Role of farm real estate in a globally diversified asset portfolio

Purpose - The paper examines the benefits of further diversifying a global portfolio of financial assets with New Zealand farm real estate (FRE). ---------- Design/methodology/approach - We compare efficient sets generated with and without farm real estate using portfolio theory. ---------- Findings - The results show that given the predominantly negative correlation between FRE and financial assets, the risk-return tradeoffs of portfolios of financial assets can be improved significantly. The diversification benefits measured in terms of risk reduction, return enhancement, and improvement in the Sharpe performance ratios are robust under a number of FRE risk-return scenarios as well as under high and low inflationary periods. Using 5- and 10-year rolling periods we also find that FRE is a consistent part of risk efficient portfolios. Consistent with the results reported in Lee and Stevenson (2006) for UK real estate the risk reduction benefits of diversifying with FRE are larger than the risk enhancement benefits. ---------- Practical implication - The results suggest that FRE takes on a consistent role of risk-reducer rather than a return-enhancer in a globally diversified portfolio. FRE appears to deserve more serious consideration by investment practitioners that it has been accorded in the past. Originality/value – The study examines the role of direct real estate in a globally diversified portfolio of financial assets.

NSW rural land performance : 1990-2008

The annual income return for rural property is based on two major factors being commodity prices and production yields. Commodity prices paid to rural producers can vary depending on the agricultural policies of their respective countries. Free trade countries, such as Australia and New Zealand are subject to the volatility of the world commodity markets to a greater extent than those farmers in protected or subsidised markets. In countries where rural production is protected or subsidised the annual income received by rural producers has been relatively stable. However, the high cost of agricultural protection is now being questioned, particularly in relation to the increasing economic costs of government services such as health, education and housing. When combined with the agricultural production limitations of climate, topography, chemical residues and disease issues, the impact of commodity prices on rural property income is crucial in the ability of rural producers to enter into or expand their holdings in agricultural land. These problems are then reflected in the volatility of the rural land capital returns and the investment performance of this property class. This paper will address the total and capital return performance of a major agricultural area and compare these returns on the basis of both location of land and land use. The comparison will be used to determine if location or actual land use has a greater influence on rural property capital returns. This performance analysis is based on over 35,000 rural sales transactions. These transactions cover all market based rural property transactions in New South Wales, Australia for the period January 1990 to December 2008. Correlation analysis and investment performance analysis has also been carried out to determine the possible relationships between location and land use and subsequent changes in rural land capital values.

Governance in the Australian superannuation industry

In the Superannuation/Pension industry ordinary investors entrust their retirement savings to the trustees of the superannuation plan. Investors rely on the trustees to ensure ethical business and risk management practices are implemented to protect their retirement savings. Governance practices ensure the monitoring of ethical risk management (Drennan, 2004). The Australian superannuation industry presents a unique scenario. Legislation requires employers to contribute a minimum of 9% of the employees wage to retirement savings. However, there are no legislated governance standards, although there are standards of recommended governance practices. In this paper, we examine the level of voluntary adoption of governance practices by the trustees of Australian public sector and industry superannuation funds. We also assess whether superannuation governance practices are associated with performance and volatility/riskiness of returns. Survey results show that the majority of superannuation plans adopt recommended governance practices supporting the concept of ethical management of the member’s retirement savings. The examination of governance principles that impact returns and risk show that board size and regular review of conflicts are positively associated with return. Superannuation plans with higher volatility in returns meet more frequently.

Pockets of creativity in business processes

Creative processes, for instance, the development of visual effects or computer games, increasingly become part of the agenda of information systems researchers and practitioners. Such processes get their managerial challenges from the fact that they comprise both well-structured, transactional parts and creative parts. The latter can often not be precisely specified in terms of control flow, required resources, and outcome. The processes’ high uncertainty sets boundaries for the application of traditional business process management concepts, such as process automation, process modeling, process performance measurement, and risk management. Organizations must thus exercise caution when it comes to managing creative processes and supporting these with information technology. This, in turn, requires a profound understanding of the concept of creativity in business processes. In response to this, the present paper introduces a framework for conceptualizing creativity within business processes. The conceptual framework describes three types of uncertainty and constraints as well as the interrelationships among these. The study is grounded in the findings from three case studies that were conducted in the film and visual effects industry. Moreover, we provide initial evidence for the framework’s validity beyond this narrow focus. The framework is intended to serve as a sensitizing device that can guide further information systems research on creativity-related phenomena.

Momentum and seasonality in Chinese stock markets

In this paper, we follow Jegadeesh and Titman's (1993, Journal of Finance) approach to examine 25 momentum/contrarian trading strategies using monthly stock returns in China for the period from 1994 to 2007. Our results suggest that there is no momentum profitability in any of the 25 strategies. In contrast, there is some evidence of reversal effects where the past winners become losers and past losers become winners afterward. The contrarian profit is statistically significant for the strategies using short formation and holding periods, especially for the formation periods of 1 to 3 months and the holding periods of 1 to 3 months. The contrarian strategies can generate about 12% per annum on average. Moreover, we follow Heston and Sadka (2008, Journal of Financial Economics) to investigate where there is any seasonal pattern in the cross-sectional variation of average stock returns in our momentum/contrarian strategies. There is no evidence of any seasonal pattern, and the results are robust to different formation and holding periods.

