VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT"

Transcription

1 VALUE BASED FINANCIAL PERFORMANCE MEASURES: AN EVALUATION OF RELATIVE AND INCREMENTAL INFORMATION CONTENT Pierre Erasmus Absrac Value-based (VB) financial performance measures are ofen advanced as improvemens over measures faciliaes he evaluaion of value creaion. Furhermore hey aemp o remove some accouning disorions resuling from he limiaions of convenional accouning informaion. This paper invesigaes he abiliy of four VB measures o explain marke-adjused share reurns and compare i o ha of some radiional measures. Empirical resuls indicae ha he relaive informaion conens of he VB measures are no greaer han ha of earnings. The incremenal informaion conen ess indicae ha heir componens add significanly o he informaion conen of earnings, bu ha he level of significance is relaively low. Keywords: financial performance, cos of capial, accouning informaion Deparmen of Business Managemen, Universiy of Sellenbosch, Privae Bag 1, Maieland, 7602, SOUTH AFRICA Tel : , Fax : Inroducion Firms focused on he maximisaion of shareholder value need o ensure ha all aciviies yield posiive ne presen values. A number of value-based financial performance measures have been developed in an aemp o guide managemen acions owards achieving his objecive. These value-based measures, such as Economic Value Added (EVA) and Cash Value Added (CVA of capial and o adjus financial saemen informaion in order o remove some of he accouning disorions conained in radiional financial performance measures. Performance exceeding he cos of capial yields value, while he failure o achieve his resuls in he desrucion of shareholder value. Value-based financial performance measures (VBM) are presened by heir proponens as a major improvemen over he radiional performance measures. Mos imporanly, cos of capial in heir calculaion hey could be applied in order o evaluae he value creaing Lehn and Makhija, 1996: 35). If he reurns generaed xcess of he cos of capial, hese projecs would yield posiive ne presen values and consequenly shareholder value is increased (Gran, 2003: 81; Sewar, 1991: 174). These VBM also aemp o overcome some of he problems associaed wih he radiional measures by removing he accouning disorions conained in he financial saemens (Ehrbar, 1998: 80; Peerson and Peerson, 1996: 10; Sewar, 1991: 66). Perhaps one of he bes known value-based performance measures is Economic Value Added (EVA). EVA is an esimae of he economic profi generaed by a firm (Sewar, 1994: 73) and is afer ax (NOPAT) o he oal cos of all is forms of capial (deb, as well as equiy) (Gran, 2003: 2). Ma in shareholder value creaed (Sewar, 1991: 174). Proponens of he measure repor high levels of correlaion wih share reurns (Worhingon and Wes, Mi 117; Gran, 1996: 44; Lehn and Makhija, 1996: 36; Peerson and Peerson, 1996: 45; Sewar, 1994: 75, 136; Sewar, 1991: 66). The measure Cash Value Added (CVA) is considered as anoher form of residual income cash flow and a capial charge based on he gross 2001: 440). One of he major differences beween CVA and EVA is ha depreciaion and accruals are added back o NOPAT when calculaing he operaing cash flow values included in CVA (Marin and Pey, 2000: 128). Furhermore, accumulaed depreciaion is included wih he invesed capial amoun when he gross invesed capial is deermined (Marin and (2001: 429), he calculaion of CVA is less complex 66

2 han he calculaion of EVA since no accouning adjusmens are required. They also argue ha since depreciaion is added back during he calculaion of They perceive his characerisic of CVA as an advanage over EVA where differen depreciaion policies can resul in large variaions in he value of he measure. A number of limiaions wih regard o CVA, however, are also highlighed. According o Young measure han CVA. They argue ha he problem of differen depreciaion policies in he case of EVA can be solved by including an accouning adjusmen. Furhermore, hey indicae ha by removing accruals and depreciaion from he calculaion of CVA he measure may loose imporan informaion required by he marke when evaluaing an enerprise. The process of removing he effecs of accouning accruals in he calculaion of CVA could also be relaively complex. They also warn ha he incorporaion of CVA values ino valuaion models should be considered carefully since CVA is based on hisorical accouning figures ha do no represen he expeced fuure cash flow generaed by he enerprise (Young Anoher problem experienced wih CVA occurs when uneven cash flow values are considered (Marin and Pey, 2000: 149). The resuling CVA values may provide conflicing signals wih regard o he value creaion of he projecs under consideraion. From he exising lieraure i is no clear wheher CVA is able o ouperform oher financial performance measures. The measure Cash Flow Reurn on Invesmen (CFROI) has been presened as an improvemen over some of he oher radiional and value-based measures by is proponens (Dzamba, 2003: 10). I is calculaed by considering he inflaion-adjused invesmen in asses, he inflaion-adjused cash flow generaed by employing hese asses in he firm, and deermines he yield generaed over he esimaed lifeime of he asses. Madden (1999: 110) considers he calculaion of CFROI o be based on basic DCF principles. The four inpus required o calculae he measure are as follows: o The average life of he depreciaing asses. o The oal amoun of asses (includes boh depreciaing, as well as nondepreciaing asses) adjused for inflaion. o The inflaion-adjused cash flows generaed by he asses over heir o lifeime. The final inflaion-adjused residual value of he non-depreciaing asses a he end of he asse lifeime. The calculaions of he CFROI inpus are discussed in greaer de These four inpus are represened in he cash flow diagram provided in Figure 1: Inflaion-adjused gross cash flows Non-depreciaing asses Non-depreciaing asses Esimaed asse lifeime Depreciaing asses Figure 1. Cash flow diagram represening he four CFROI componens 67

3 Based on hese inpus he fi calculaed as he discoun rae ha would ensure ha he presen value of all he fuure cash flows (he equal annual inflaion-adjused gross cash flows, as well as he erminal non-depreciaing asses amoun) is equal o he iniial invesmen (oal nondepreciaing and depreciaing asses). As such, he CFROI may be viewed as a reurn on invesmen (ROI). However, i is no calculaed for individual projecs, bu raher for he firm as a whole. This CFROI figure is compared o h inflaion-adjused (real) cos of capial. If a firm is able o generae CFROI values in excess of is inflaion-adjused cos of capial i should increase is real cos of capial will resul in he desrucion of measure is ha is focuses on he reurn offered o all he capial providers of he firm and no only he shareholders (Madden, 1999: 101). Relaively lile empirical research, however, have been conduced on he performance of CFROI relaive o oher financial performance measures. In his paper he abiliy of he value-based measures residual income (RI), EVA, CVA and CFROI o explain marke-adjused share reurns is invesigaed for a sample of firms lised in he Indusrial Secor of he Johannesburg Securiies Exchange (JSE) and compared o ha of he radiional financial performance measures earnings before exraordinary iems (EBEI) and operaing cash flow (CFO). In he firs par of he sudy he relaive informaion conens of he value-based measures relaive o he radiional measures are evaluaed. The second par of he sudy invesigaes he incremenal informaion conen of he componens of he valuebased measures, and es wheher he inclusion of hese componens conribues significanly o he informaion conen of he oher measures. The empirical resuls indicae ha he relaive informaion conens of he value-based measures are no greaer han ha of earnings. The incremenal informaion conen ess indicae ha he componens of some of he value-based measures do add significanly o he informaion conen of earnings. The level of significance, however, is relaively low. The remainder of he paper consiss of six secions. The firs secion focuses on he breakdown of he measures ino heir conribuing componens ha is required for he informaion conen ess. The second secion describes he research mehod. The hird secion conains he descripive saisics of he measures and componens included in he relaive and incremenal informaion conen ess. The fourh secion provides he resuls from he relaive informaion conen ess, while he fifh secion repors on he incremenal informaion conen ess. The final secion conains he summary and he conclusions. 2 Componens of he Value-Based Measures This paper invesigaes he relaive and incremenal informaion conen of he measures cash flow reurn on invesmen (CFROI), nominal and inflaionadjused cash value added (CVA nom and CVA real ), nominal and inflaion-adjused economic value added (EVA nom and EVA real ), operaing cash flow (CFO), earnings before exraordinary iems (EBEI) and residual income (RI). To do so, hese measures are pariioned ino heir conribuing componens using an approach applied by Biddle, Bowen and Wallace (1997: 305). The following secion provides a break-down of he componens included in he calculaion of he nominal versions of he measures included in he sudy. Thereafer, he inflaion adjusmens proposed by Inernaional Accouning Sandard 15 (IAS15) are highlighed. Finally, he componens of he inflaionadjused measures EVA real, CVA real and CFROI are considered. 2.1 Nominal Measures To explore he relaionships beween he various measures, one should commence by defining EBEI, and hen discuss all he addiional componens required o calculae he measures. According o Biddle e al. (1997: 305) a f defined as follows: EBEI = CFO + Accrual, EBEI = The earnings before exraordinary iems and ax for period. CFO = The ne cash from operaing aciviies. Accrual = The oal operaing accruals of he firm. The difference beween EBEI and he ne operaing profi afer ax (NOPAT) is ha NOPAT does no ake he afer-ax ineres expense ino accoun, while EBEI does. Therefore: NOPAT - ATIn = EBEI ATIn = Ineres expense afer provision for ax While EBEI makes provision for he cos of deb by subracing he ineres expense, RI is calculaed by deducing he cos of he oal (i.e. deb and equiy) capial. RI = NOPAT (c x IC -1 ) c = capial (WACC) afer ax IC -1 = The amoun of capial invesed in he firm a he beginning of he period Firms ha achieve posiive RI values are able o generae profis in excess of heir oal cos of capial, and consequenly shareholder value should be creaed. Negaive RI values are an indicaion ha insufficien profis are generaed, and as a resul, shareholder value could be desroyed. 68

