can emerge during the worst and best performance days of stock returns, but extreme uncertainty can bring both herding behaviours to a near halt. The study reveals the presence of a regulated stock market environment and the change in volatility and risk-aversion as the determinants of herding behaviour.

Historical rates of return on investments have received increasing scholarly attention in recent years. Much literature has focused especially on colonies, where institutions have been argued to facilitate severe exploitation. In the present study, we examine the return on investments in an Asian colony, British Malaya, from 1889 to 1969 for a large sample of companies. Our results suggest that the return on investments in Malaya might have been among the highest in the world during the period studied. Nevertheless, this finding fits badly with theories of imperial exploitation and can only to a limited extent be explained by a higher risk premium. Instead, we argue that the main driver of the very high return on investments in Malaya was rather the substantial rise in global market prices of the output of the two main sectors of the Malayan economy, rubber and tin. The way that the process of decolonization unfolded in Malaya did, furthermore, not lead to any major nationalization of foreign-held assets, and did thereby not disrupt the return on investment in the region in the same way as decolonization did to the return on investment in some other colonies.

Education is one of the tools in human capital investment because it is considered important in producing an adequate return to schooling. At the East Java Province in 2015 and 2018 the highest education was marked by a difference in the number of each level of education, especially at the tertiary level, which was still relatively low. So, that will be affect return to schooling received by the workforce. This research uses cross section data sourced from SAKERNAS data in 2015 and 2018, with Ordinary Least Square (OLS). The results of OLS in 2015 and 2018 shown if the level of education, age, worked training, worked experience, sex, and location have a significant effect on income. The results of the OLS regression are then used to calculated return to education based on education level, sex, and location. The results shown if the education achieved produce a rate of return that is always increasing at every level of education while return to schooling based on gender is a difference in junior and university education, in rural areas return to schooling at the primary school is higher than in the urban area.Keywords: Gender, Education, Return To Education, LocationJEL: J24, I21

The subject of this publication is an analysis of the sentiment of stock exchange investors in terms of making investment decisions in the energy sector of the Polish stock exchange. The investment mood is considered in the context of the possible impact of weather factors on investment decisions. Possible effects are verified in relation to the rates of return and the volume of trading of energy sector entities. The analysis is carried out both in terms of co-integration analyses as well as in econometric terms, in the cross-section of classic OLS models or causality analysis using VAR vector autoregression models. The main purpose of the issues discussed is the problem of indicating (illustrating) the presence or absence of mutual relations between weather factors and the stock market in terms of the methods considered.

This paper studies the reaction of share prices in the Chilean securities market at the sectoral level to the arrival of COVID-19 in the country. The following question is answered: Did the Chilean market act efficiently before the arrival of COVID-19? To answer this question, an event study using a 10-day investment return window was applied to the industrial sectors that make up the IPSA (Selective Stock Price Index). To obtain the abnormal returns (AR) and cumulative abnormal returns (CAR) for the event window, three models were used: (1) adjusted average return, (2) adjusted market return, and (3) the market model. The results of the study show an overreaction to market losses, except in the utilities industry, causing greater losses after the event, which shows that information is slow to be incorporated in the previous stage and suggests that the prices of the assets do not reflect all the information available in the market. A significant finding is that the Chilean stock market responded inefficiently in the face of the arrival of the pandemic. This information is useful for investors in the formation of portfolios and/or investment strategies with a view to the long term This research received support from the Family Business Chair of the University de Lleida.

We present a simple, linear asset pricing model of the cross section of Mortgage-Backed Security (MBS) returns. MBS earn risk premia as compensation for their exposure to prepayment risk. We measure prepayment risk and estimate security risk loadings using real data on prepayment forecasts vs. realizations. Estimated loadings on prepayment risk are monotonically decreasing in securities’ coupons relative to the par coupon, as predicted by the fundamental effect of prepayment on the value of bonds trading above and below par. Prepayment risks appear to be priced by specialized MBS investors. In particular, we find convincing evidence that prepayment risk prices change sign over time with the sign of a representative MBS investor’s exposure to prepayment risk.

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.

This paper uses administrative tax data to estimate top wealth in the United States. We assemble new data that links people to their sources of capital income and develop new methods to estimate the degree of return heterogeneity within asset classes. Disaggregated fixed income data reveal that rich individuals earn much more of their interest income in higher-yielding forms, and have much greater exposure to credit risk. Consequently, in recent years, the interest rate on fixed income at the top is approximately three times higher than the average. Using firm-level characteristics to value firms, we find that twenty percent of total pass-through business wealth accrues to those with losses. We combine this new data on fixed income and pass-through business returns with refined estimates of C-corporation equity, housing, and pension wealth to deliver new capitalized wealth estimates. Our approach---which builds on Saez and Zucman (2016) and Bricker, Henriques, and Hansen (2018)---reduces bias because wealth and rates of return are correlated. From 1989 to 2016, the top 1%, 0.1%, and 0.01% wealth shares increased by 7.6, 5.1, and 3.0 percentage points, respectively, to 31.5%, 15.0%, and 7.0%. While these changes are less dramatic than some prior estimates, wealth is very concentrated: the top 1% holds nearly as much wealth as either the bottom 90% or the "P90-99" class. We discuss implications for income inequality measures, capital tax policy, and savings behavior.