A 'conceptual models' approach to organisational resilience

Gibson and Tarrant discuss the range of inter-dependant factors needed to manage organisational resilience. Over the last few years there has been considerable interest in the idea of resilience across all areas of society. Like any new area or field this has produced a vast array of definitions, processes, management systems and measurement tools which together have clouded the concept of resilience. Many of us have forgotten that ultimately resilience is not just about ‘bouncing back from adversity’ but is more broadly concerned with adaptive capacity and how we better understand and address uncertainty in our internal and external environments. The basis of organisational resilience is a fundamental understanding and treatment of risk, particularly non-routine or disruption related risk. This paper presents a number of conceptual models of organisational resilience that we have developed to demonstrate the range of inter-dependant factors that need to be considered in the management of such risk. These conceptual models illustrate that effective resilience is built upon a range of different strategies that enhance both ‘hard’ and ‘soft’ organisational capabilities . They emphasise the concept that there is no quick fix, no single process, management system or software application that will create resilience.

The use of ZIP and CART to model cryptosporidiosis in relation to climatic variables

This research assesses the potential impact of weekly weather variability on the incidence of cryptosporidiosis disease using time series zero-inflated Poisson (ZIP) and classification and regression tree (CART) models. Data on weather variables, notified cryptosporidiosis cases and population size in Brisbane were supplied by the Australian Bureau of Meteorology, Queensland Department of Health, and Australian Bureau of Statistics, respectively. Both time series ZIP and CART models show a clear association between weather variables (maximum temperature, relative humidity, rainfall and wind speed) and cryptosporidiosis disease. The time series CART models indicated that, when weekly maximum temperature exceeded 31°C and relative humidity was less than 63%, the relative risk of cryptosporidiosis rose by 13.64 (expected morbidity: 39.4; 95% confidence interval: 30.9–47.9). These findings may have applications as a decision support tool in planning disease control and risk management programs for cryptosporidiosis disease.

The influence of safety ownership on occupational road safety outcomes

Questionnaires and interviews were conducted with employees and senior managers from three Australian organisations to explore the relationship between perceived managerial ownership of safety responsibilities and occupational road safety. It was found that the perceived authority of the person primarily responsible for managing road risks and perceived shared ownership of safety tasks were both significant independent predictors of safer driving behaviours. It was identified that the position of the person accepting primary risk management responsibilities was typically a member of the OHS team and typically in a management position. The extent that ownership was shared across members within the researched organisations varied, with personnel from OHS and fleet management typically accepting partial ownership of managing occupational road risks. Based on the findings, several recommendations are made to assist practitioners in managing occupational road risks.

A comparative review of quantitative VFM methodology for PPP infrastructure project in Indonesia and Australia

The Government of Indonesia (GoI) increasingly relies on the private sector financing to build and operate infrastructures through public private partnership (PPP) schemes. However, PPP does not automatically provide the solution for the financing scheme due to value for money (VFM) issues. The procurement authority must show whether a PPP proposal is the optimal solution that provides best VFM outcome. The paper presents a literature review of comparing quantitative VFM methodology for PPP infrastructure project procurement in Indonesia and Australia. Public Sector Comparator (PSC) is used to assess the potential project VFM quantitatively in Australia. In Indonesia, the PSC has not been applied, where the PPP procurement authority tends to utilize a common project evaluation method that ignores the issues of risk. Unlike the conventional price bid evaluation, the PSC enables a financial comparison including costs/gains and risks. Since the construction of PSC is primarily on risk management approach, it can facilitate risk negotiation processes between the involved parties. The study indicates that the quantitative VFM methodology of PSC is potentially applicable in Indonesia for water supply sector. Various supporting regulations are available that emphasize the importance of VFM and risk management in infrastructure investment. However, the study also reveals a number of challenges that need to be anticipated, such as the need of a more comprehensive PPP policy at both central and local government level, a more specific legal instrument for bidding evaluation method and the issue of institutional capacity development in PPP Units at the local level.

Should funds invest in socially responsible investments during downturns?

Purpose: This paper investigates whether Socially Responsible Investment (SRI) is less sensitive to market downturns than conventional investments; the legal implications for fund managers and trustees; and possible legislative reforms to allow conventional funds more scope to invest in SRI. ----- ----- Design/methodology/approach: The paper uses the market model to estimate betas over the past 15 years for SRI funds and conventional investment funds during economic downturns, as distinct from during more ‘normal’ (non-recessionary) economic times. ----- ----- Findings: The beta risk of SRI, both in Australia and internationally, increases more than that of conventional investment during economic downturns. Traditional fund managers and trustees in Australia are therefore likely to breach their fiduciary duties if they go long - or remain long - in SRI funds during economic downturns, unless relevant legislation is reformed. ----- ----- Research limitations/implications: The methodology assumes that alpha and beta in the market model are constant. This is the subject of ongoing research. Second, it categorises the state of the market into ‘normal’ economic conditions and downturns using dummy variables. More sophisticated techniques could be used in future research. ----- ----- Practical implications: The current law would prevent conventional funds from investing in SRI. If SRI is viewed as socially desirable, useful legislative reforms could include explicitly overriding the common law to allow conventional funds to invest in SRI; introducing a 150% tax deduction or investment allowance for SRI; and allowing SRI sub-funds to obtain Deductible Gift Recipient status from the Australian Tax Office and other taxation authorities. ----- ----- Originality/value: The accurate assessment of risk in SRIs is an area which, despite its serious legal implications, is yet to be subjected to rigorous empirical investigation. Keywords - SRI, market model, GARCH, trust fund, fiduciary duties, market downturns, Australia.