4 EVA is calculaed in a similar way as RI. The major difference beween he wo measures relaes o a number of adjusmens o NOPAT and IC included in he calculaion of EVA. These adjusmens are included wih a view o removing some of he accouning disorions idenified by Sewar (1991: 28). EVA =(NOPAT + AccAdj op; ) [c x (IC -1 + AccAdj c; )] AccAdj op; =Adjusmens o remove he accouning disorions from operaing profi AccAdj c; =Adjusmens o remove he accouning disorions from invesed capial Since EVA values are no published by Sern Sewar for Souh African firms, he EVA values are obained from he McGregor BFA daabase (2005). Alhough hese EVA values do no include all he adjusmens recommended by Sern Sewar, he sandardisaion process applied o he financial saemens conained in he daabase already makes provision for a number of he adjusmens. operaing cash flow raher han operaing profi (as was he case for EVA), and subracing he gross capial charge. To conver NOPAT ino he operaing cash flow, depreciaion and amorisaion are added back (Marin & Pey, 2000: 128). Changes in oher long-erm liabiliies, such as provisions and deferred axes, are also added o NOPAT o conver i ino a capial charge is based on he gross value of he invesed capial and no on he ne figure (Marin & Pey, 2000: 141). Accumulaed depreciaion is, herefore, added back o he invesed capial. CVA =Operaing cash flow gross capial charge =(NOPAT + CVAAdj op; ) [c x (IC -1 + AccDepr -1 )] CVAAdj op; =Depreciaion, amorisaion and changes in oher long-erm liabiliies AccDepr -1 =Accumulaed depreciaion Based on hese definiions CVA can be presened as follows: CVA=CFO + Accrual + ATIn CapChg + AccAdj + CVAAdj CapChg =c x IC -1 AccAdj =AccAdj op; (c x AccAdj c; ) CVAAdj=CVAAdj op; AccAdj op; + [c x (AccAdj c; + AccDepr -1 )] 2.2 Inflaion-Adjused Measures In addiion o he nominal measures, his sudy also invesigaes he informaion conen of he inflaionadjused versions of EVA and CVA, as well as he measure CFROI. In order o calculae he inflaionadjused versions of hese measures, inflaion adjusmens are calculaed according o he guidelines conained in IAS15. These guidelines recommend adjusmens o he cos of sales, he depreciaion, he level of gearing, and he propery, plan and equipmen (PPE). The calculaions of hese adjusmens are described in more deail in Afer calculaing he IAS15 inflaion adjusmens, he inflaion-adjused version of he measure EVA is calculaed as follows: EVA real; =NOPAT real; (IC real;-1 x creal; ) = (NOPAT nom; - COSAdj DeprAdj ) [(IC nom;-1 + PPEAdj ) x c ] real; EVA real; =EVA in real erms, calculaed afer he inflaion adjusmens o NOPAT and IC, are included NOPAT real; =NOPAT afer including he cos of sales, depreciaion and gearing adjusmens c real; =he inflaion-adjused cos of capial IC real;-1 =he invesed capial afer including he PPE inflaion adjusmen The real CVA is hen calculaed as follows: CVA real; = (NOPAT nom; + CVAAdj op; - COSAdj DeprAdj ) [ c x (IC nom; -1 + PPEAdj real + AccDepr -1 )] CVA real; = CVA in real erms, calculaed afer he inflaion adjusmens o NOPAT and capial, are included CVAAdj op; = Depreciaion, amorisaion and changes in oher long-erm liabiliies AccDepr -1 = Accumulaed depreciaion The measure cash flow reurn on invesmen (CFROI) compares he inflaion-adjused cash flow generaed by a firm wih he inflaion-adjused cash 2001: 382). By including he esimaed lifeime of he value of is non-depreciable asses an inernal rae of reurn is calculaed. This CFROI figure is hen -adjused (real) cos of capial. In order o invesigae he relaive and incremenal informaion conen of he measure and o compare i wih he oher measures included in his sudy he CFROI margin is defined as he difference CFROI Margin =CFROI - c real The CFROI margin can be presened as follows: CFROI Margin = CFO + Accrual + ATIn CapChg + AccAdj + InflAdj + CVAAdj real + CFROIAdj Accrual = The oal operaing accruals of he firm ATIn = Ineres expense afer provision for ax CapChg = The capial charge based on he cos of capial and he invesed capial a he beginning of he financial year AccAdj = The accouning adjusmens o NOPAT and IC -1 o calculae EVA nom InflAdj = The IAS15 inflaion adjusmens included o calculae EVA real 69

5 CVAAdjreal = The adjusmens made o EVA real o calculae CVA real CFROIAdj = The difference beween CVA real and he Margin The relaionship beween he CFROI Margin componens is summarised in Figure 2 (Biddle e al., 1997: 307): CFROI Margin = CFO + Accrual + ATIn CapChg + AccAdj + InflAdj + CVAAdj real + CFROIAdj earnings (EBEI) operaing profis (NOPAT) residual income (RI) economic value added (EVA) real economic value added (EVA real ) real cash value added (CVA real ) cash flow reurn on invesmen margin (CFROI Margin ) Figure 2. Componens of he cash flow reurn on invesmen margin (CFROI Margin ) 3 Research Mehod 3.1 Hypoheses The informaion conen of a financial measure refers o he addiional informaion ha he marke deduces from is publicaion and incorporaes ino he expeced fuure financial performance of he firm. In order o evaluae he relaive and incremenal informaion conen of he radiional and he value based measures included in his sudy, an approach developed by Biddle e al. (1997: 307) is applied. According o his approach, relaive informaion conen comparisons should be used o compare differen measures, or when a choice beween he measures is required. Incremenal informaion conen is used o deermine wheher one componen of a measure provides addiional informaion over and above ha provided by anoher componen. To invesigae he relaive informaion conen of he measures, he following null hypohesis is formulaed (Biddle e al., 1997: 308): H REL : The informaion conen of measure 1 is equal o ha of 2 where 1 and 2 are pairwise combinaions of he measures under invesigaion. Rejecion of he null hypohesis indicaes a saisically significan difference in he informaion conen of he wo measures. 70

6 In order o invesigae he incremenal informaion conen of he componens of measure i, i is necessary o decompose i ino is conribuing componens: i = Y 1 + Y 2 + Y 3 Y n The following null hypohesis is hen formulaed (Biddle e al., 1997: 308): H INC : Componen Y 1 does no provide informaion conen beyond ha provided by he remaining componens Y 2 -Y n where Y 1 -Y n are he various componens of he measure i invesigaed. Pairwise comparisons of he componens are conduced o evaluae he incremenal informaion conen. Rejecion of he null hypohesis indicaes ha he inclusion of he componen under invesigaion will conribue significan addiional informaion conen. 3.2 Saisical Techniques In order o evaluae he informaion conen of he measures, he relaionships beween he measures and marke adjused share reurns are invesigaed. For his purpose, regression analyses wih he share reurn as dependen variable and he various measures as he independen variables are conduced. The saisical echnique employed in his sudy focuses on he forecas errors of he various measures (calculaed as he difference beween he acual and expeced values), which are sandardised o size. When assessing he informaion conen of a measure, he saisical significance of he slope coefficien b 1 from he following ordinary-leas squares regression is examined (Biddle e al., 1997: 308): D = b 0 + b 1 FE / MVE -1 + e (1) where D (he dependen variable) is a measure of reurn for ime period ; FE / MVE -1 is he unexpeced realisaion (or forecas error) of he measure (FE ), divided by he he financial year (MVE -1 ); while e is a random disurbance erm. The unexpeced realisaion of he measure for ime period is defined as he difference beween he observed value of he measure ( expeced value of he measure (E( )): FE = E( ) (2) formed according o a discree linear sochasic process in auoregressive form, E( ) may be defined as: E( ) = (3) auoregressive parameers. Subsiuing Equaions (2) and (3) ino Equaion (1) yields: D = b 0 + b 1 [ / MVE -1 + e = b / b ' ' ' ' 0 b1 / MVE b2 / MVE b3 2 / MVE... e ' 4 3 MVE (4) E E b ' b, and where E b ' 0 b0 b1, 1 1 ' i bi i 1 b for i > 1. Equaion (4) provides he relaionship beween abnormal reurns (D ), and he lagged measures of accouning performance () scaled by MVE. For he purpose of his sudy, Equaion (5) is limied o one lag: ' ' ' D = b0 b1 / MVE b2 / MVE e (5) Tess for Relaive Informaion Conen The relaive informaion conens of he measures are assessed by means of a saisical es developed by Biddle, Seow and Siegel (1995: 9). The independen variables are included in individual regressions agains he dependen variable based on he following equaion: ' ' ' D = b0 b1 / MVE b2 / MVE e (6) where D is he marke-adjused reurn on a, is one of he measures invesigaed, and MVE is he marke value According o he es, pairwise comparisons of he adjused R 2 values from he individual regressions are conduced. Saisically significan differences beween wo adjused R 2 values resul in he rejecion of he null hypohesis H REL. This indicaes a saisically significan difference in he abiliy of he wo measures under invesigaion o explain he variaion in he dependen variable (Biddle e al., 1997: 310) Tess for Incremenal Informaion Conen In order o evaluae he incremenal informaion conen of he componens of he measures invesigaed in his sudy, he following regression is conduced (Biddle e al., 1997: 311): D = d 0 + d 1 Y 1; / MVE -1 + d 2 Y 1;-1 / MVE -1 + d 3 Y 2; / MVE -1 + d 4 Y 2;-1 / MVE -1 + e (7) where Y 1 and Y 2 are wo differen componens of he measure under invesigaion. The individual regression coefficiens are assessed by means of - ess o invesigae he conribuion of he specific componen. F-ess are used o assess he following join null hypoheses: H : d 1 = d 2 = 0 0Y 1 H 0Y 2 : d 3 = d 4 = 0 Rejecion of he null hypoheses indicaes ha he inclusion of a componen provides significan incremenal informaion. 3.3 Measures Dependen Variable The relaive and incremenal informaion conen ess applied in his sudy focus on he relaionship beween 71

