The Pay-Off Method as a Tool for Evaluating the Risk and Profitability of Public Real Estate Investments

Real option valuation, in particular the fuzzy pay-off method, has proven to be useful in defining risk and visualizing imprecision of investments in various industry applications. This study examines whether the evaluation of risk and profitability for public real estate investments can be improved by using real option methodology. Firstly, the context of real option valuation in the real estate industry is examined. Further, an empirical case study is performed on 30 real estate investments of a Finnish government enterprise in order to determine whether the presently used investment analysis system can be complemented by the pay-off method. Despite challenges in the application of the pay-off method to the case company’s large investment base, real option valuation is found to create additional value and facilitate more robust risk analysis in public real estate applications.

Social Solidarity and Fear of Crime - Community and Individual Approaches in Responses to Mass Violence after School Shootings

The aim of this study was to examine community and individual approaches in responses to mass violence after the school shooting incidents in Jokela (November 2007) and Kauhajoki (September 2008), Finland. In considering the community approach, responses to any shocking criminal event may have integrative, as well as disintegrative effects, within the neighborhood. The integration perspective argues that a heinous criminal event within one’s community is a matter of offence to collectively held feelings and beliefs, and increases perceived solidarity; whereas the disintegration perspective suggests that a criminal event weakens the social fabric of community life by increasing fear of crime and mistrust among locals. In considering the individual approach, socio-demographic factors, such as one’s gender, are typically significant indicators, which explain variation in fear of crime. Beyond this, people are not equally exposed to violent crime and therefore prior victimization and event related experiences may further explain why people differ in their sensitivity to risk from mass violence. Finally, factors related to subjective mental health, such as depressed mood, are also likely to moderate individual differences in responses to mass violence. This study is based on the correlational design of four independent cross-sectional postal surveys. The sampling frames (N=700) for the surveys were the Finnish speaking adult population aged 18–74-years. The first mail survey in Jokela (n=330) was conducted between May and June 2008, approximately six months from the shooting incident at the local high-school. The second Jokela survey (n=278) was conducted in May–June of 2009, 18 months removed from the incident. The first survey in Kauhajoki (n=319) was collected six months after the incident at the local University of Applied Sciences, March– April 2009, and the second (n=339) in March–April 2010, approximately 18 months after the event. Linear and ordinal regression and path analysis are used as methods of analyses. The school shootings in Jokela and Kauhajoki were extremely disturbing events, which deeply affected the communities involved. However, based on the results collected, community responses to mass violence between the two localities were different. An increase in social solidarity appears to apply in the case of the Jokela community, but not in the case of the Kauhajoki community. Thus a criminal event does not necessarily impact the wider community. Every empirical finding is most likely related to different contextual and event-specific factors. Beyond this, community responses to mass violence in Jokela also indicated that the incident was related to a more general sense of insecurity and was also associating with perceived community deterioration and further suggests that responses to mass violence may have both integrating and disintegrating effects. Moreover, community responses to mass violence should also be examined in relation to broader social anxieties and as a proxy for generalized insecurity. Community response is an emotive process and incident related feelings are perhaps projected onto other identifiable concerns. However, this may open the door for social errors and, despite integrative effects, this may also have negative consequences within the neighborhood. The individual approach suggests that women are more fearful than men when a threat refers to violent crime. Young women (aged 18–34) were the most worried age and gender group as concerns perception of threat from mass violence at schools compared to young men (aged 18–34), who were also the least worried age and gender group when compared to older men. It was also found that concerns about mass violence were stronger among respondents with the lowest level of monthly household income compared to financially better-off respondents. Perhaps more importantly, responses to mass violence were affected by the emotional proximity to the event; and worry about the recurrence of school shootings was stronger among respondents who either were a parent of a school-aged child, or knew a victim. Finally, results indicate that psychological wellbeing is an important individual level factor. Respondents who expressed depressed mood consistently expressed their concerns about mass violence and community deterioration. Systematic assessments of the impact of school shooting events on communities are therefore needed. This requires the consolidation of community and individual approaches. Comparative study designs would further benefit from international collaboration across disciplines. Extreme school violence has also become a national concern and deeper understanding of crime related anxieties in contemporary Finland also requires community-based surveys.

