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This paper investigates the market's reaction to U. K. Insider transactions and analyzes whether the reaction depends on the firm's ownership. We present three major findings. First, differences in regulation between the U. K. And United States, in particular the speedier reporting of trades in the U. K. , may explain the observed larger abnormal returns in the U. K. Second, ownership by directors and outside shareholders has an impact on the abnormal returns. Third, it is important to adjust for news released before directors' trades. In particular, trades preceded by news on mergers and acquisitions and CEO replacements contain significantly less information. [ABSTRACT FROM AUTHOR]

We compare initial offer prices in privatizations to initial prices in public offerings of private companies. The evidence indicates that government officials in the United Kingdom underprice IPOs significantly more than their private company counterparts. In Canada and Malaysia, however, the opposite is true. There does not appear to be a general tendency for privatizations to be underpriced to a greater degree than private company IPOs. We provide additional evidence on the determinants of privatization initial returns. Our findings indicate that initial returns are significantly higher in relatively primitive capital markets and for privatized companies in regulated industries. [ABSTRACT FROM AUTHOR]

We test whether the reaction of international stock markets to oil shocks can be justified by current and future changes in real cash flows and/or changes in expected returns. We find that in the postwar period, the reaction of United States and Canadian stock prices to oil shocks can be completely accounted for by the impact of these shocks on real cash flows alone. In contrast, in both the United Kingdom and Japan, innovations in oil prices appear to cause larger changes in stock prices than can be justified by subsequent changes in real cash flows or by changing expected returns. [ABSTRACT FROM AUTHOR]

This study examines the behavior of share prices around the ex-dividend dates before and after the introduction of the 1988 Income and Corporation Taxes Act that reduced substantially the tax differential between dividends and capital gains in the United Kingdom. We find that, in the pre-1988 period when the differential taxation of dividends and capital gains is high, ex-day returns are positive and significant. In contrast, in the post-1988 period, ex-day returns are, in most cases, negative and insignificant. Further analysis reveals that, while ex-day returns are significantly related to dividend yield and to the length of the settlement period, they are not affected by the commonly used measures of transaction costs, such as the bid-ask spread and trading volume, or by the day of week, month of the year, type of dividend distribution, or number of days to the actual receipt of the cash dividend. We conclude that taxation affects significantly ex-day share prices in the United Kingdom. [ABSTRACT FROM AUTHOR]

The evidence of slowly mean-reverting components in stock prices has been controversial. The hypothesis of stock price mean-reversion is tested using a regression model that yields the highest asymptotic power among a class of regression tests. Although the evidence that the equally weighted index of stocks exhibits mean- reversion is significant in the period 1926-1988, this phenomenon is entirely concentrated in January. In the post-war period both the equally weighted and the value-weighted indices exhibit seasonal mean-reversion in January. A similar phenomenon is also observed for the equally weighted index of stocks traded on the London Stock Exchange. [ABSTRACT FROM AUTHOR]

The article tests the Fisher hypothesis with British data and focuses on the relationship between inflation and rates of return for common stocks. Regression models are used to evaluate statistics from the London Business School share price databank and inflation measures from the Index of Retail Prices. The Wholesale Price Index is mentioned in the context of replication tests. The study extended some of the monthly data back to 1935 and the annual data to 1919. The Financial Times Ordinary Share Index provided monthly stock market returns from June 1935 and an equally weighted geometric mean of the stock returns.

This paper investigates a sample of forty-seven British closed-end investment trusts over the interval 1960 to 1970. Using the traditional performance measures of Jensen, Treynor, and Sharpe, it was found that no trust in any of the intervals studied had performance measures that were significantly different from zero. This either means that the test was not powerful enough to identify any superior performance if it existed, or that no trust significantly outperformed the LSE. Two other performance measures were investigated: The first involved an empirically estimated security market line and the second the zero-beta form of the capital asset pricing model. In both cases some significant measures of performance were obtained. On investigating whether the performance measures abstracted from beta, it was found that whereas the new measures were related to beta the effect in the case of the traditional measures was insignificant. [ABSTRACT FROM AUTHOR]