7 he independen variables and he unexpeced reurn er o esimae he unexpeced reurn, he marke adjused reurn is calculaed (Biddle e al., 1997: 312). This value indicaes wheher a firm over- or under performed relaive o he overall marke. MkAdjRe The marke adjused reurn is calculaed as he difference beween he 12-monh compounded reurn on a share and he 12-monh compounded reurn on he ALSI index. These reurns are calculaed for a period ending hree monhs afer -end o ensure ha he informaion conained in he financial saemens is refleced in he share prices. The 12-monh compounded share reurns, as well as he reurn on he ALSI index, are obained from he McGregor BFA daabase (2005) Independen Variables The primary objecive of his sudy is o invesigae he relaive and he incremenal informaion conen of a number of radiional and value based financial performance measures. The measures included in he relaive informaion conen es are CFO, EBEI, RI, EVA, and CVA, as well as he inflaion-adjused measures EVA real, CVA real and CFROI. The measures are calculaed based on informaion obained from he sandardised financial saemen daa conained in he McGregor BFA daabase (2005). Sern Sewar does no publish EVA values for Souh African firms. The McGregor BFA daabase (2005), however, conains EVA values ha are calculaed based on he sandardised financial saemens included in he daabase. Through he sandardisaion process applied by he daabase he majoriy of he EVA accouning adjusmens are addressed. The equiy adjusmens proposed by Sern Sewar, however, are no included in he EVA values repored in he daabase. In he case of firms lised a he end of he research period, values for EVA, cos of capial and invesed capial are obained from he McGregor BFA daabase (2005). Since hese values are no available for hose firms ha delised during he period under review, hey are esimaed using he same mehod as he one employed in he daabase. In order o evaluae he effec of inflaion on he measures, he inflaion adjusmens proposed by IAS15 are quanified and included in he calculaion of EVA real and CVA real. CFROI values are no available from he McGregor BFA daabase (2005). Consequenly, hese values are esimaed by using he approach described by Madden (1999). In order o evaluae he incremenal informaion conen of he componens of he measures EVA, EVA real, CVA, CVA real and CFROI, he componens indicaed in Figure 2 are required. These componens are quanified by informaion obained from he McGregor BFA daabase (2005). To reduce heeroscedasiciy in he daa, all he independen variables are divided by he marke value of equiy as measured hree monhs afer he -1 ) (Biddle e al., 1997: 313). This period is chosen o correspond wih he period over which he dependen variable is calculaed. 3.4 Daa The measures CFO, EBEI, RI, EVA nom, EVA real, CVA real and CFROI, as well as heir conribuing componens, are calculaed for all firms lised in he indusrial secor of he JSE during he 15-year period from 1991 o Those firms lised a he end of his period are considered for he iniial sample. Focusing only on hese firms, however, would expose he sudy o a survivorship bias. Consequenly, all delised firms ha were lised during he period under invesigaion are also included in he sample. A oal of 198 lised firms and 188 delised firms are idenified. Following Biddle e al. (1997: 311), hose observaions in excess of eigh sandard deviaions from he median are classified as exreme ouliers, and consequenly 41 observaions were removed from he sample. The number of observaions classified as exreme ouliers relaive o he overall sample is relaively small. A closer invesigaion of hose firms classified as exreme ouliers also reveals ha he majoriy of hese values are observed for firms a he end of heir lifecycle, where financial performance is diminishing, and share prices have already collapsed. Oher examples include he firs financial year of firms ha lised for he firs ime, or firms ha underwen financial reorganisaion. Boh he dependen and independen variables are also median. The final sample invesigaed in he informaion conen ess consiss of 316 firms wih complee observaions. 4 Descripive Saisics of he Measures and Componens Included in he Informaion Conen Tess 4.1 Measures Included in he Relaive Informaion Conen Tess The descripive saisics of he winsorised values of MkAdjRe, EBEI, CFO, RI, EVA nom, EVA real, CVA real and CFROI Margin included in he relaive informaion conen ess pooled across ime are provided in Table 1. 72

8 Table 1. Descripive saisics on he dependen and independen variables in he relaive informaion conen ess of CFROI Margin Descripive saisics Dependen Variable Independen Variables MkAdjRe EBEI CFO RI EVA nom EVA real CVA real CFROI Margin Mean Median Sd. Dev Correlaions Dependen Variable Independen Variables MkAdjRe EBEI CFO RI EVA nom EVA real CVA real CFROI Margin MkAdjRe EBEI CFO RI EVA nom EVA real CVA real CFROI Margin Noes: m he median values. All he independen variables are size-adjused by divided hem by he marke value of he equiy as measured hree monhs afer he beginning of he financial year. All correlaions are significan a he 1% level, excep beween CFO, and RI and EVA nom. The measures EBEI and CFO exhibi he highes mean and median values, while he value based measures display small mean and median values, which are all close o zero. The lowes mean and median values are observed for he measure CFROI Margin. If he correlaions are considered, all are found o be saisically significan a he 1% level, excep he correlaions beween CFO, and RI and EVA nom. The highes correlaion beween he dependen variable and an independen variable is observed beween MkAdjRe and EBEI. In he case of CFROI Margin, he highes correlaion is beween he measure and RI (correlaion coefficien of 0.418). I is also ineresing o noe ha he correlaion beween MkAdjRe and CFROI Margin is he highes for all he value based measures. 4.2 Componens Included in he Incremenal Informaion Conen Tess The descripive daa of he winsorised CFROI Margin componens included in he incremenal informaion conen ess pooled across ime are provided in Table 2. The correlaions beween he majoriy of he CFROI Margin componens are saisically significan a he 1% level. The correlaion beween AccAdj and InflAdj is significan a he 5% level, while he correlaion beween CapChg and Accruals is significan a he 10% level. Only he correlaions beween MkAdjRe and InflAdj, AccAdj and Accruals, and CFROIAdj and ATIn are no significan. 5 Relaive Informaion Conen Tess of CFROI margin The relaive informaion conen of he measures included in his chaper is evaluaed by comparing he adjused R 2 values obained from seven separae regressions based on he following equaion: D = b 0 + b 1 / MVE -1 + b 2-1 / MVE -1 + e. (8) D = he marke-adjused reurn for period. = one of he seven measures CFO, EBEI, RI, EVA nom, EVA real, CVA real and CFROI Margin. 73

9 MVE -1 = he marke value of he equiy hree monhs afer he beginning of he financial year. The resuls from he relaive informaion conen ess are provided in Table 3: Table 2. Descripive saisics on he dependen and independen variables in he incremenal informaion conen ess of he CFROI Margin componens Dependen Variable MkAdjRe Descripive saisics Independen Variables CFO Accruals ATIn CapChg AccAdj InflAdj CVAAdj rea Mean Median Sd. Dev Dependen Variable MkAdjRe MkAdjRe Correlaions Independen Variables CFO Accruals ATIn CapChg AccAdj InflAdj CFO Accruals ATIn CapChg AccAdj InflAdj CVAAdj real l CVAAdj rea CFROIAdj l CFROIAdj CFROIAdj Noes: deflaed by he marke value of he equiy as measured hree monhs afer he beginning of he financial year. Significan a he 1% level Significan a he 5% level Significan a he 10% level Panel A of Table 3 conains he adjused R 2 values calculaed for he seven separae regressions. The measures are arranged in decreasing order based on heir adjused R 2 values. EBEI has a significanly higher adjused R 2 value (0.0773) han he oher measures. The regression analysis based on he CFROI Margin values yields he second larges adjused R 2 value (0.0438). I is followed by RI (0.0375), CFO (0.0319), EVA nom (0.0305), EVA real (0.0139) and CVA real (0.0138) correspondingly. In erms of relaive informaion conen, EBEI appears o ouperform he oher measures. In erms of he value based financial measures, CFROI Margin yields he bes resuls. According o Hayn (1995: 127), Burgsahler and Dichev (1997: 192) and Collins, Pincus and ie (1997) profiable firms exhibi larger earnings responses han loss-making 51) also recommends a disincion beween posiive and negaive EVA values. The ess for relaive informaion conen are repeaed afer allowing differen coefficiens for he posiive and negaive values of he differen measures. The resuls from hese regressions are provided in Panel B of Table 3. All he measures exhibi higher adjused R 2 values. The measure RI experienced he larges increase in is adjused R 2 value ( o ), and i exhibis he highes adjused R 2 value overall when compared o he oher measures. I is followed by EBEI (0.0886), EVA nom (0.0855), EVA real (0.0635), CVA real (0.0597) and CFO (0.0472) respecively. 74