Risk Assessment of Modern Landfill Structures in Finland

The purpose of this thesis was to investigate environmental permits of landfills with respect to the appropriateness of risk assessments focusing on contaminant migration, structures capable to protect the environment, waste and leachate management and existing environmental impacts of landfills. According to the requirements, a risk assessment is always required to demonstrate compliance with environmental protection requirements if the environmental permit decision deviates from the set requirements. However, there is a reason to doubt that all relevant risk factors are identified in current risk assessment practices in order to protect people end environment. In this dissertation, risk factors were recognized in 12 randomly selected landfills. Based on this analysis, a structural risk assessment method was created. The method was verified with two case examples. Several development needs were found in the risk assessments of the environmental permit decisions. The risk analysis equations used in the decisions did not adequately take into account all the determining factors like waste prospects, total risk quantification or human delineated factors. Instead of focusing on crucial factors, the landfill environmental protection capability is simply expressed via technical factors like hydraulic conductivity. In this thesis, it could be shown, that using adequate risk assessment approaches the most essential environmental impacts can be taken into account by consideration of contaminant transport mechanisms, leachate effects, and artificial landfill structures. The developed structural risk analysing (SRA) method shows, that landfills structures could be designed in a more cost-efficient way taking advantage of recycled or by-products. Additionally, the research results demonstrate that the environmental protection requirements of landfills should be updated to correspond to the capability to protect the environment instead of the current simplified requirements related to advective transport only.

A performance analysis of conventional and fundamental exchange traded funds: ETFs and their risk-return characteristics in relation to building institutional investor’s passive portfolio

An exchange traded fund (ETF) is a financial instrument that tracks some predetermined index. Since their initial establishment in 1993, ETFs have grown in importance in the field of passive investing. The main reason for the growth of the ETF industry is that ETFs combine benefits of stock investing and mutual fund investing. Although ETFs resemble mutual funds in many ways, also many differences occur. In addition, ETFs not only differ from mutual funds but also differ among each other. ETFs can be divided into two categories, i.e. market capitalisation ETFs and fundamental (or strategic) ETFs, and further into subcategories depending on their fundament basis. ETFs are a useful tool for diversification especially for a long-term investor. Although the economic importance of ETFs has risen drastically during the past 25 years, the differences and risk-return characteristics of fundamental ETFs have yet been rather unstudied area. In effect, no previous research on market capitalisation and fundamental ETFs was found during the research process. For its part, this thesis seeks to fill this research gap. The studied data consist of 50 market capitalisation ETFs and 50 fundamental ETFs. The fundaments, on which the indices that the fundamental ETFs track, were not limited nor segregated into subsections. The two types of ETFs were studied at an aggregate level as two different research groups. The dataset ranges from June 2006 to December 2014 with 103 monthly observations. The data was gathered using Bloomberg Terminal. The analysis was conducted as an econometric performance analysis. In addition to other econometric measures, the methods that were used in the performance analysis included modified Value-at-Risk, modified Sharpe ratio and Treynor ratio. The results supported the hypothesis that passive market capitalisation ETFs outperform active fundamental ETFs in terms of risk-adjusted returns, though the difference is rather small. Nevertheless, when taking into account the higher overall trading costs of the fundamental ETFs, the underperformance gap widens. According to the research results, market capitalisation ETFs are a recommendable diversification instrument for a long-term investor. In addition to better risk-adjusted returns, passive ETFs are more transparent and the bases of their underlying indices are simpler than those of fundamental ETFs. ETFs are still a young financial innovation and hence data is scarcely available. On future research, it would be valuable to research the differences in risk-adjusted returns also between the subsections of fundamental ETFs.

Performance improvement in mediterranean operations using risk management analysis : Case study of Containerships Group Ltd

Emerging markets of Northern Africa and Turkey provide growth opportunities for logistics service companies in the middle of low growth environment of European Union. The purpose of this research is to explore and analyze the risk factors in container shipping industry and third party logistics (3PL) services. The research empirically examined the risk factors, which are related within the interaction between these two parties in emerging markets of Mediterranean area. The previous studies have provided a valuable insight into the operational risks faced by container shipping industries. However, most of these studies have focused on one or several operational risk factors from a single point of view, and no studies have inclusively examined the possible operational risks faced in the container shipping industry from dual perspective of 3PL provider and its customers. A questionnaire has been deployed to collect related data; and the impacts of the risks were then be assessed and ranked using the method of risk mapping. Respondents were located in Turkey, Algeria, Tunisia, and Libya. Research presents the most important risk factors identified, and compares them between 3PL provider and its customers. The research also provide some risk mitigation strategies for the key risk factors, and tried to figure out a common risk picture, which guides the managers in both sides to have a better decisions and as a result, improve the performance of the container shipping operations. Challenge during project execution time was that customers identified vast amount of more risks than what was the case with logistics service operator.