This article combines a Structural Vector Autoregression with a no-arbitrage approach to build a multifactor Affine Term Structure Model (ATSM). The resulting No-Arbitrage Structural Vector Autoregressive (NASVAR) model implies that expected excess returns are driven by structural macroeconomic shocks. This is in contrast with a standard ATSM, in which agents are concerned with non-structural risks. As a simple application, we study the effects of supply, demand and monetary policy shocks on the UK yield curve. We show that all structural shocks affect the slope of the yield curve, with demand and supply shocks accounting for a large part of the time variation in bond yields. [ABSTRACT FROM AUTHOR]

The equity premium in the UK has risen significantly since the start of the financial crisis and the associated extended recession. This paper examines the relationship between the business cycle and equity returns to see how robust this association is. Using official business cycle dating and identified structural macroeconomic shocks, evidence is found for counter-cyclicality in excess returns. Negative supply shocks are found to have an especially large and significant counter-cyclical impact. A long sample of realized returns using revised data and a sample of expected returns using real-time data show similar results suggesting similarity in realized and expected returns. [ABSTRACT FROM AUTHOR]

The UK government first set financial objectives for the nationalised industries in 1961 and subsequently promoted the use of 'discounted cash flow' for investment appraisal. The nationalised industry regime evolved until, in the 1990s, it was succeeded by economic regulation regimes for the privatised utilities. Meanwhile discounting conventions emerged and have continued to evolve for wider government policy analysis, including aspects of climate change. Issues about the size and functions of public expenditure notwithstanding, UK government conventions are currently fairly uncontroversial: however, in the world at large, government discounting remains subject to many academic and international controversies and misunderstandings. [ABSTRACT FROM AUTHOR]

The seminal work of J. B. Jefferys highlighted two unusual features of the Victorian equity market, namely high share denomination and uncalled capital. This article examines the extent to which publicly traded company stocks in the nineteenth century had these features. It also analyses the effect of these features on stock returns using monthly data for the London Stock Market over the period 1825-70. We find that stocks with unpaid capital earned a higher return, which is consistent with investors being rewarded for the risk of a call on their personal assets. We also find that stocks with a high share denomination earned a lower return, which is consistent with the view that this feature was conducive to superior corporate governance. [ABSTRACT FROM AUTHOR]

This study analyses the determinants of the variation in option-adjusted credit spreads (OASs) using a unique database and enlarges the traditional analysis to include disaggregated indexes, new variables, and a complete set of markets (USA, UK, and the Eurozone). An extended set of regressors explains almost half the variability of OASs in the three markets. We find that institutional trading activity significantly affects corporate bond spreads, signalling either variation in perceptions of risk or the existence of an indirect measure of liquidity. We also find that US business cycle indicators significantly affect the variability of OASs in the UK and the Eurozone. Finally, we find evidence that stock returns have more influence on high-yield bonds in the Eurozone than in the USA. [ABSTRACT FROM AUTHOR]

Can dividend yields out-predict stock returns without short rates? Using monthly data of the UK over the period of 1923-2007, in this paper we investigate both in- and out-of-sample predictability of stock returns based on dividend yields. Empirical results indicate that the predictability of UK's stock returns is visible without short rates if the forecast horizon is greater than four months. The above finding is new in literature and results from adopting a long data set and a non-linear modeling strategy. [ABSTRACT FROM AUTHOR]