10 Table 3. Tess of he relaive informaion conen of CFROI Margin, CVA real, EVA real, EVA nom, residual income, earnings and operaing cash flow Relaive informaion conen Rank order of Observaio R 2 ns (1) (2) (3) (4) (5) (6) (7) Panel A: Coefficien of he posiive and negaive values of each performance measure consrained o be equal a All firms 2450 EBEI > CFROI Margi n > RI > CFO > EVA nom > EVA real > CVA real Adj. R Panel B: Coefficien of posiive and negaive values of each performance measure allowed o differ b All firms 2450 RI > EBEI > EVA no m > EVA real > CVA real > CFO > CFROI Margi Adj. R Noes: a In Panel A, he regression based on Equaion (8) is conduced, D = b 0 + b 1 / MVE -1 + b 2-1 / MVE -1 + e. D is he marke-adjused reurn for period, is one of he seven measures CFO, EBEI, RI, EVA nom, EVA real, CVA real and CFROI Margin, and MVE is he marke value of he equiy hree monhs afer he beginning of he financial year. b In Panel B, he regression used in Panel A is adjused o allow differen coefficiens for posiive and negaive values of he independen variable: The regression based on he following equaion is conduced, D = c 0 + c 1 ;pos / MVE c 2 ;neg / MVE -1 + c 3-1;pos / MVE -1 + c 4-1;neg / MVE -1 + e. D is he marke-adjused reurn for period, is one of he seven measures CFO, EBEI, RI, EVA nom, EVA real, CVA real and CFROI Margin, and MVE is he marke value of he equiy hree monhs afer he beginning of he financial year. n In he case of CFROI Margin, however, he measure dropped from he second o he las posiion overall in erms of he ranking of he adjused R 2 values. I is also he only measure where he adjused R 2 value decreased when he disincion beween posiive and negaive values is allowed. A possible reason for his decrease could be he variable naure of he CFROI values. The cash flows included in he based on he changes in he profi figures, however, could resul in CFROI values swiching from a posiive o a negaive value (and vice versa). These changes are no he financial performance, bu raher he way in which CFROI values (and IRR measures in general) are calculaed. Disinguishing beween he posiive and negaive values of he measure herefore reduces he adjused R 2 value of he regression analysis. 6 Incremenal Informaion Conen Tess Of The CFROI margin Componens In order o evaluae he incremenal informaion conens of he CFROI Margin componens, he following regression analysis is conduced: MkAdjRe = d 0 + d 1 CFO / MVE -1 + d 2 CFO -1 / MVE -1 + d 3 Accrual / MVE -1 + d 4 Accrual -1 / MVE d 5 ATIn / MVE -1 + d 6 ATIn -1 / MVE -1 + d 7 CapChg / MVE -1 + d 8 CapChg -1 / MVE -1 + d 9 AccAdj / MVE -1 + d 10 AccAdj -1 / MVE -1 + d 11 InflAdj / MVE -1 + d 12 InflAdj -1 / MVE -1 + d 13 CVAAdj real; / MVE -1 + d 14 CVAAdj real; -1 / MVE -1 + d 15 CFROIAdj / MVE -1 + d 16 CFROIAdj -1 / MVE -1 + (9) The resuls of he incremenal informaion conen ess of he CFROI Margin componens are provided in Table 4. If he resuls from he incremenal informaion conen ess are considered, i is observed ha he Margin componens excep InflAdj are highly significan. If he correlaion coefficien of ATIn -1 is significan. The F- saisic for he componen InflAdj is no saisically significan, indicaing ha i does no conribue significan informaion conen. The oher F-saisics, however, are all significan, indicaing ha he remaining CFROI componens conain saisically significan incremenal informaion conen. The adjused R 2 value for he muliple regression analysis conduced o evaluae he incremenal informaion conen of he CFROI Margin componens in his sudy, however, is much lower han he values obained in previous sudies invesigaing he measures EVA real, CVA nom and CVA real. An adjused R 2 value of is observed in he case of he CFROI Margin componens, compared o values of , and (respecively) when he componens of he oher measures are invesigaed (Erasmus, 2008). Alhough he incremenal informaion conen of he CFROI Margin 75

11 componens are saisically significan, i explains less of he variaion in he marke adjused share reurns. Table 4. Tess of incremenal informaion conen of CFROI Margin componens: CFO, operaing accruals, afer-ax ineres, capial charge, accouning adjusmens, inflaion adjusmens, real cash value added adjusmens and CFROI adjusmens All firms a -sa F-sa p-value b Observaions 2450 Consan CFO CFO < Accrual Accrual ATIn ATIn CapChg CapChg AccAdj AccAdj InflAdj InflAdj CVAAdj CVAAdj CFROIAdj CFROIAdj Noes: a The regression based on he following equaion is conduced: MkAdjRe = d 0 + d 1 CFO / MVE -1 + d 2 CFO -1 / MVE -1 + d 3 Accrual / MVE -1 + d 4 Accrual -1 / MVE -1 + d 5 ATIn / MVE -1 + d 6 ATIn -1 / MVE -1 + d 7 CapChg / MVE -1 + d 8 CapChg -1 / MVE -1 + d 9 AccAdj / MVE -1 + d 10 AccAdj -1 / MVE -1 + d 11 InflAdj / MVE -1 + d 12 InflAdj -1 / MVE -1 + d 13 CVAAdj / MVE -1 + d 14 CVAAdj -1 / MVE -1 + d 15 CFROIAdj / MVE -1 + d 16 CFROIAdj -1 / MVE -1 + e. D is he marke-adjused reurn for period, while he independen variables are he CFROI Margin componens (CFO, accruals, afer-ax finance cos, capial charge, accouning adjusmens, inflaion adjusmens and cash value added adjusmens). MVE is he marke value of equiy hree monhs afer he sar of he financial year. b p-values in parenheses represen non-direcional F-es of he null hypohesis of no incremenal informaion conen (Hypohesis H INC ) Significan a he 1% level Significan a he 5% level Significan a he 10% level 7 Summary The value-based financial performance measures economic value added (EVA), cash value added (CVA) and cash flow reurn on invesmen (CFROI) are proposed by cerain research sudies as improvemens over he radiional financial measures. The objecive of his paper was o evaluae he relaive and incremenal informaion conen of hese value-based measures compared o ha of he radiional measures earnings and cash from operaions. When he relaive informaion conens of he differen value-based financial performance measures are invesigaed, he resuls indicae ha hey are no able o ouperform earnings (EBEI) in explaining marke adjused share reurns. The resuls from he incremenal informaion conen ess indicae ha he adjusmens required in order o calculae he various value-based measures do conribue saisically significan incremenal informaion conen. If he adjused R 2 values of he muliple regression analyses conduced o evaluae he incremenal informaion conen of he value-based measures are compared o he adjused R 2 values obained for he radiional measures, however, a much lower value is observed. The componens of he value-based measures herefore explain significanly less of he variaion in marke adjused share reurns han he componens of he oher measures. Alhough he conribuions of hese componens are saisically significan, hey are no economically significan when combined ino he various measures. Based on he resuls repored in his sudy i appears as if he value based measures are no able o ouperform he relaively simple radiional financial performance measure earnings (EBEI) in explaining he variaion in marke adjused share reurns. The incremenal informaion conen ess conduced o evaluae he conribuion of he componens of he value-based measures also yield much lower resuls han for similar ess conduced for he radiional measures. 76

12 References 1. Bacidore, J.M., Boquis, J.A., Milbourn, T.T., & Thakor, A.V. (1997). The search for he bes performance measure. Financial Analyss Journal, 53(3), Biddle, G.C., Bowen, R.M., & Wallace, J.S. (1999). Evidence on EVA. Journal of Applied Corporae Finance, 12(2), Biddle, G.C., Seow, G.S., & Siegel, A.F. (1995). Relaive versus incremenal informaion conen. Conemporary Accouning Research, 12(1), Burgsahler, D., & Dichev, I. (1997). Earnings, adapaion and equiy value. The Accouning Review, 72(2), Collins, D., Pincus, M., & ie, H. (1997). Equiy valuaion and negaive earnings: The role of book value of equiy. Unpublished paper, Universiy of Iowa, Iowa Ciy, IA. 6. Dzamba, A. (2003). Focus on CFROI analysis o Financial Analysis, Planning & Reporing, 3(11), Ehrbar, A. (1998). EVA: The real key o creaing wealh. New York: John Wiley & Sons. 8. Erasmus, P.D. (2008). The relaive and incremenal informaion conen of he value based financial performance measure cash value added (CVA). Managemen Dynamics, 17(2), (Forhcoming). 9. Fabozzi, F.J., & Gran, J.L. (ed.). (2000). Valuebased merics: Foundaions and pracice. New Hope: Frank J. Fabozzi Associaes. 10. Gran, J.L. (2003). Foundaions of economic value added (2 nd ed.). Hoboken, New Jersey: John Wiley and Sons. 11. Gran, J.L. (1996). Foundaions of EVA TM for invesmen managers. Journal of Porfolio Managemen, 23(1), Hayn, C. (1995). The informaion conen of losses. Journal of Accouning and Economics, 20(2), Lehn, K.L., & Makhija, A.K. (1996). EVA and MVA as performance measures and signals for sraegic change. Sraegy and Leadership, 24(3), McGregor BFA (Py.) Ld. (2005). McGregor BFA Version Madden, B.J. (1998). The CFROI valuaion model. Journal of Invesing, 17(1), Madden, B.J. (1999). CFROI valuaion: A oal sysem approach o valuing he firm. Boson: Buerworh-Heinemann. 17. Marin, J.D., & Pey, J.W. (2000). Value based managemen: The corporae response o he shareholder revoluion. Boson: Harvard Business School Press. 18. Journal of Applied Corporae Finance, 12(2), and marke value. Journal of Applied Corporae Finance, 9(1), Peerson, P.P., & Peerson, D.R. (1996). Company performance and measures of value added. Charloesville: The Research Foundaion of The Insiue of Charered Financial Analyss. 21. Sewar, G.B. (1994). EVA TM : Fac and fanasy. Journal of Applied Corporae Finance, 7(2), Sewar, G.B. (1991). The Ques for value: The EVA TM managemen guide. New York: HarperBusiness. 23. Worhingon, A.C., & Wes, T. (2004). Ausralian evidence considering he informaion conen of economic value added. Ausralian Journal of Managemen, 29(2), EVA and value-based managemen: A pracical guide o implemenaion. New York: McGraw Hill. 77

