The cross-section of stock returns in an early stock market

Using a new dataset which contains monthly data on 1015 stocks traded on the London Stock Exchange between 1825 and 1870, we investigate the cross section of stock returns in this early capital market. Unique features of this market allow us to evaluate the veracity of several popular explanations of asset pricing behavior. Using portfolio analysis and Fama–MacBeth regressions, we find that stock characteristics such as beta, illiquidity, dividend yield, and past-year return performance are all positively correlated with stock returns. However, market capitalization and past-three-year return performance have no significant correlation with stock returns.

Short-Term Reversals: The Effects of Past Returns and Institutional Exits

Price declines over the previous quarter lead to stronger reversals across the subsequent two months. We explain this finding based on the dual notions that liquidity provision can influence reversals, and agents that act as de facto liquidity providers may be less active in past losers. Supporting these observations, we find that active institutions participate less in losing stocks, and that the magnitude of monthly return reversals fluctuates with changes in the number of active institutional investors. Thus, we argue that fluctuations in liquidity provision with past return performance accounts for the link between return reversals and past returns.

Investigating the cost Performance of UK Credit Unions using Radial and Non-Radial Efficiency Measures

This paper examines the relative efficiency of UK credit unions. Radial and non-radial measures of input cost efficiency plus associated scale efficiency measures are computed for a selection of input output specifications. Both measures highlighted that UK credit unions have considerable scope for efficiency gains. It was mooted that the documented high levels of inefficiency may be indicative of the fact that credit unions, based on clearly defined and non-overlapping common bonds, are not in competition with each other for market share. Credit unions were also highlighted as suffering from a considerable degree of scale inefficiency with the majority of scale inefficient credit unions subject to decreasing returns to scale. The latter aspect highlights that the UK Government's goal of larger credit unions must be accompanied by greater regulatory freedom if inefficiency is to be avoided. One of the advantages of computing non-radial measures is that an insight into potential over- or under-expenditure on specific inputs can be obtained through a comparison of the non-radial measure of efficiency with the associated radial measure. Two interesting findings emerged, the first that UK credit unions over-spend on dividend payments and the second that they under-spend on labour costs.

Power-law behaviour, heterogeneity, and trend chasing

Long-range dependence in volatility is one of the most prominent examples in financial market research involving universal power laws. Its characterization has recently spurred attempts to provide some explanations of the underlying mechanism. This paper contributes to this recent line of research by analyzing a simple market fraction asset pricing model with two types of traders---fundamentalists who trade on the price deviation from estimated fundamental value and trend followers whose conditional mean and variance of the trend are updated through a geometric learning process. Our analysis shows that agent heterogeneity, risk-adjusted trend chasing through the geometric learning process, and the interplay of noisy fundamental and demand processes and the underlying deterministic dynamics can be the source of power-law distributed fluctuations. In particular, the noisy demand plays an important role in the generation of insignificant autocorrelations (ACs) on returns, while the significant decaying AC patterns of the absolute returns and squared returns are more influenced by the noisy fundamental process. A statistical analysis based on Monte Carlo simulations is conducted to characterize the decay rate. Realistic estimates of the power-law decay indices and the (FI)GARCH parameters are presented.

E-Commerce Innovations in the Personal Tax System of the United Kingdom

This study finds evidence that attempts to reduce costs and error rates in the Inland Revenue through the use of e-commerce technology are flawed. While it is technically possible to write software that will record tax data, and then transmit it to the Inland Revenue, there is little demand for this service. The key finding is that the tax system is so complex that many people are unable to complete their own tax returns. This complexity cannot be overcome by well-designed software. The recommendation is to encourage the use of agents to assist taxpayers or simplify the tax system. The Inland Revenue is interested in saving administrative costs and errors by encouraging electronic submission of tax returns. To achieve these objectives, given the raw data it would seem clear that the focus should be on facilitating the work of agents.

Optimising the use of virtual and conventional simulation: a clinical and economic analysis

Background and purpose: Currently, optimal use of virtual simulation for all treatment sites is not entirely clear. This study presents data to identify specific patient groups for whom conventional simulation may be completely eliminated and replaced by virtual simulation. Sampling and method: Two hundred and sixty patients were recruited from four treatment sites (head and neck, breast, pelvis, and thorax). Patients were randomly assigned to be treated using the usual treatment process involving conventional simulation, or a treatment process differing only in the replacement of conventional plan verification with virtual verification. Data were collected on set-up accuracy at verification, and the number of unsatisfactory verifications requiring a return to the conventional simulator. A micro-economic costing analysis was also undertaken, whereby data for each treatment process episode were also collected: number and grade of staff present, and the time for each treatment episode. Results: The study shows no statistically significant difference in the number of returns to the conventional simulator for each site and study arm. Image registration data show similar quality of verification for each study arm. The micro-costing data show no statistical difference between the virtual and conventional simulation processes. Conclusions: At our institution, virtual simulation including virtual verification for the sites investigated presents no disadvantage compared to conventional simulation.