Introduction: Following concerns expressed regarding recently expanded dental education, a survey was conducted on United Kingdom and Republic of Ireland clinical educators' perceptions of their work and the educational experiences they provide in clinical restorative dentistry. Many of the challenges facing dental education are common to all countries, and it would be of interest to note if the views reported are representative of the greater European perspective. The results of this survey represent a European regional picture. Methods and Materials: This is a survey of clinical staff in restorative dentistry departments across all of the fully established UK and ROI dental schools. The survey covered factors affecting the quality of undergraduate learning in restorative dentistry and the implications of these for programme delivery. Thematic analysis was applied to qualitative responses. Results: One hundred and eighty-eight responses were received across the gamut of clinical educators' roles and across 15 of the 16 schools. Themes identified were personal workload, teaching effectiveness, students' clinical experiences, provision of teaching, departmental organisation and job satisfaction. Discussion: The survey findings had many parallels with other recent reports but also suggested some developments. Conclusion: The survey provided an accurate snapshot of staff views on the quality of undergraduate clinical training in restorative dentistry. Despite experiencing difficulties in many areas of their work resulting in poor morale, staff considered teaching rewarding although undervalued by others. A number of recommendations are made for the development of undergraduate teaching. [ABSTRACT FROM AUTHOR]

Dividends can provide a tangible signal of earnings, but this function depends upon characteristics of financial reporting that were not always present in early financial capitalism. Although eighteenth-century English canal companies offered low-risk securitized capital approved by Parliament and were important to the development of financial capitalism, little is known about the economic state of the canal industry, beyond observed dividend levels. This article estimates rates of return on equity for a set of major English canals, but shows that their financial reporting under-represented equity inputs so that dividend rates did not reliably signal operating returns or equity-based rates of return. [ABSTRACT FROM AUTHOR]

We provide evidence on the nature of co-movement in monthly US and UK stock returns by investigating time-varying correlations in returns since 1980. There is a marked increase in correlations between these markets around 2000, which we attribute to globalization and model with a time-varying smooth transition conditional correlation (STCC) GARCH specification. A double transition correlation model with time and US stock price volatility indicates that correlations not only increase over time but also during periods of high volatility. The STCC models perform well in comparison with constant and dynamic conditional correlation models in terms of both statistical and economic criteria, but we demonstrate that an investor will gain little from portfolio diversification across these two important markets. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

In this paper we examine a comprehensive set of 2,499 UK IPOs launched between mid-1975 and the end of 2004. We find compelling evidence of long run under-performance that persists for between 36 and 60 months post-flotation, depending on the precise method chosen to measure abnormal returns. Following Schultz (2003) , we ask whether our results are consistent with ‘pseudo-timing’. Equally-weighted returns in calendar time provide further evidence of under-performance, a result that favours the Loughran and Ritter (2000) behavioural timing hypothesis rather than the Schultz (2003) pseudo-timing hypothesis. However, we show that this under-performance is concentrated in AIM and USM stocks. When we measure value-weighted returns in calendar time we find that abnormal returns are not significantly different from zero. Further analysis shows that, consistent with the findings of other studies, IPO under-performance is concentrated in smaller firms. [ABSTRACT FROM AUTHOR]

We find strong evidence of regime switching in the relation between real stock prices and real activity for the UK over the period 1946–2002. Furthermore, there is evidence that the causality pattern from real stock returns to the IP growth rate varies across regimes: causality exists only in the low stock market volatility regime, while it does not exist in the high stock market volatility regime. As the latter largely refers to the period of inflation targeting in the UK, this finding uncovers the importance of monetary policy in insulating the real economy from unexpected financial market effects during periods of financial instability. Additional evidence of regime-dependence is uncovered using impulse response analysis. Finally, the US stock market is found to exercise significant regime-independent effects on the UK relation as a whole as well as on the future UK IP growth. Copyright © 2008 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

We analyse the ability of the conditional asset pricing models to explain the cross-sectional variation in UK stock returns. We examine conditional versions of the Sharpe-Linter CAPM and the Fama-French three-factor model. The results indicate that the conditional single-factor model is rejected in all instances. However, there is evidence supportive of the three-factor model. A specification of this model that allows for time variation in conditional covariances, conditionally expected returns and the conditional variance of the market cannot be rejected. Copyright © 2009 John Wiley & Sons, Ltd. [ABSTRACT FROM AUTHOR]