Chapter 6: Business Valuation (Income Approach)

Chapter 6: Business Valuation (Income Approach) Chaper 6: Business Valuaion (Income Approach) Cash flow deerminaion is one of he mos criical elemens o a business valuaion. Everyhing may be secondary. If cash flow is high, hen he value is high; if he

More information

Contrarian insider trading and earnings management around seasoned equity offerings; SEOs

Contrarian insider trading and earnings management around seasoned equity offerings; SEOs Journal of Finance and Accounancy Conrarian insider rading and earnings managemen around seasoned equiy offerings; SEOs ABSTRACT Lorea Baryeh Towson Universiy This sudy aemps o resolve he differences in

More information

Morningstar Investor Return

Morningstar Investor Return Morningsar Invesor Reurn Morningsar Mehodology Paper Augus 31, 2010 2010 Morningsar, Inc. All righs reserved. The informaion in his documen is he propery of Morningsar, Inc. Reproducion or ranscripion

More information

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments

BALANCE OF PAYMENTS. First quarter 2008. Balance of payments BALANCE OF PAYMENTS DATE: 2008-05-30 PUBLISHER: Balance of Paymens and Financial Markes (BFM) Lena Finn + 46 8 506 944 09, lena.finn@scb.se Camilla Bergeling +46 8 506 942 06, camilla.bergeling@scb.se

More information

LEASING VERSUSBUYING

LEASING VERSUSBUYING LEASNG VERSUSBUYNG Conribued by James D. Blum and LeRoy D. Brooks Assisan Professors of Business Adminisraion Deparmen of Business Adminisraion Universiy of Delaware Newark, Delaware The auhors discuss

More information

DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR

DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Invesmen Managemen and Financial Innovaions, Volume 4, Issue 3, 7 33 DOES TRADING VOLUME INFLUENCE GARCH EFFECTS? SOME EVIDENCE FROM THE GREEK MARKET WITH SPECIAL REFERENCE TO BANKING SECTOR Ahanasios

More information

Market Liquidity and the Impacts of the Computerized Trading System: Evidence from the Stock Exchange of Thailand

Market Liquidity and the Impacts of the Computerized Trading System: Evidence from the Stock Exchange of Thailand 36 Invesmen Managemen and Financial Innovaions, 4/4 Marke Liquidiy and he Impacs of he Compuerized Trading Sysem: Evidence from he Sock Exchange of Thailand Sorasar Sukcharoensin 1, Pariyada Srisopisawa,

More information

Hedging with Forwards and Futures

Hedging with Forwards and Futures Hedging wih orwards and uures Hedging in mos cases is sraighforward. You plan o buy 10,000 barrels of oil in six monhs and you wish o eliminae he price risk. If you ake he buy-side of a forward/fuures

More information

I. Basic Concepts (Ch. 1-4)

I. Basic Concepts (Ch. 1-4) (Ch. 1-4) A. Real vs. Financial Asses (Ch 1.2) Real asses (buildings, machinery, ec.) appear on he asse side of he balance shee. Financial asses (bonds, socks) appear on boh sides of he balance shee. Creaing

More information

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE

PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Profi Tes Modelling in Life Assurance Using Spreadshees PROFIT TEST MODELLING IN LIFE ASSURANCE USING SPREADSHEETS PART ONE Erik Alm Peer Millingon 2004 Profi Tes Modelling in Life Assurance Using Spreadshees

More information

Chapter 1.6 Financial Management

Chapter 1.6 Financial Management Chaper 1.6 Financial Managemen Par I: Objecive ype quesions and answers 1. Simple pay back period is equal o: a) Raio of Firs cos/ne yearly savings b) Raio of Annual gross cash flow/capial cos n c) = (1

More information

YTM is positively related to default risk. YTM is positively related to liquidity risk. YTM is negatively related to special tax treatment.

YTM is positively related to default risk. YTM is positively related to liquidity risk. YTM is negatively related to special tax treatment. . Two quesions for oday. A. Why do bonds wih he same ime o mauriy have differen YTM s? B. Why do bonds wih differen imes o mauriy have differen YTM s? 2. To answer he firs quesion les look a he risk srucure

More information

INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS

INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS INVESTIGATION OF THE INFLUENCE OF UNEMPLOYMENT ON ECONOMIC INDICATORS Ilona Tregub, Olga Filina, Irina Kondakova Financial Universiy under he Governmen of he Russian Federaion 1. Phillips curve In economics,

More information

Measuring macroeconomic volatility Applications to export revenue data, 1970-2005

Measuring macroeconomic volatility Applications to export revenue data, 1970-2005 FONDATION POUR LES ETUDES ET RERS LE DEVELOPPEMENT INTERNATIONAL Measuring macroeconomic volailiy Applicaions o expor revenue daa, 1970-005 by Joël Cariolle Policy brief no. 47 March 01 The FERDI is a

More information

Journal Of Business & Economics Research September 2005 Volume 3, Number 9

Journal Of Business & Economics Research September 2005 Volume 3, Number 9 Opion Pricing And Mone Carlo Simulaions George M. Jabbour, (Email: jabbour@gwu.edu), George Washingon Universiy Yi-Kang Liu, (yikang@gwu.edu), George Washingon Universiy ABSTRACT The advanage of Mone Carlo

More information

Principal components of stock market dynamics. Methodology and applications in brief (to be updated ) Andrei Bouzaev, bouzaev@ya.

Principal components of stock market dynamics. Methodology and applications in brief (to be updated ) Andrei Bouzaev, bouzaev@ya. Principal componens of sock marke dynamics Mehodology and applicaions in brief o be updaed Andrei Bouzaev, bouzaev@ya.ru Why principal componens are needed Objecives undersand he evidence of more han one

More information

MSCI Index Calculation Methodology

MSCI Index Calculation Methodology Index Mehodology MSCI Index Calculaion Mehodology Index Calculaion Mehodology for he MSCI Equiy Indices Index Mehodology MSCI Index Calculaion Mehodology Conens Conens... 2 Inroducion... 5 MSCI Equiy Indices...

More information

WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT 1

WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT 1 Invesmen Managemen and Financial Innovaions, Volume 4, Issue 2, 2007 33 WORKING CAPITAL ACCRUALS AND EARNINGS MANAGEMENT Joseph Kersein *, Aul Rai ** Absrac We reexamine marke reacions o large and small

More information

Supplementary Appendix for Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking?

Supplementary Appendix for Depression Babies: Do Macroeconomic Experiences Affect Risk-Taking? Supplemenary Appendix for Depression Babies: Do Macroeconomic Experiences Affec Risk-Taking? Ulrike Malmendier UC Berkeley and NBER Sefan Nagel Sanford Universiy and NBER Sepember 2009 A. Deails on SCF

More information

Cointegration: The Engle and Granger approach

Cointegration: The Engle and Granger approach Coinegraion: The Engle and Granger approach Inroducion Generally one would find mos of he economic variables o be non-saionary I(1) variables. Hence, any equilibrium heories ha involve hese variables require

More information

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613.

Duration and Convexity ( ) 20 = Bond B has a maturity of 5 years and also has a required rate of return of 10%. Its price is $613. Graduae School of Business Adminisraion Universiy of Virginia UVA-F-38 Duraion and Convexiy he price of a bond is a funcion of he promised paymens and he marke required rae of reurn. Since he promised

More information

SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES

SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES Inernaional Journal of Accouning Research Vol., No. 7, 4 SURVEYING THE RELATIONSHIP BETWEEN STOCK MARKET MAKER AND LIQUIDITY IN TEHRAN STOCK EXCHANGE COMPANIES Mohammad Ebrahimi Erdi, Dr. Azim Aslani,

More information

Depreciation and Corporate Taxes

Depreciation and Corporate Taxes 205 Depreciaion and Corporae Taxes Chris Hendrickson Carnegie Mellon Universiy Tung Au Carnegie Mellon Universiy 205.1 Depreciaion as Tax Deducion 205.2 Tax Laws and Tax Planning 205.3 Decision Crieria

More information

Price elasticity of demand for crude oil: estimates for 23 countries

Price elasticity of demand for crude oil: estimates for 23 countries Price elasiciy of demand for crude oil: esimaes for 23 counries John C.B. Cooper Absrac This paper uses a muliple regression model derived from an adapaion of Nerlove s parial adjusmen model o esimae boh

More information

USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES

USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES USE OF EDUCATION TECHNOLOGY IN ENGLISH CLASSES Mehme Nuri GÖMLEKSİZ Absrac Using educaion echnology in classes helps eachers realize a beer and more effecive learning. In his sudy 150 English eachers were

More information

Relationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith**

Relationships between Stock Prices and Accounting Information: A Review of the Residual Income and Ohlson Models. Scott Pirie* and Malcolm Smith** Relaionships beween Sock Prices and Accouning Informaion: A Review of he Residual Income and Ohlson Models Sco Pirie* and Malcolm Smih** * Inernaional Graduae School of Managemen, Universiy of Souh Ausralia

More information

Usefulness of the Forward Curve in Forecasting Oil Prices

Usefulness of the Forward Curve in Forecasting Oil Prices Usefulness of he Forward Curve in Forecasing Oil Prices Akira Yanagisawa Leader Energy Demand, Supply and Forecas Analysis Group The Energy Daa and Modelling Cener Summary When people analyse oil prices,

More information

The Grantor Retained Annuity Trust (GRAT)

The Grantor Retained Annuity Trust (GRAT) WEALTH ADVISORY Esae Planning Sraegies for closely-held, family businesses The Granor Reained Annuiy Trus (GRAT) An efficien wealh ransfer sraegy, paricularly in a low ineres rae environmen Family business