The importance of a sustainable labor market is a critical and fundamental point for many developing countries, where global competitiveness is based on cheap labor. The aim of this empirical–analytical study, framed in China in the research context, is to approach this hot topic from the lens of household wage differences between generations. Using cross-sectional data, consisting of the China Dynamic Migrant Survey and Oaxaca-Blinder decomposition methods and quantiles, to analyze the data results confirmed the differences in wages between two generations of peasant and urban workers. Moreover, a distinctive tapering in the pay gap occurred among the new generation. Fundamentally, a big gap exists in the rate of return on education between urban and rural labor. According to the results of quantile decomposition, the old generation of peasant and urban workers demonstrate anti-discriminatory phenomena at very low and very high scores.

In the article the methodical approach to determining the projected real return on investment related to a private pension funds (PPFs) is proposed. The technique involves variant calculations and allows maximization the real return of investor based on the variation of input parameters. The first stage involves building the model for forecast investments in PPF, taking into account compound interest. At the second stage, the calculation of periodic pension benefits is based on the forecast rate of return. At the third stage, an investor, based on the model, can perform the inverse operation – to determine the return on investment without taking into account inflation, using the money-weighted rate of return, based on NPF’s proposal for payments. At the fourth stage, the real return on investment is calculated taking into account the inflation rate. The criterion for the choice of investment conditions is the maximum real return on investment. The capitalization rate is compared with the risk-free rate.

In this study, we used regression discontinuity and difference-in-differences methods to verify whether price effects exist in the China Securities Index (CSI 300). Results suggest that the stocks included in this index had an extra abnormal rate of return of approximately 15% compared with the control group. Furthermore, the excluded stocks had a negative abnormal return of approximately 10% before the exclusion announcement, which reversed after the announcement. However, the price effects of the excluded stocks were not significant. Overall, the results indicate that price effects in the CSI 300 are asymmetrical.

This study estimates the utility function, including the rate of return, riskiness, greenness, and mood across selected countries. We incorporate mood as investors’ sensitivity or momentum towards environmental issues. This study assumes that higher sensitivity of environmental issues compels the firms to follow green measures. We report that the proportion of investment is higher if the firms account for greenness measures. This study compares the results of five Asian economies and reports that Japanese and South Korean firms are following the greenness measures. However, the firms locating in developing countries are far behind in implementing greenness measures. Our regression results also suggest that greenness and mood x greenness positively influence stock returns.

Based on the concept of high returns as the preference to low returns, this study discusses the adjustable security proportion for excess investment and shortage investment based on the selected guaranteed return rates in a fuzzy environment, in which the return rates for selected securities are characterized by fuzzy variables. We suppose some securities are for excess investment because their return rates are higher than the guaranteed return rates, and the other securities whose return rates are lower than the guaranteed return rates are considered for shortage investment. Then, we solve the proposed expected fuzzy returns by the concept of possibility theory, where fuzzy returns are quantified by possibilistic mean and risks are measured by possibilistic variance, and then we use linear programming model to maximize the expected value of a portfolio’s return under investment risk constraints. Finally, we illustrate two numerical examples to show that the expected return rate under a lower guaranteed return rate is better than a higher guaranteed return rates in different levels of investment risks. In shortage investments, the investment proportion for the selected securities are almost zero under higher investment risks, whereas the portfolio is constructed from those securities in excess investments.

The objective of this paper is to revisit the concepts of diversifiable and non-diversifiable risk, expound the portfolio risk in two ways: mathematically first, and with practical examples, second It also explains lending and borrowing at the risk-free rate of return, in addition to juxtaposing the diversification method to measure the unsystematic risk against utilizing Beta to measure the systematic risk. Furthermore, it briefly examines the mathematical simulation and sensitivity analysis, and mathematically delineates the technique for choices under risk, ambiguity, and uncertainty. The practical implication of this conceptual paper is to offer a further clarification of theoretical terms, especially those which might be interchangeable in financial and economic literature, and further show, by examples, the terms’ applicability.

This is an event-based study that uses intraday (hourly) log returns to quantify Conditional Value-at-Risk (CVaR) and MCMC stochastic volatility before and during the Covid-19 pandemic (January 2019–June 2020) across the stock, commodity and cryptocurrency markets. The results indicate pandemic-induced risk exposure (expected shortfall), increasing volatility, and stronger cross-market integration. These effects might reduce the potential benefits of cross-market hedging and contribute to a global financial contagion, imposing an additional constraint on both the bank-level risk management strategy and macroprudential policy framework. Thus, the ongoing crisis can be amplified through the global financial spillovers.

In the U.S., the geometric return on stocks has been higher than the geometric return on bonds over long periods. We study whether balanced portfolios have a larger geometric return (and expected log return) than stock portfolios when the risk premium is low. We use a theoretical model and historical data and find that this is the case. This low-risk premium is often observed in other developed countries. Further, in the past two decades, a balanced portfolio with 70% or 90% invested in the U.S. stock market (with the remainder invested in U.S. government bonds) performed better than a 100% stock or bond portfolio. The reason for this is that a pure stock portfolio loses a large fraction of its value in a downturn. We show that this result is not driven by outliers, and that it occurs even when the returns are log normally distributed. This result has broad policy implications for the construction of pension systems and target-date mutual funds.