This paper examines the joint role of market feedback and investment constraints on managerial behavior. Using a sample of UK fixed price initial public offerings, we show that underperformance of share returns at the IPO significantly affects managerial investment decisions in the period after the offering. Firms with better investment opportunities and proportionately lower fixed (higher intangible) assets are more sensitive to negative market feedback. Over the longer term, the more responsive firms perform significantly better than their non-responsive counterparts. The findings contribute to the debate on the informational advantage of managers over investors and present strong evidence that the market, on aggregate, can provide a superior assessment of a firm's opportunities. Managers who are able to respond to negative market feedback can significantly improve their firm's future prospects. [ABSTRACT FROM AUTHOR]

Since the mid-1990s the dividend yield reached and largely remained at a historically low level, even accounting for the stock market correction in the early 2000s. This appears to suggest that prices are overvalued. However, alternative valuation models based upon comparing bond and equity yields suggest that, if anything, prices are undervalued. This paper seeks to provide answers to this seeming paradox. Preliminary results suggest non-stationarity of the dividend yield and bond yield–equity yield differential, although the yield ratio is possibly stationary, casting doubt on mean reversion. Evidence from structural breakpoint testing suggests that all measures have been subjected to several mean level shifts throughout the sample period, and notably within the last decade, such that each series now fluctuates around a mean level lower than that experienced previously. Thus, the lower dividend yield and lower bond–equity ratio do not necessarily imply equity mispricing but that concepts of pre-existing normal levels no longer apply. In explaining why higher equity prices are supported, we note that the last decade has seen a period of historically low and stable inflation and interest rates. Further, there is a strong positive relationship between inflation and the dividend yield. This more stable economic environment has led to more accurate valuation of stocks and lower required rates of return, thus supporting higher prices. [ABSTRACT FROM AUTHOR]

Traditional methods of estimating required rates of return overstate hurdle rates in the presence of growth opportunities. We attempt to quantify this effect by developing a simple model which: (i) identifies those companies that have valuable growth opportunities; (ii) splits the value of shares into ‘assets-in-place’ and ‘growth opportunities’; and (iii) splits the equity β into β for ‘assets-in-place’ and ‘growth opportunities’. We find growth opportunities for UK companies over the 1990–2004 period to average 33% of equity value. Incorporating the effect of growth opportunities, the average cost of capital for investment purposes falls by 1.1 percentage points. [ABSTRACT FROM AUTHOR]

There are three key types of political risk facing pension schemes: those induced by demographic, economic, and pure political factors. The state scheme in the United Kingdom has been susceptible to all three types since 1980, with the result that the annual real internal rate of return on the second-pillar state pension for the average male worker fell from 5.1% to 1.5% over 25 years. The flat-rate, first-pillar Basic State Pension has also experienced a fall in its IRR of 3 percentage points as a result of the indexation basis changing from earnings to prices. [ABSTRACT FROM AUTHOR]

We examine whether past return measures have any significant predictive ability for future returns of UK unit trusts with international equity objectives. We find significant positive persistence between the past return performance of the trust relative to its investment sector and future trust returns relative to its sector. This result holds at short-run and long-run return horizons. The persistence is stronger in trusts that perform well relative to their sector. Our findings suggest that the past return performance of the trust relative to their sector provides a useful guide to future return performance relative to their sector. [ABSTRACT FROM AUTHOR]

This paper examines the UK equity premium over more than a century using dividend growth to estimate expectations of capital gains employing the approach of Fama and French (2002) . Over recent decades estimated equity premia implied by dividend growth have been much lower than that produced by average stock returns for the UK market as a whole; a finding corroborated by all economic sub-sectors. The empirical analysis suggests this is primarily due to a declining discount rate, during the latter part of the 20th century, which would rationally stimulate unanticipated equity price rises during this period. Thus, I conclude that historical stock returns over recent decades have been above investors' expectations. [ABSTRACT FROM AUTHOR]