More information

Market Efficiency or Not? The Behaviour of China s Stock Prices in Response to the Announcement of Bonus Issues

Market Efficiency or Not? The Behaviour of China s Stock Prices in Response to the Announcement of Bonus Issues Discussion Paper No. 0120 Marke Efficiency or No? The Behaviour of China s Sock Prices in Response o he Announcemen of Bonus Issues Michelle L. Barnes and Shiguang Ma May 2001 Adelaide Universiy SA 5005,

More information

Chapter 8: Regression with Lagged Explanatory Variables

Chapter 8: Regression with Lagged Explanatory Variables Chaper 8: Regression wih Lagged Explanaory Variables Time series daa: Y for =1,..,T End goal: Regression model relaing a dependen variable o explanaory variables. Wih ime series new issues arise: 1. One

More information

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation

A Note on Using the Svensson procedure to estimate the risk free rate in corporate valuation A Noe on Using he Svensson procedure o esimae he risk free rae in corporae valuaion By Sven Arnold, Alexander Lahmann and Bernhard Schwezler Ocober 2011 1. The risk free ineres rae in corporae valuaion

More information

Capital Budgeting and Initial Cash Outlay (ICO) Uncertainty

Capital Budgeting and Initial Cash Outlay (ICO) Uncertainty Financial Decisions, Summer 006, Aricle Capial Budgeing and Iniial Cash Oulay (ICO) Uncerainy Michael C. Ehrhard and John M. Wachowicz, Jr. * * The Paul and Beverly Casagna Professor of Finance and Professor

More information

Abstract. Review of Literatures. Free Cash Flows (FCF)

Abstract. Review of Literatures. Free Cash Flows (FCF) 123 A COMPARATIVE STUDY BETWEEN FREE CASH FLOWS AND EARNINGS MANAGEMENT Dr. Amalendu Bhundia Reader in Commerce; Fakir Chad College Under Universiy of Calcua, Diamond Harbour, Souh 24-Parganas, Pin. 743331,

More information

Individual Health Insurance April 30, 2008 Pages 167-170

Individual Health Insurance April 30, 2008 Pages 167-170 Individual Healh Insurance April 30, 2008 Pages 167-170 We have received feedback ha his secion of he e is confusing because some of he defined noaion is inconsisen wih comparable life insurance reserve

More information

Hotel Room Demand Forecasting via Observed Reservation Information

Hotel Room Demand Forecasting via Observed Reservation Information Proceedings of he Asia Pacific Indusrial Engineering & Managemen Sysems Conference 0 V. Kachivichyanuul, H.T. Luong, and R. Piaaso Eds. Hoel Room Demand Forecasing via Observed Reservaion Informaion aragain

More information

Appendix D Flexibility Factor/Margin of Choice Desktop Research

Appendix D Flexibility Factor/Margin of Choice Desktop Research Appendix D Flexibiliy Facor/Margin of Choice Deskop Research Cheshire Eas Council Cheshire Eas Employmen Land Review Conens D1 Flexibiliy Facor/Margin of Choice Deskop Research 2 Final Ocober 2012 \\GLOBAL.ARUP.COM\EUROPE\MANCHESTER\JOBS\200000\223489-00\4

More information

Earnings Timeliness and Seasoned Equity Offering Announcement Effect

Earnings Timeliness and Seasoned Equity Offering Announcement Effect Inernaional Journal of Humaniies and Social Science Vol. 1 No. 0; December 011 Earnings Timeliness and Seasoned Equiy Offering Announcemen Effec Yuequan Wang School of Accouning and Finance The Hong Kong

More information

Determinants of Capital Structure: Comparison of Empirical Evidence from the Use of Different Estimators

Determinants of Capital Structure: Comparison of Empirical Evidence from the Use of Different Estimators Serrasqueiro and Nunes, Inernaional Journal of Applied Economics, 5(1), 14-29 14 Deerminans of Capial Srucure: Comparison of Empirical Evidence from he Use of Differen Esimaors Zélia Serrasqueiro * and

More information

Diagnostic Examination

Diagnostic Examination Diagnosic Examinaion TOPIC XV: ENGINEERING ECONOMICS TIME LIMIT: 45 MINUTES 1. Approximaely how many years will i ake o double an invesmen a a 6% effecive annual rae? (A) 10 yr (B) 12 yr (C) 15 yr (D)

More information

Anticipating the future from the past: the valuation implication of mergers and acquisitions 1

Anticipating the future from the past: the valuation implication of mergers and acquisitions 1 Anicipaing he fuure from he pas: he valuaion implicaion of mergers and acquisiions 1 Ning Zhang Deparmen of Accouning, Fuqua School of Business Duke Universiy June, 2012 Preliminary and commens welcome

More information

MITEL NETWORKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions of US dollars) (unaudited) December 31, December 31, 2015 2014

MITEL NETWORKS CORPORATION CONSOLIDATED BALANCE SHEETS (in millions of US dollars) (unaudited) December 31, December 31, 2015 2014 CONSOLIDATED BALANCE SHEETS,, 5 ASSETS Curren asses: Cash and cash equivalens.. Accouns receivable..5 Sales-ype lease receivables.. Invenories.. Oher curren asses 5. 5. 5. 5. curren porion of sales-ype

More information

Corporate governance reform and earnings management

Corporate governance reform and earnings management Invesmen Managemen and Financial Innovaions, Volume 8, Issue 4, 2011 Juo-Lien Wang (Taiwan), Her-Jiun Sheu (Taiwan), Huimin Chung (Taiwan) Corporae governance reform and earnings managemen Absrac This

More information

The Interest Rate Risk of Mortgage Loan Portfolio of Banks

The Interest Rate Risk of Mortgage Loan Portfolio of Banks The Ineres Rae Risk of Morgage Loan Porfolio of Banks A Case Sudy of he Hong Kong Marke Jim Wong Hong Kong Moneary Auhoriy Paper presened a he Exper Forum on Advanced Techniques on Sress Tesing: Applicaions

More information

Do Investors Overreact or Underreact to Accruals? A Reexamination of the Accrual Anomaly

Do Investors Overreact or Underreact to Accruals? A Reexamination of the Accrual Anomaly Do Invesors Overreac or Underreac o Accruals? A Reexaminaion of he Accrual Anomaly Yong Yu* Smeal College of Business Pennsylvania Sae Universiy This draf: December 30, 2005 Absrac Sloan (996) finds ha

More information

Premium Income of Indian Life Insurance Industry

Premium Income of Indian Life Insurance Industry Premium Income of Indian Life Insurance Indusry A Toal Facor Produciviy Approach Ram Praap Sinha* Subsequen o he passage of he Insurance Regulaory and Developmen Auhoriy (IRDA) Ac, 1999, he life insurance

More information

THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS

THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS VII. THE FIRM'S INVESTMENT DECISION UNDER CERTAINTY: CAPITAL BUDGETING AND RANKING OF NEW INVESTMENT PROJECTS The mos imporan decisions for a firm's managemen are is invesmen decisions. While i is surely

More information

Why Did the Demand for Cash Decrease Recently in Korea?

Why Did the Demand for Cash Decrease Recently in Korea? Why Did he Demand for Cash Decrease Recenly in Korea? Byoung Hark Yoo Bank of Korea 26. 5 Absrac We explores why cash demand have decreased recenly in Korea. The raio of cash o consumpion fell o 4.7% in

More information

Evidence from the Stock Market

Evidence from the Stock Market UK Fund Manager Cascading and Herding Behaviour: New Evidence from he Sock Marke Yang-Cheng Lu Deparmen of Finance, Ming Chuan Universiy 250 Sec.5., Zhong-Shan Norh Rd., Taipe Taiwan E-Mail ralphyclu1@gmail.com,

More information

Accruals and cash flows anomalies: evidence from the Indian stock market

Accruals and cash flows anomalies: evidence from the Indian stock market Sanjay Sehgal (India), Srividya Subramaniam (India), Floren Deising (France) Accruals and cash flows anomalies: evidence from he Indian sock marke Absrac This sudy examines he persisence of earnings performance,

More information

4. International Parity Conditions

4. International Parity Conditions 4. Inernaional ariy ondiions 4.1 urchasing ower ariy he urchasing ower ariy ( heory is one of he early heories of exchange rae deerminaion. his heory is based on he concep ha he demand for a counry's currency

More information

Influence of the Dow returns on the intraday Spanish stock market behavior

Influence of the Dow returns on the intraday Spanish stock market behavior Influence of he Dow reurns on he inraday Spanish sock marke behavior José Luis Miralles Marcelo, José Luis Miralles Quirós, María del Mar Miralles Quirós Deparmen of Financial Economics, Universiy of Exremadura

More information

Measuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry

Measuring the Effects of Exchange Rate Changes on Investment. in Australian Manufacturing Industry Measuring he Effecs of Exchange Rae Changes on Invesmen in Ausralian Manufacuring Indusry Robyn Swif Economics and Business Saisics Deparmen of Accouning, Finance and Economics Griffih Universiy Nahan

More information

The Determinants of Trade Credit: Vietnam Experience

The Determinants of Trade Credit: Vietnam Experience Proceedings of he Second Asia-Pacific Conference on Global Business, Economics, Finance and Social Sciences (AP15Vienam Conference) ISBN: 978-1-63415-833-6 Danang, Vienam, 10-12 July 2015 Paper ID: V536

More information

Performance Center Overview. Performance Center Overview 1

Performance Center Overview. Performance Center Overview 1 Performance Cener Overview Performance Cener Overview 1 ODJFS Performance Cener ce Cener New Performance Cener Model Performance Cener Projec Meeings Performance Cener Execuive Meeings Performance Cener

More information

The Behavior of China s Stock Prices in Response to the Proposal and Approval of Bonus Issues

The Behavior of China s Stock Prices in Response to the Proposal and Approval of Bonus Issues The Behavior of China s Sock Prices in Response o he Proposal and Approval of Bonus Issues Michelle L. Barnes a* and Shiguang Ma b a Federal Reserve Bank of Boson Research, T-8 600 Alanic Avenue Boson,

More information

Inflation Accounting. Advanced Financial Accounting

Inflation Accounting. Advanced Financial Accounting Inflaion Accouning Advanced Financial Accouning Inflaion: Definiions Decrease in purchasing power of money due o an increase in he general price level A process of seadily rising prices resuling in diminishing

More information

THE SUPPLY OF STOCK MARKET RETURNS. Roger G. Ibbotson Yale University. Peng Chen Ibbotson Associates, Inc.

