Size and book to market effects and the Fama French three factor asset pricing model: Evidence from the Australian stockmarket

The present study adds to the sparse published Australian literature on the size effect, the book to market (BM) effect and the ability of the Fama French three factor model to account for these effects and to improve on the asset pricing ability of the Capital Asset Pricing Model (CAPM). The present study extends the 1981–1991 period examined by Halliwell, Heaney and Sawicki (1999) a further 10 years to 2000 and addresses several limitations and findings of that research. In contrast to Halliwell, Heaney and Sawicki the current study finds the three factor model provides significantly improved explanatory power over the CAPM, and evidence that the BM factor plays a role in asset pricing.

Forecasting stock returns using model-selection criteria

This paper examines the economic significance of return predictability in Australian equities. In light of considerable model uncertainty, formal model-selection criteria are used to choose a specification for the predictive model. A portfolio-switching strategy is implemented according to model predictions. Relative to a buy-and-hold market investment, the returns to the portfolio-switching strategy are impressive under several model-selection criteria, even after accounting for transaction costs. However, as these findings are not robust across other model-selection criteria examined, it is difficult to conclude that the degree of return predictability is economically significant.

Invariant risk attitudes

Concepts of constant absolute risk aversion and constant relative risk aversion have proved useful in the analysis of choice under uncertainty, but are quite restrictive, particularly when they are imposed jointly. A generalization of constant risk aversion, referred to as invariant risk aversion is developed. Invariant risk aversion is closely related to the possibility of representing preferences over state-contingent income vectors in terms of two parameters, the mean and a linearly homogeneous, translation-invariant index of riskiness. The best-known index with such properties is the standard deviation. The properties of the capital asset pricing model, usually expressed in terms of the mean and standard deviation, may be extended to the case of general invariant preferences. (C) 2003 Elsevier Inc. All rights reserved.

Consumption habit and international stock returns

We use the consumption-based asset pricing model with habit formation to study the predictability and cross-section of returns from the international equity markets. We find that the predictability of returns from many developed countries' equity markets is explained in part by changing prices of risks associated with consumption relative to habit at the world as well as local levels. We also provide an exploratory investigation of the cross-sectional implications of the model under the complete world market integration hypothesis and find that the model performs mildly better than the traditional consumption-based model. the unconditional and conditional world CAPMs and a three-factor international asset pricing model. (C) 2004 Elsevier B.V. All rights reserved.

Conditional performance evaluation and the relevance of money flows for Australian international equity funds

This paper assesses the importance of fund flows in the performance evaluation of Australian international equity funds. Two concepts of fund flows are considered in the context of a conditional asset pricing model. The first measure is net fund flow relative to fund size and the second is net fund flow relative to sector flows. We find that incorporating a fund flow measure relative to the sector flow results in a reduction of measured perverse market timing. The results indicate that, at the individual fund level, cash flows are relevant in assessing management outcomes.

Relationship between franking credits and the market risk premium

In a dividend imputation tax system, equity investors have three potential sources of return: dividends, capital gains and franking (tax) credits. However, the standard procedures for estimating the market risk premium (MRP) for use in the capital asset pricing model, ignore the value of franking credits. Officer (1994) notes that if franking credits do affect the corporate cost of capital, their value must be added to the standard estimates of MRP. In the present paper, we explicitly derive the relationship between the value of franking credits (gamma) and the MRP. We show that the standard parameter estimates that have been adopted in practice (especially by Australian regulators) violate this deterministic mathematical relationship. We also show how information on dividend yields and effective tax rates bounds the values that can be reasonably used for gamma and the MRP. We make recommendations for how estimates of the MRP should be adjusted to reflect the value of franking credits in an internally consistent manner.

The risk premium for equity: implications for resource allocation, welfare and policy

Analysis of the equity premium puzzle has focused on private sector capital markets. The object of this paper is to consider the welfare and policy implications of each of the broad classes of explanations of the equity premium puzzle. As would be expected, the greater the deviation from the first-best outcome implied by a given explanation of the equity premium puzzle, the more interventionist are the implied policy conclusions. Nevertheless, even explanations of the equity premium puzzle consistent with a general consumption-based asset pricing model have important welfare and policy implications.

Defining a role for the subthalamic nucleus within operative theoretical models of subcortical participation in language