I examine how well different linear factor models and consumption-based asset pricing models price idiosyncratic risk in U.K. stock returns. Correctly pricing idiosyncratic risk is a significant challenge for many of the models I consider. For some consumption-based models, there is a clear tradeoff in the performance of the models between correctly pricing systematic risk and idiosyncratic risk. Linear factor models do a better job in most cases in pricing systematic risk than consumption-based models but the reverse is true for idiosyncratic risk. [ABSTRACT FROM AUTHOR]

This paper reports research conducted on detailed behavioural information from the UK Non-Executive Director (NED) Awards 2006. The key findings were that outstanding Chairmen have a high level of integrity, showing high ethical standards in their own behaviour, as well as providing a lead on corporate governance matters. They promote investors' confidence and ensure high returns to investors. They spend significant time mentoring, developing and advising their colleagues, are team builders, are empathetic and very effective. They encourage contributions from fellow directors and achieve consensus yet they challenge and probe colleagues, especially the executive directors. They have an acute critical faculty and a critical thinking ability. [ABSTRACT FROM AUTHOR]

Credit in early modern England has been studied by both social historians of the market and historians of the book. The intersection of these literatures is explored by asking the question: how did producers of books about interest (which was closely connected to credit) convince readers that their books could be trusted? One particular book is considered: a palm-sized book of interest calculations by John Castaing. Most importantly, and unusually, many copies of this book contain his signature, which, it is argued, must be interpreted in the context of the particular role that signatures played in guaranteeing financial transactions. [ABSTRACT FROM AUTHOR]

This paper examines the post-cost profitability of momentum trading strategies in the UK over the period 1988–2003 and provides direct evidence on stock concentration, turnover and trading cost associated with the strategy. We find that after factoring out transaction costs the profitability of the momentum strategy disappears for shorter horizons but remains for longer horizons. Indeed, for ranking and holding periods up to 6-months, profitable momentum returns would not be available to most average investors as the cost of implementation outweighs the possible returns. However, we find post-cost profitability for ranking and/or holding periods beyond 6 months as portfolio turnover and its associated cost reduces. We find similar results for a sub-sample of relatively large and liquid stocks. [ABSTRACT FROM AUTHOR]

We evaluate the Fama–French three-factor model in the UK using the approach of Daniel and Titman (1997) to determine whether characteristics or covariance risk better explains the size and value premiums. Across all three factors, we find that return premiums bear little relationship to the corresponding loadings. We show that small and value stocks earn higher returns irrespective of their return covariance. Our study contributes to the existing literature by reporting original findings on the Fama–French three-factor model in the UK and by reporting results that complement existing evidence from similar studies in the USA and Japan. [ABSTRACT FROM AUTHOR]

The expansion of higher education (HE) in the UK has disproportionately benefited young people from relatively rich families: the gap between rich and poor in terms of participation in HE having widened since the 1970s. We explore a neglected possible cause of this class difference: that the labour market fails to provide sufficient incentives for potential entrants from less advantaged backgrounds to enter HE. Most studies of the rewards from participating in HE in the UK suggest that the rates of returns are sufficiently high to provide clear economic incentives to participate. However, until recently, most studies generated estimates of the average rate of return to graduation, which could overestimate returns to marginal entrants, particularly those from disadvantaged backgrounds. In this review we examine the methodological problems faced by more targeted studies of the rates of return to graduation and review their key findings concerning the economic returns to non-traditional entrants. [ABSTRACT FROM AUTHOR]

The fundamental valuation perspective on stock returns suggests that book-to-market will be positively related to returns if market value of equity equals future expected cash flows discounted at the expected return and book value proxies for future cash flows. Building on this perspective, we develop a log linear model which includes expectations of future BM and ROE in addition to current BM as explanatory variables for future stock returns. We show that these three variables explain a significant part of UK cross-sectional stock returns and that they remain highly statistically significant after including additional risk proxy variables. This supports relevance of fundamental valuation based firm characteristics for explaining stock returns and indicates their potential usefulness for predicting future stock returns. [ABSTRACT FROM AUTHOR]

This article discusses the magnitude of aggregate longevity risk and which entities in the United Kingdom should bear the financial burden. The author reviews the uncertainty surrounding past forecasts of life expectancy and projects future trends. He concludes that the state has absorbed much of the longevity and investment return risks through defined benefit funds. He recommends that the state should gradually transfer much of the preretirement longevity risk to private providers of capital willing to take on those risks for an acceptable rate of return.