THE SUPPLY OF STOCK MARKET RETURNS. Roger G. Ibbotson Yale University. Peng Chen Ibbotson Associates, Inc. THE SUPPLY OF STOCK MARKET RETURNS Roger G. Ibboson Yale Universiy Peng Chen Ibboson Associaes, Inc. June 2001 The Supply of Sock Marke Reurns Roger G. Ibboson, Ph.D. Professor in he Pracice of Finance

More information

Present Value Methodology

Present Value Methodology Presen Value Mehodology Econ 422 Invesmen, Capial & Finance Universiy of Washingon Eric Zivo Las updaed: April 11, 2010 Presen Value Concep Wealh in Fisher Model: W = Y 0 + Y 1 /(1+r) The consumer/producer

More information

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas

The Greek financial crisis: growing imbalances and sovereign spreads. Heather D. Gibson, Stephan G. Hall and George S. Tavlas The Greek financial crisis: growing imbalances and sovereign spreads Heaher D. Gibson, Sephan G. Hall and George S. Tavlas The enry The enry of Greece ino he Eurozone in 2001 produced a dividend in he

More information

Chapter 8 Student Lecture Notes 8-1

Chapter 8 Student Lecture Notes 8-1 Chaper Suden Lecure Noes - Chaper Goals QM: Business Saisics Chaper Analyzing and Forecasing -Series Daa Afer compleing his chaper, you should be able o: Idenify he componens presen in a ime series Develop

More information

Lecture III: Finish Discounted Value Formulation

Lecture III: Finish Discounted Value Formulation Lecure III: Finish Discouned Value Formulaion I. Inernal Rae of Reurn A. Formally defined: Inernal Rae of Reurn is ha ineres rae which reduces he ne presen value of an invesmen o zero.. Finding he inernal

More information

Table of contents Chapter 1 Interest rates and factors Chapter 2 Level annuities Chapter 3 Varying annuities

Table of contents Chapter 1 Interest rates and factors Chapter 2 Level annuities Chapter 3 Varying annuities Table of conens Chaper 1 Ineres raes and facors 1 1.1 Ineres 2 1.2 Simple ineres 4 1.3 Compound ineres 6 1.4 Accumulaed value 10 1.5 Presen value 11 1.6 Rae of discoun 13 1.7 Consan force of ineres 17

More information

Chapter Four: Methodology

Chapter Four: Methodology Chaper Four: Mehodology 1 Assessmen of isk Managemen Sraegy Comparing Is Cos of isks 1.1 Inroducion If we wan o choose a appropriae risk managemen sraegy, no only we should idenify he influence ha risks

More information

MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR

MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR MACROECONOMIC FORECASTS AT THE MOF A LOOK INTO THE REAR VIEW MIRROR The firs experimenal publicaion, which summarised pas and expeced fuure developmen of basic economic indicaors, was published by he Minisry

More information

Capital Investment Measures, Future Earnings and Future Returns: The UK Evidence

Capital Investment Measures, Future Earnings and Future Returns: The UK Evidence Capial Invesmen Measures, Fuure Earnings and Fuure Reurns: The UK Evidence Nikola Perovic 1 School of Economics, Finance and Managemen, Universiy of Brisol Suar Manson Essex Business School, Universiy

More information

The effect of debt on corporate profitability Evidence from French service sector

The effect of debt on corporate profitability Evidence from French service sector The effec of deb on corporae profiabiliy Evidence from French service secor Mazen KEBEWAR 1 mazen.kebewar@univ-orleans.fr mazen.kebewar@gmail.com Curren sudy aims o provide new empirical evidence on he

More information

Market Analysis and Models of Investment. Product Development and Whole Life Cycle Costing

Market Analysis and Models of Investment. Product Development and Whole Life Cycle Costing The Universiy of Liverpool School of Archiecure and Building Engineering WINDS PROJECT COURSE SYNTHESIS SECTION 3 UNIT 11 Marke Analysis and Models of Invesmen. Produc Developmen and Whole Life Cycle Cosing

More information

1. Fund types and population covered

1. Fund types and population covered Performance and financial overview of invesmen funds - France 1 March 016 The Banque de France draws up he following informaion for invesmen funds: 1 monhly saisics on fund ousandings and flows, and on

More information

ZESZYTY NAUKOWE UNIWERSYTETU SZCZECIŃSKIEGO NR 690 FINANSE, RYNKI FINANSOWE, UBEZPIECZENIA NR 51 2012

ZESZYTY NAUKOWE UNIWERSYTETU SZCZECIŃSKIEGO NR 690 FINANSE, RYNKI FINANSOWE, UBEZPIECZENIA NR 51 2012 ZESZYTY NAUKOWE UNIWERSYTETU SZCZECIŃSKIEGO NR 690 FINANSE, RYNKI FINANSOWE, UBEZPIECZENIA NR 51 2012 BARTŁOMIEJ NITA VALUE CREATION MEASUREMENT IN RESPONSIBILITY ACCOUNTING Inroducion Responsibiliy accouning

More information

INTERNATIONAL REAL ESTATE REVIEW 2003 Vol. 6 No. 1: pp. 43-62. Banking System, Real Estate Markets, and Nonperforming Loans

INTERNATIONAL REAL ESTATE REVIEW 2003 Vol. 6 No. 1: pp. 43-62. Banking System, Real Estate Markets, and Nonperforming Loans Banking Sysem, Real Esae Markes, and Nonperforming Loans 43 INTERNATIONAL REAL ESTATE REVIEW 2003 Vol. 6 No. 1: pp. 43-62 Banking Sysem, Real Esae Markes, and Nonperforming Loans Wen-Chieh Wu Deparmen

More information

LIFE INSURANCE WITH STOCHASTIC INTEREST RATE. L. Noviyanti a, M. Syamsuddin b

LIFE INSURANCE WITH STOCHASTIC INTEREST RATE. L. Noviyanti a, M. Syamsuddin b LIFE ISURACE WITH STOCHASTIC ITEREST RATE L. oviyani a, M. Syamsuddin b a Deparmen of Saisics, Universias Padjadjaran, Bandung, Indonesia b Deparmen of Mahemaics, Insiu Teknologi Bandung, Indonesia Absrac.

More information

Capital budgeting techniques

Capital budgeting techniques Capial budgeing echniques A reading prepared by Pamela Peerson Drake O U T L I N E 1. Inroducion 2. Evaluaion echniques 3. Comparing echniques 4. Capial budgeing in pracice 5. Summary 1. Inroducion The

More information

The Effect of Working Capital Management on Reducing the Stock Price Crash Risk(Case Study: Companies Listed in Tehran Stock Exchange)

The Effect of Working Capital Management on Reducing the Stock Price Crash Risk(Case Study: Companies Listed in Tehran Stock Exchange) Inernaional Research Journal of Applied and Basic Sciences 2013 Available online a www.irjabs.com ISSN 2251-838X / Vol, 6 (9): 1222-1228 Science Explorer Publicaions The Effec of Working Capial Managemen

More information

TRADE-OFF THEORY VERSUS PECKING ORDER THEORY: CAPITAL STRUCTURE DECISIONS IN A PERIPHERAL REGION OF PORTUGAL

TRADE-OFF THEORY VERSUS PECKING ORDER THEORY: CAPITAL STRUCTURE DECISIONS IN A PERIPHERAL REGION OF PORTUGAL TRADE-OFF THEORY VERSUS PECKING ORDER THEORY: CAPITAL STRUCTURE DECISIONS IN A PERIPHERAL REGION OF PORTUGAL Zélia Serrasqueiro 1, Ana Caeano 2 1 Deparmen of Managemen and Economics, Faculy of Social and

More information

GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA

GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA Journal of Applied Economics, Vol. IV, No. (Nov 001), 313-37 GOOD NEWS, BAD NEWS AND GARCH EFFECTS 313 GOOD NEWS, BAD NEWS AND GARCH EFFECTS IN STOCK RETURN DATA CRAIG A. DEPKEN II * The Universiy of Texas

More information

Debt Portfolio Optimization Eric Ralaimiadana

Debt Portfolio Optimization Eric Ralaimiadana Deb Porfolio Opimizaion Eric Ralaimiadana 27 May 2016 Inroducion CADES remi consiss in he defeasance of he Social Securiy and Healh public deb To achieve is ask, he insiuion has been assigned a number

More information

THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION

THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION The Inernaional Journal of Business and Finance Research VOLUME 8 NUMBER 2 2014 THE INTERPLAY BETWEEN DIRECTOR COMPENSATION AND CEO COMPENSATION Dan Lin, Takming Universiy of Science and Technology Lu

More information

A Brief Introduction to the Consumption Based Asset Pricing Model (CCAPM)