Objective:To investigate the effects of bilateral, surgically induced functional inhibition of the subthalamic nucleus (STN) on general language, high level linguistic abilities, and semantic processing skills in a group of patients with Parkinson’s disease. Methods:Comprehensive linguistic profiles were obtained up to one month before and three months after bilateral implantation of electrodes in the STN during active deep brain stimulation (DBS) in five subjects with Parkinson’s disease (mean age, 63.2 years). Equivalent linguistic profiles were generated over a three month period for a non-surgical control cohort of 16 subjects with Parkinson’s disease (NSPD) (mean age, 64.4 years). Education and disease duration were similar in the two groups. Initial assessment and three month follow up performance profiles were compared within subjects by paired t tests. Reliability change indices (RCI), representing clinically significant alterations in performance over time, were calculated for each of the assessment scores achieved by the five STN-DBS cases and the 16 NSPD controls, relative to performance variability within a group of 16 non-neurologically impaired adults (mean age, 61.9 years). Proportions of reliable change were then compared between the STN-DBS and NSPD groups. Results:Paired comparisons within the STN-DBS group showed prolonged postoperative semantic processing reaction times for a range of word types coded for meanings and meaning relatedness. Case by case analyses of reliable change across language assessments and groups revealed differences in proportions of change over time within the STN-DBS and NSPD groups in the domains of high level linguistics and semantic processing. Specifically, when compared with the NSPD group, the STN-DBS group showed a proportionally significant (p

Redefining functional models of basal ganglia organisation: Role for the posteroventral pallidum in linguistic processing?

Traditionally the basal ganglia have been implicated in motor behavior, as they are involved in both the execution of automatic actions and the modification of ongoing actions in novel contexts. Corresponding to cognition, the role of the basal ganglia has not been defined as explicitly. Relative to linguistic processes, contemporary theories of subcortical participation in language have endorsed a role for the globus pallidus internus (GPi) in the control of lexical-semantic operations. However, attempts to empirically validate these postulates have been largely limited to neuropsychological investigations of verbal fluency abilities subsequent to pallidotomy. We evaluated the impact of bilateral posteroventral pallidotomy (BPVP) on language function across a range of general and high-level linguistic abilities, and validated/extended working theories of pallidal participation in language. Comprehensive linguistic profiles were compiled up to 1 month before and 3 months after BPVP in 6 subjects with Parkinson's disease (PD). Commensurate linguistic profiles were also gathered over a 3-month period for a nonsurgical control cohort of 16 subjects with PD and a group of 16 non-neurologically impaired controls (NC). Nonparametric between-groups comparisons were conducted and reliable change indices calculated, relative to baseline/3-month follow-up difference scores. Group-wise statistical comparisons between the three groups failed to reveal significant postoperative changes in language performance. Case-by-case data analysis relative to clinically consequential change indices revealed reliable alterations in performance across several language variables as a consequence of BPVP. These findings lend support to models of subcortical participation in language, which promote a role for the GPi in lexical-semantic manipulation mechanisms. Concomitant improvements and decrements in postoperative performance were interpreted within the context of additive and subtractive postlesional effects. Relative to parkinsonian cohorts, clinically reliable versus statistically significant changes on a case by case basis may provide the most accurate method of characterizing the way in which pathophysiologically divergent basal ganglia linguistic circuits respond to BPVP.

Elliptic Gaudin models and elliptic KZ equations

The Gaudin models based on the face-type elliptic quantum groups and the XYZ Gaudin models are studied. The Gaudin model Hamiltonians are constructed and are diagonalized by using the algebraic Bethe ansatz method. The corresponding face-type Knizhnik–Zamolodchikov equations and their solutions are given.

Algebraic Bethe ansatz method for the exact calculation of energy spectra and form factors: applications to models of Bose-Einstein condensates and metallic nanograins

In this review we demonstrate how the algebraic Bethe ansatz is used for the calculation of the-energy spectra and form factors (operator matrix elements in the basis of Hamiltonian eigenstates) in exactly solvable quantum systems. As examples we apply the theory to several models of current interest in the study of Bose-Einstein condensates, which have been successfully created using ultracold dilute atomic gases. The first model we introduce describes Josephson tunnelling between two coupled Bose-Einstein condensates. It can be used not only for the study of tunnelling between condensates of atomic gases, but for solid state Josephson junctions and coupled Cooper pair boxes. The theory is also applicable to models of atomic-molecular Bose-Einstein condensates, with two examples given and analysed. Additionally, these same two models are relevant to studies in quantum optics; Finally, we discuss the model of Bardeen, Cooper and Schrieffer in this framework, which is appropriate for systems of ultracold fermionic atomic gases, as well as being applicable for the description of superconducting correlations in metallic grains with nanoscale dimensions.; In applying all the above models to. physical situations, the need for an exact analysis of small-scale systems is established due to large quantum fluctuations which render mean-field approaches inaccurate.

Review of recent results on excursion set models

Many images consist of two or more 'phases', where a phase is a collection of homogeneous zones. For example, the phases may represent the presence of different sulphides in an ore sample. Frequently, these phases exhibit very little structure, though all connected components of a given phase may be similar in some sense. As a consequence, random set models are commonly used to model such images. The Boolean model and models derived from the Boolean model are often chosen. An alternative approach to modelling such images is to use the excursion sets of random fields to model each phase. In this paper, the properties of excursion sets will be firstly discussed in terms of modelling binary images. Ways of extending these models to multi-phase images will then be explored. A desirable feature of any model is to be able to fit it to data reasonably well. Different methods for fitting random set models based on excursion sets will be presented and some of the difficulties with these methods will be discussed.