The present article proposes a multivariate approach to unsmoothing appraisal-based real estate return indexes to recover the true market volatility information in real estate returns. It scrutinizes the role played by errors in variables, in conjunction with an analysis of other economic activities relevant to real estate returns, to exploit the functional relationship and the mechanism of interactions between real estate returns and these economic activities. Appraisal smoothing can therefore be detected and corrected properly and efficiently, without presuming a weakly efficient real estate market. The approach is then applied to U.K. real estate indexes as empirical examples. The results suggest a reasonable volatility in U.K. real estate investment that is close to reality. It is found that the volatility of the true market return on real estate is 1.5404–1.9282 times that of the return on the appraisal-based indexes, in contrast to figures of 2.4862–5.8720 produced by the fully unsmoothing procedure. [ABSTRACT FROM AUTHOR]

This paper investigates return and volatility spillover effects between the FTSE 100, FTSE 250 and FTSE Small Cap equity indices using the multivariate GARCH framework. We find that return and volatility transmission mechanisms between large and small stocks in the UK are asymmetric. In particular, there are significant spillover effects in both returns and volatility from the portfolios of larger stocks to the portfolios of smaller stocks. For volatility, there is also evidence of limited feedback from the portfolios of smaller stocks to the portfolios of larger stocks, although sub-period analysis suggests that this is to some extent period-specific. Simulation evidence shows that non-synchronous trading potentially explains some, but not all, of the spillover effects in returns, and that it explains none of the spillover effects in volatility. These results are consistent with a market in which information is first incorporated into the prices of large stocks before being impounded into the prices of small stocks. [ABSTRACT FROM AUTHOR]

We examine the relation between the degree of short sale constraints for acquiring firms' equity and post takeover stock performance. We find that negative long-run abnormal returns appear to decline (in economic and statistical terms) as the extent and persistence of institutional block-holder ownership increase, after accounting for the size, book-to-market and method of payment effects. In the spirit of Miller (1977) , such evidence implies that the degree of short sale constraints serves as an important determinant of acquiring firms' short-run overpricing. It appears that the presence of concentrated institutional presence mitigates and in most cases eliminates, through effective arbitrage, any short-run overpricing that may be responsible for the long-run underperformance of acquirers, preserving in this way efficiency in the takeover markets. [ABSTRACT FROM AUTHOR]

The price-earnings effect has been thoroughly documented and is the subject of numerous academic studies. However, in existing research it has almost exclusively been calculated on the basis of the previous year's earnings. We show that the power of the effect has until now been seriously underestimated due to taking too short-term a view of earnings. Looking at all UK companies since 1975, using the traditional P/E ratio we find the difference in average annual returns between the value and glamour deciles to be 6%. This is similar to other authors' findings. We are able to almost double the value premium by calculating the P/E ratio using earnings averaged over the previous eight years. [ABSTRACT FROM AUTHOR]

This paper presents evidence of the effects of OPEC policy decisions on the US and UK stock markets, as well as on oil prices, during periods of conflict and non-conflict from 1986 to 2004. The outcomes of this study are potentially valuable in assessing future strategies for OPEC policy decisions on oil production targets for its Members. This paper also adds to the strong body of evidence supporting the hypothesis that market returns are influenced by factors that affect business conditions, such as oil price shocks. The key findings are that there are asymmetric reactions to OPEC policy decisions during conflict periods for the US and UK stock markets. During conflict periods, oil markets require time to incorporate OPEC decisions. Conversely, in non-conflict periods the evidence suggests that the oil markets incorporate OPEC decisions efficiently. [ABSTRACT FROM AUTHOR]