A Brief Introduction to the Consumption Based Asset Pricing Model (CCAPM) A Brief Inroducion o he Consumpion Based Asse Pricing Model (CCAPM We have seen ha CAPM idenifies he risk of any securiy as he covariance beween he securiy's rae of reurn and he rae of reurn on he marke

More information

Forecasting the dynamics of financial markets. Empirical evidence in the long term

Forecasting the dynamics of financial markets. Empirical evidence in the long term Leonardo Franci (Ialy), Andi Duqi (Ialy), Giuseppe Torluccio (Ialy) Forecasing he dynamics of financial markes. Empirical evidence in he long erm Absrac This sudy aims o verify wheher here are any macroeconomic

More information

Single-machine Scheduling with Periodic Maintenance and both Preemptive and. Non-preemptive jobs in Remanufacturing System 1

Single-machine Scheduling with Periodic Maintenance and both Preemptive and. Non-preemptive jobs in Remanufacturing System 1 Absrac number: 05-0407 Single-machine Scheduling wih Periodic Mainenance and boh Preempive and Non-preempive jobs in Remanufacuring Sysem Liu Biyu hen Weida (School of Economics and Managemen Souheas Universiy

More information

Information Content of Net Income and Other Comprehensive Income: Investigation of Japanese Firms

Information Content of Net Income and Other Comprehensive Income: Investigation of Japanese Firms Informaion Conen of Ne Income and Oher Comprehensive Income: Invesigaion of Japanese Firms Keiichi Kuboa Musashi Universiy and Chuo Universiy Kazuyuki Suda Waseda Universiy Hioshi Takehara Waseda Universiy

More information

Journal Of Business & Economics Research Volume 1, Number 11

Journal Of Business & Economics Research Volume 1, Number 11 Profis From Buying Losers And Selling Winners In The London Sock Exchange Anonios Anoniou (E-mail: anonios.anoniou@durham.ac.ak), Universiy of Durham, UK Emilios C. Galariois (E-mail: emilios.galariois@dirham.ac.uk),

More information

INTEREST RATE FUTURES AND THEIR OPTIONS: SOME PRICING APPROACHES

INTEREST RATE FUTURES AND THEIR OPTIONS: SOME PRICING APPROACHES INTEREST RATE FUTURES AND THEIR OPTIONS: SOME PRICING APPROACHES OPENGAMMA QUANTITATIVE RESEARCH Absrac. Exchange-raded ineres rae fuures and heir opions are described. The fuure opions include hose paying

More information

Can the earnings fixation hypothesis explain the accrual anomaly?

Can the earnings fixation hypothesis explain the accrual anomaly? Can he earnings fixaion hypohesis explain he accrual anomaly? Linna Shi and Huai Zhang* Absrac This paper provides empirical evidence on wheher he earnings fixaion hypohesis can explain he accrual anomaly

More information

TEMPORAL PATTERN IDENTIFICATION OF TIME SERIES DATA USING PATTERN WAVELETS AND GENETIC ALGORITHMS

TEMPORAL PATTERN IDENTIFICATION OF TIME SERIES DATA USING PATTERN WAVELETS AND GENETIC ALGORITHMS TEMPORAL PATTERN IDENTIFICATION OF TIME SERIES DATA USING PATTERN WAVELETS AND GENETIC ALGORITHMS RICHARD J. POVINELLI AND XIN FENG Deparmen of Elecrical and Compuer Engineering Marquee Universiy, P.O.

More information

Monetary Policy & Real Estate Investment Trusts *

Monetary Policy & Real Estate Investment Trusts * Moneary Policy & Real Esae Invesmen Truss * Don Bredin, Universiy College Dublin, Gerard O Reilly, Cenral Bank and Financial Services Auhoriy of Ireland & Simon Sevenson, Cass Business School, Ciy Universiy

More information

Option Put-Call Parity Relations When the Underlying Security Pays Dividends

Option Put-Call Parity Relations When the Underlying Security Pays Dividends Inernaional Journal of Business and conomics, 26, Vol. 5, No. 3, 225-23 Opion Pu-all Pariy Relaions When he Underlying Securiy Pays Dividends Weiyu Guo Deparmen of Finance, Universiy of Nebraska Omaha,

More information

ANALYSIS AND ACCOUNTING OF TOTAL CASH FLOW

ANALYSIS AND ACCOUNTING OF TOTAL CASH FLOW Annals of he Universiy of Peroşani, Economics, 12(1), 2012, 205-216 205 ANALYSIS AND ACCOUNTING OF TOTAL CASH FLOW MELANIA ELENA MICULEAC ABSTRACT: In order o reach he objecive of supplying some relevan

More information

Vector Autoregressions (VARs): Operational Perspectives

Vector Autoregressions (VARs): Operational Perspectives Vecor Auoregressions (VARs): Operaional Perspecives Primary Source: Sock, James H., and Mark W. Wason, Vecor Auoregressions, Journal of Economic Perspecives, Vol. 15 No. 4 (Fall 2001), 101-115. Macroeconomericians

More information

One dictionary: Native language - English/English - native language or English - English

One dictionary: Native language - English/English - native language or English - English Faculy of Social Sciences School of Business Corporae Finance Examinaion December 03 English Dae: Monday 09 December, 03 Time: 4 hours/ 9:00-3:00 Toal number of pages including he cover page: 5 Toal number

More information

DNB W o r k i n g P a p e r. Stock market performance and pension fund investment policy: rebalancing, free f loat, or market timing?

DNB W o r k i n g P a p e r. Stock market performance and pension fund investment policy: rebalancing, free f loat, or market timing? DNB Working Paper No. 154 / November 2007 Jacob Bikker, Dirk Broeders and Jan de Dreu DNB W o r k i n g P a p e r Sock marke performance and pension fund invesmen policy: rebalancing, free f loa, or marke

More information

Topic Overview. Learning Objectives. Capital Budgeting Steps: WHAT IS CAPITAL BUDGETING?

Topic Overview. Learning Objectives. Capital Budgeting Steps: WHAT IS CAPITAL BUDGETING? Chaper 10: THE BASICS OF CAPITAL BUDGETING Should we build his plan? Topic Overview Projec Types Capial Budgeing Decision Crieria Payback Period Discouned Payback Period Ne Presen Value () Inernal Rae

More information

Return Calculation of U.S. Treasury Constant Maturity Indices

Return Calculation of U.S. Treasury Constant Maturity Indices Reurn Calculaion of US Treasur Consan Mauri Indices Morningsar Mehodolog Paper Sepeber 30 008 008 Morningsar Inc All righs reserved The inforaion in his docuen is he proper of Morningsar Inc Reproducion

More information

THE DETERMINATION OF PORT FACILITIES MANAGEMENT FEE WITH GUARANTEED VOLUME USING OPTIONS PRICING MODEL

THE DETERMINATION OF PORT FACILITIES MANAGEMENT FEE WITH GUARANTEED VOLUME USING OPTIONS PRICING MODEL 54 Journal of Marine Science and echnology, Vol. 13, No. 1, pp. 54-60 (2005) HE DEERMINAION OF POR FACILIIES MANAGEMEN FEE WIH GUARANEED VOLUME USING OPIONS PRICING MODEL Kee-Kuo Chen Key words: build-and-lease

More information

Investment-Cash Flow Sensitivities Are Really Investment-Investment Sensitivities

Investment-Cash Flow Sensitivities Are Really Investment-Investment Sensitivities Invesmen-Cash Flow Sensiiviies Are Really Invesmen-Invesmen Sensiiviies Rober M. Bushman Kenan-Flagler Business School, Universiy of Norh Carolina a Chapel Hill Abbie J. Smih Booh School of Business, Universiy

More information

Does Stock Price Synchronicity Represent Firm-Specific Information? The International Evidence

Does Stock Price Synchronicity Represent Firm-Specific Information? The International Evidence Does Sock Price Synchroniciy Represen Firm-Specific Informaion? The Inernaional Evidence Hollis Ashbaugh-Skaife Universiy of Wisconsin Madison 975 Universiy Avenue Madison, WI 53706 608-63-7979 hashbaugh@bus.wisc.edu

More information

Term Structure of Prices of Asian Options

Term Structure of Prices of Asian Options Term Srucure of Prices of Asian Opions Jirô Akahori, Tsuomu Mikami, Kenji Yasuomi and Teruo Yokoa Dep. of Mahemaical Sciences, Risumeikan Universiy 1-1-1 Nojihigashi, Kusasu, Shiga 525-8577, Japan E-mail:

More information

SPEC model selection algorithm for ARCH models: an options pricing evaluation framework

SPEC model selection algorithm for ARCH models: an options pricing evaluation framework Applied Financial Economics Leers, 2008, 4, 419 423 SEC model selecion algorihm for ARCH models: an opions pricing evaluaion framework Savros Degiannakis a, * and Evdokia Xekalaki a,b a Deparmen of Saisics,

More information

UNDERSTANDING THE DEATH BENEFIT SWITCH OPTION IN UNIVERSAL LIFE POLICIES. Nadine Gatzert

UNDERSTANDING THE DEATH BENEFIT SWITCH OPTION IN UNIVERSAL LIFE POLICIES. Nadine Gatzert UNDERSTANDING THE DEATH BENEFIT SWITCH OPTION IN UNIVERSAL LIFE POLICIES Nadine Gazer Conac (has changed since iniial submission): Chair for Insurance Managemen Universiy of Erlangen-Nuremberg Lange Gasse

More information

Long-Run Stock Returns: Participating in the Real Economy

Long-Run Stock Returns: Participating in the Real Economy Long-Run Sock Reurns: Paricipaing in he Real Economy Roger G. Ibboson and Peng Chen In he sudy repored here, we esimaed he forward-looking long-erm equiy risk premium by exrapolaing he way i has paricipaed

More information