The Cost of Sustainability Capital and the Creation of Sustainable Value by Companies

We develop and apply a valuation methodology to calculate the cost of sustainability capital, and, eventually, sustainable value creation of companies. Sustainable development posits that decisions must take into account all forms of capital rather than just economic capital. We develop a methodology that allows calculation of the costs that are associated with the use of different forms of capital. Our methodology borrows the idea from financial economics that the return on capital has to cover the cost of capital. Capital costs are determined as opportunity costs, that is, the forgone returns that would have been created by alternative investments. We apply and extend the logic of opportunity costs to the valuation not only of economic capital but also of other forms of capital. This allows (a) integrated analysis of use of different forms of capital based on a value-based aggregation of different forms of capital, (b) determination of the opportunity cost of a bundle of different forms of capital used in a company, called cost of sustainability capital, (c) calculation of sustainability efficiency of companies, and (d) calculation of sustainable value creation, that is, the value above the cost of sustainability capital. By expanding the well-established logic of the valuation of economic capital in financial markets to cover other forms of capital, we provide a methodology that allows determination of the most efficient allocation of sustainability capital for sustainable value creation in companies. We demonstrate the practicability of the methodology by the valuation of the sustainability performance of British Petroleum (BP).

A comparison of three standard methods of identifying mast cells in endobronchial biopsies in normal and asthmatic subjects

Reported mast-cell counts in endobronchial biopsies from asthmatic subjects are conflicting, with different methodologies often being used. This study compared three standard methods of counting mast cells in endobronchial biopsies from asthmatic and normal subjects. Endobronchial biopsies were obtained from atopic asthmatic subjects (n=17), atopic nonasthmatic subjects (n=6), and nonatopic nonasthmatic control subjects (n=5). After overnight fixation in Carnoy's fixative, mast cells were stained by the short and long toluidine blue methods and antitryptase immunohistochemistry and were counted by light microscopy. Method comparison was made according to Bland & Altman. The limits of agreement were unacceptable for each of the comparisons, suggesting that the methods are not interchangeable. Coefficients of repeatability were excellent, and not different for the individual techniques. These results suggest that some of the reported differences in mast-cell numbers in endobronchial biopsies in asthma may be due to the staining method used, making direct comparisons between studies invalid. Agreement on a standard method is required for counting mast cells in bronchial biopsies, and we recommend the immunohistochemical method, since fixation is less critical and the resultant tissue sections facilitate clear, accurate, and rapid counts.

Demonstration of glycated insulin in human diabetic plasma and decreased biological activity assessed by euglycemic-hyperinsulinemic clamp technique in humans

The presence and biological significance of circulating glycated insulin has been evaluated by high-pressure liquid chromatography (HPLC), electrospray ionization mass spectrometry (ESI-MS), radioimmunoassay (RIA), receptor binding, and hyperinsulinemic-euglycemic clamp techniques. ESI-MS analysis of an HPLC-purified plasma pool from four male type 2 diabetic subjects (HbA(1e) 8.1 +/- 0.2%, plasma glucose 8.7 +/- 1.3 mmol/l [means +/- SE]) revealed two major insulin-like peaks with retention times of 14-16 min. After spectral averaging, the peak with retention time of 14.32 min exhibited a prominent triply charged (M+3H)(3+) species at 1,991.1 m/z, representing monoglycated insulin with an intact M-r of 5,970.3 Da. The second peak (retention time 15.70 min) corresponded to native insulin (M-r 5,807.6 Da), with the difference between the two peptides (162.7 Da) representing a single glucitol adduct (theoretical 164 Da). Measurement of glycated insulin in plasma of type 2 diabetic subjects by specific RIA gave circulating levels of 10.1 +/- 2.3 pmol/l, corresponding to -9% total insulin. Biological activity of pure synthetic monoglycated insulin (insulin B-chain Phe(1)-glucitol adduct) was evaluated in seven overnight-fasted healthy nonobese male volunteers using two-step euglycemic-hyperinsulinemic clamps (2 h at 16.6 mug (.) kg(-1) (.) min(-1), followed by 2 h at 83.0 mug (.) kg(-1) (.) min(-1); corresponding to 0.4 and 2.0 mU (.) kg(-1) (.) min(-1)). At the lower dose, the exogenons glucose infusion rates required to maintain euglycemia during steady state were significantly lower with glycated insulin (P