Takeovers of privately held companies represent more than 80% of all takeovers. Despite their significance, studies of such takeovers and their impact on the wealth of shareholders are rare. Using a very large, near exhaustive, sample of listed and privately held UK targets we examine the impact of such takeovers on the risk adjusted return of listed UK acquirers over the period 1981 to 2001. Acquirers earn significant positive returns during the period surrounding the bid announcement although the gains are dependent on target status, mode of payment, and the relative size of those involved. The much quoted conclusion, derived from the experiences of listed firm bidders that the shareholders of acquiring firms fail to gain from takeovers, cannot be generalised. Acquiring a privately held company is an attractive option for maximising shareholder wealth. [ABSTRACT FROM AUTHOR]

Presents a research that proves the link between design and shareholder return in Great Britain. Impact of investment on financial performance; Assessment of a company's success based on its market-share performance and use of design; Identification of firms that are active and effective users of design. INSET: Design Leaders.

This paper seeks to characterise the distribution of extreme returns for a UK share index over the years 1975 to 2000. In particular, the suitability of the following distributions is investigated: Gumbel, Frechet, Weibull, Generalised Extreme Value, Generalised Pareto, Log-Normal and Generalised Logistic. Daily returns for the FT All Share index were obtained from Datastream, and the maxima and minima of these daily returns over a variety of selection intervals were calculated. Plots of summary statistics for the weekly maxima and minima on statistical distribution maps suggested that the best fitting distribution would be either the Generalised Extreme Value or the Generalised Logistic. The results from fitting each of these two distributions to extremes of a series of UK share returns support the conclusion that the Generalised Logistic distribution best fits the UK data for extremes over the period of the study. The Generalised Logistic distribution has fatter tails than either the log-normal or the Generalised Extreme Value distribution, hence this finding is of importance to investors who are concerned with assessing the risk of a portfolio. [ABSTRACT FROM AUTHOR]

Discusses the features of Great Britain's Enterprise Act 2002 on corporate insolvency laws. Implementation of rescue-orientated and inequitable modifications; Aim of the regulation to attain a corporate rescue environment, a higher return for creditors and a balanced system of insolvency distribution; History of corporate insolvency laws; Focus of the article on the abolition of administrative receivership, reformation of the administrative procedure, removal of the Crown's preferential status in insolvency.

We analyse the abnormal returns to target shareholders in cross-border and domestic acquisitions of UK companies. The cross-border effect during the bid month is small (0.84%), although cross-border targets gain significantly more than domestic targets during the months surrounding the bid. We find no evidence for the level of abnormal returns in cross-border acquisitions to be associated with market access or exchange rate effects, and only limited support for an international diversification effect. However, the cross-border effect appears to be associated with significant payment effects, and there is no significant residual cross-border effect once various bid characteristics are controlled for. [ABSTRACT FROM AUTHOR]

This paper presents results from recursive modeling of nonlinear dynamics in UK stock returns. A specification search suggests a two-state model and we demonstrate the ability of this model to capture time-varying volatility, skew and kurtosis in UK stock returns. An out-of-sample forecasting experiment confirms the strong statistical evidence of nonlinearity and shows that accounting for regimes leads to improved forecasting performance. [ABSTRACT FROM AUTHOR]

The study quantifies the differences in the level of return from investing in deposit (savings) accounts provided by depository institutions, which are either ‘mutual’ or ‘proprietary’. It is shown that for most types of deposit accounts offered in the UK, mutual building societies provide higher returns than proprietary firms. Surprisingly, it is also shown that returns from deposit accounts issued by converted or non-mutual building societies are, generally, lower than either mutual building societies or proprietary firms. These findings are consistent for interest rate data adjusted for the effect of non-price product characteristics and for unadjusted interest rate data. [ABSTRACT FROM AUTHOR]

