Returns from investing in Australian equity superannuation funds, 1991-1999

In this analysis of investment manager performance, two questions are addressed. First, do managers that actively trade stocks create value for investors? Second, can the multifactor model of Gruber capture the cross-section of average fund returns for the Australian setting? The answers from this study are as follows: as an industry, investment managers destroyed value for superannuation investors for the period 1991 through 1999, under-performing passive portfolio returns by 2.80-4.00 per cent per annum on a risk-unadjusted basis and 0.50-0.93 per cent per annum on a risk-adjusted basis. Evidence is provided in support of the four-factor model of Gruber; however, the model fails to capture the impact of investment style for the Australian setting. The findings suggest that Australian superannuation investors would transform their retirement savings into retirement income more efficiently through the use of passive alternatives to the stock selection problem.

Systemic absorptive capacity: creating early-to-market returns through R&D alliances

For most complex emergent technologies, product-market success depends on efficient linkages between changing lead innovators within the R&D process. In this paper, our unit of analysis is a complex high technology product and the system of alliance linkages formed to progress a product through R&D milestones. We present a model and evidence for advancing our understanding of how achieving early-to-market returns depends on systemic absorptive capacity. This systemic absorptive capacity is the cumulative efficiency in the use of absorptive capacity to link changing lead innovators across successive milestones in R&D product development. We advance propositions of how systemic absorptive capacity can explain performance differences between rival product development systems competing for early-to-market returns with similar products through accelerating speed to market, cost and quality advantages. These explanations are contrasted with the conclusions of previous studies that have focused on absorptive capacity of single firms or single alliances in RD.

Outbound Travel Depends on Business Returns: Australian Evidence

In an earlier note, Collins and Tisdell (2002b) explored the possibility of a long-run relationship between Australian business returns and international business travel. Using annual data they found that such a relationship exists. The purpose of this study is to further examine this relationship using quarterly data for the time frame 1974:1 to 1999:4. In addition, previous studies on international business travel have offered some but not strong evidence for the existence of a positive relationship between the level of international business travel and real GDP of the origin country. This study suggests that the aggregate return on business investments is a better predictor of international business travel than GDP. The Engle-Granger and Johansen's maximum-likelihood cointegration procedures are used to show a long-term relationship exists between Australian outbound business travel and Australian business returns, but not with Real Australian GDP. Reasons for this relationship are discussed.

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.

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.

Estimating variable returns to scale production frontiers with alternative stochastic assumptions

Two stochastic production frontier models are formulated within the generalized production function framework popularized by Zellner and Revankar (Rev. Econ. Stud. 36 (1969) 241) and Zellner and Ryu (J. Appl. Econometrics 13 (1998) 101). This framework is convenient for parsimonious modeling of a production function with returns to scale specified as a function of output. Two alternatives for introducing the stochastic inefficiency term and the stochastic error are considered. In the first the errors are added to an equation of the form h(log y, theta) = log f (x, beta) where y denotes output, x is a vector of inputs and (theta, beta) are parameters. In the second the equation h(log y,theta) = log f(x, beta) is solved for log y to yield a solution of the form log y = g[theta, log f(x, beta)] and the errors are added to this equation. The latter alternative is novel, but it is needed to preserve the usual definition of firm efficiency. The two alternative stochastic assumptions are considered in conjunction with two returns to scale functions, making a total of four models that are considered. A Bayesian framework for estimating all four models is described. The techniques are applied to USDA state-level data on agricultural output and four inputs. Posterior distributions for all parameters, for firm efficiencies and for the efficiency rankings of firms are obtained. The sensitivity of the results to the returns to scale specification and to the stochastic specification is examined. (c) 2004 Elsevier B.V. All rights reserved.