Bio-folio: applying portfolio theory to biodiversity

Genes, species and ecosystems are often considered to be assets. The need to ensure a sufficient diversity of this asset is being increasingly recognised today. Asset managers in banks and insurance companies face a similar challenge. They are asked to manage the assets of their investors by constructing efficient portfolios. They deliberately make use of a phenomenon observed in the formation of portfolios: returns are additive, while risks diversify. This phenomenon and its implications are at the heart of portfolio theory. Portfolio theory, like few other economic theories, has dramatically transformed the practical work of banks and insurance companies. Before portfolio theory was developed about 50 years ago, asset managers were confronted with a situation similar to the situation the research on biodiversity faces today. While the need for diversification was generally accepted, a concept that linked risk and return on a portfolio level and showed the value of diversification was missing. Portfolio theory has closed this gap. This article first explains the fundamentals of portfolio theory and transfers it to biodiversity. A large part of this article is then dedicated to some of the implications portfolio theory has for the valuation and management of biodiversity. The last section introduces three development openings for further research.

Do benchmark African equity indices exhibit the stylized facts?

This paper investigates if benchmark African equity indices exhibit the stylized facts reported for financial time-series returns. The returns distributions of the Africa All-Share, Large, Medium and Small Company Indices were found to be leptokurtotic, had fat-tails, over time experienced volatility clustering and exhibited long memory in volatility. Both the All-Share and Large Company Indices were found to exhibit leverage effects. In contrast, positive shocks had a greater impact on future volatility for the Small Company Index which implies a reverse leverage effect. This finding could reflect a bull/bubble market for small capitalisation stocks in Africa.

Econometric analysis of microscopic simulation models

Microscopic simulation models are often evaluated based on visual inspection of the results. This paper presents formal econometric techniques to compare microscopic simulation (MS) models with real-life data. A related result is a methodology to compare different MS models with each other. For this purpose, possible parameters of interest, such as mean returns, or autocorrelation patterns, are classified and characterized. For each class of characteristics, the appropriate techniques are presented. We illustrate the methodology by comparing the MS model developed by He and Li [J. Econ. Dynam. Control, 2007, 31, 3396-3426, Quant. Finance, 2008, 8, 59-79] with actual data.

The diversification and financial performance of US credit unions

For US credit unions, revenue from non-interest sources has increased significantly in recent years. We investigate the impact of revenue diversification on financial performance for the period 1993–2004. The impact of a change in strategy that alters the share of non-interest income is decomposed into a direct exposure effect, reflecting the difference between interest and non-interest bearing activities, and an indirect exposure effect which reflects the effect of the institution’s own degree of diversification. On both risk-adjusted and unadjusted returns measures, a positive direct exposure effect is outweighed by a negative indirect exposure effect for all but the largest credit unions. This may imply that similar diversification strategies are not appropriate for large and small credit unions. Small credit unions should eschew diversification and continue to operate as simple savings and loan institutions, while large credit unions should be encouraged to exploit new product opportunities around their core expertise.

Steady state pharmacokinetic profile of indomethacin in elderly patients and young volunteers

The steady-state pharmacokinetic profile of indomethacin was examined in twelve healthy volunteers (4 m, 8 f; 20-34 y) and in 12 elderly subjects (7 m, 5 f; 70-88 y). Two formulations of indomethacin were examined, providing duplicate data for each subject group. The subjects received each formulation of indomethacin (25 mg tid) for 6 days in a single blind crossover fashion. On day 7, after an overnight fast, a final 25 mg dose of indomethacin was given and plasma concentrations measured over the following 12 h. Kinetic parameters Cpmin, Tmax and AUC (0-12 h) were determined. There were no differences in the pharmacokinetic parameters between young and elderly subjects or between data for the two formulations of indomethacin. AUC values (micrograms.ml-1.h), for example, for the two formulations in the young subjects were 5.85 and 6.85 while the values for the elderly subjects were 6.55 and 6.50 respectively. When each treatment period was considered independently there was a significant difference between young and elderly subjects with regard to compliance. The rates of non compliance (over and under compliance) using a capsule count technique were, however, low with a mean maximum value of 5.8% being recorded for the elderly subjects.