Most studies concerned with measuring the rate of return to publicly-funded agricultural R&D investment have found high returns, suggesting under-investment, and calls for increased expenditure have been common. However, the evaluation of returns tends to measure the effect of research expenditure against growth in total factor productivity (TFP), based on market inputs and outputs. When compared against growing public unease over the environmental effects of pursuing agricultural productivity growth, TFP indices become a misleading measure of growth. This paper integrates some non-market components into the TFP index. The costs of two specific externalities of agricultural production, namely fertiliser and pesticide pollution, are integrated in a TFP index constructed for the period 1948–1995. This adjusted, or ‘social’, TFP index is measured against UK public R&D expenditures.The rates of return to agricultural R&D are reduced by using the ‘social’ as opposed to the traditional TFP index. Whilst both remain at justifiable levels, previous studies appear to have over-estimated the effect of agricultural R&D expenditures. Furthermore, with changes in policy towards more socially acceptable but non-productivity enhancing outcomes, such as animal welfare, rural diversification and organic farming, the future framework for analysing returns to agricultural R&D should not be so dependent on productivity growth as an indicator of research effectiveness. [Copyright &y& Elsevier]

This article presents reports on the reversal of corporate diversification and use of the proceeds from asset sales of Thorn EMI in Great Britain. The restructuring of Thorn EMI presents an example that counters the idea that managers destroy shareholder value when they reinvest the proceeds from asset sales for expansion through acquisitions. Thorn EMI resolved the lack of sufficient funds for investment that characterized its music division during its diversification by raising cash through asset sales for reinvestment in the firm's core music activities. As a result of the concentration in music, the firm experienced significant operating performance improvements and value increases. The largest part of the increases in the company's value during the period were due to management's choice to concentrate in the growing music industry and exit from declining industries and to specific restructuring and other strategy-related announcements. The restructuring was accompanied by concentrating executive powers in the hands of one person. This person was granted company stock and options, albeit in less generous terms than U.S. executives of similar size firms. In the process, the firm created considerable value for its shareholders, out-performed any relevant benchmark, and eliminated a large diversification discount.

This paper examines the empirical determinants of borrowing decisions of firms and the role of adjustment process. A partial adjustment model is estimated by GMM estimation procedure using data for an unbalanced panel of 390 UK firms over the period of 1984-1996. Our results suggest that firms have long-term target borrowing ratios and they adjust to their target ratios relatively fast, which might suggest that the costs of being away from their target ratios are significant. The results also provide support for positive impact of size, and negative effects of growth opportunities, liquidity, profitability of firms and non-debt tax shields on the borrowing decisions of companies. [ABSTRACT FROM AUTHOR]

The article examines the association between acquisition-related provision-taking behavior and post-acquisition performance for a sample of firms in Great Britain. Until 1998, British accounting standards allowed firms to write off goodwill arising on consolidation directly to shareholders' equity, bypassing the income statement entirely. Internationally, debate over the direct write-off method has tended to focus on whether goodwill is an asset, and if it is an asset, whether it should be amortized and over what horizon. Critics commonly asserted that the direct write-off method enabled managers to inflate profits in the post-acquisition period by taking unwarranted write-downs and provisions when adjusting the book value of the acquirers separable net assets to their fair values. Here the authors focus on the interrelationship between these write-downs and provisions and the post-acquisition performance of acquirers. They present evidence of a negative association between post-acquisition abnormal stock returns and acquisition-related provision-taking up to three years after the close of the accounting period in which the acquisition occurred.

In this article the authors presents an estimation of the ex-ante equity risk premium in Great Britain using developments in the theoretical modeling of the links between unrecorded accounting goodwill, accounting profitability and the cost of equity. The authors use a new method for inferring the cost of equity capital to provide an estimate of the equity risk premium in Great Britain. The method derives from recent theoretical advances in the area of equity valuation, in particular, it draws upon the work of professor J. Ohlson on the links between accounting fundamentals and share prices. Representing information in a dynamic simultaneous equation model permits considerable generality of formulation but, under assumptions of stationarity, linear valuation equations are obtained. This paper provides evidence that is relevant to the debate on the magnitude of the ex-ante equity risk premium. The view of the cost of equity capital as the rate at which abnormal earnings are capitalized into unrecorded goodwill is an interesting perspective on cost of capital estimation.