Estimating expected excess returns using historical and option-implied volatility

We test the relation between expected and realized excess returns for the S&P 500 index from January 1994 through December 2003 using the proportional reward-to-risk measure to estimate expected returns. When risk is measured by historical volatility, we find no relation between expected and realized excess returns. In contrast, when risk is measured by option-implied volatility, we find a positive and significant relation between expected and realized excess returns in the 1994–1998 subperiod. In the 1999–2003 subperiod, the option-implied volatility risk measure yields a positive, but statistically insignificant, risk-return relation. We attribute this performance difference to the fact that, in the 1994–1998 subperiod, return volatility was lower and the average return was much higher than in the 1999–2003 subperiod, thereby increasing the signal-to-noise ratio in the latter subperiod.

Consolidation within the Australian real estate investment trust sector : an evaluation of the impact on unitholder returns

Mergers and acquisitions within the Australian-real estate investment trusts (A-REITs) sector have become a noticeable trend in the last decade. Utilising
event study methodology, 36 successful A-REIT mergers and acquisitions
between January 1995 and December 2008 were examined. Both target and
bidding shareholders experience positive excess returns of 4.27% and 0.54%
respectively over the 41 day event window [−20, +20]. Analysis indicates that the
cumulative abnormal returns (CARs) for bidding firms are considerably greater
than previous research suggests. This study finds higher bidder CARs when scrip
or a combination of scrip and cash is used to finance the acquisition. We also find
that the relative size or the size of the acquirer have a positive and significant
impact on the excess returns of bidding A-REITs. This suggests that the
synergistic benefits from the acquisition are a result of economies of scale and
increased market power. There is also some evidence that the relative size and
method of payment influence the CARs of target firms during the event window.

A-REIT bidder returns : an evaluation of public and private targets and method of payment

This study examines the wealth effects of fifty-six Australian Real Estate Investment Trusts (A-REITS) acquirers around the announcement date of a merger and acquisition over the period of 1996 to 2010. This study extends Ratcliffe et al (2009) by examining mergers and acquisitions of private entity targets as well as public targets and confirms recent US REIT work in this field. Utilising event study methodology we find that bidding A-REITs earn positive and significant cumulative abnormal returns (CARs) of +0.966% around the three-day announcement period [-1, +1]. Analysis also indicates bidding firms earn higher CARs when the acquisition is financed by scrip and/or a combination of scrip and cash. Consistent with prior REIT research, event study results show that A-REIT acquirers earn higher excess returns when the target is private as compared to a public target, +2.834% and +0.457% respectively. Further investigation, employing regression analysis, shows book-to-market ratio has a negative impact on bidding firms CARs, suggesting that investors penalise high book-to-market A-REITs in an M&A due to their higher risk characteristics. We also find that both specialisation by property type and relative size of the bidder compared to the target has a positive and significant influence on bidder excess returns. Finally, our results show support for the method of payment findings in the event study, with method of payment returning a negative and significant impact on the bidder CARs.

Conducting event studies with Asia-Pacific security market data

We investigate the effectiveness of several well-known parametric and non-parametric event study test statistics with security price data from the major Asia-Pacific security markets. Extensive Monte Carlo simulation experiments with actual daily security returns data reveal that the parametric test statistics are prone to misspecification with Asia-Pacific returns data. Two non-parametric tests, a rank test [Corrado and Zivney (Corrado, C.J., Zivney, T.L., 1992, The specification and power of the sign test in event study hypothesis tests using daily stock returns, Journal of Financial and Quantitative Analysis 27(3), 465-478)] and a sign test [Cowan (Cowan, A.R., 1992, Non-parametric event study tests, Review of Quantitative Finance and Accounting 1(4), 343–358)] were the best performers overall with market model excess returns computed using an equal weight index.

Momentum profits in Australian listed property trusts

This paper examines the profitability of momentum trading strategies in Australian listed property trusts (LPTs). Monthly value-weighted momentum portfolios are formed using the monthly excess returns of LPTs for the period from 1990 to 2005. Overall the findings confirm that a momentum trading strategy in Australian LPTs is a profitable strategy. More specifically, momentum strategies are profitable after adjusting for variance and downside risk where the momentum returns substantially outperform the benchmark. An analysis using different study periods confirm the findings about momentum. The practical implication from this study is that investors can generate substantial abnormal returns by adopting a momentum trading strategy, particularly with a long strategy (i.e. winner portfolios).

Implied volatility smiles, option mispricing and net buying pressure : evidence around the global financial crisis

Using the recent global financial crisis as an exogenous setting, we examine the presence and source of implied volatility smile phenomena in Australian S&P ASX 200 index options. We find a pronounced implied volatility smile for index puts in both bull and bear markets and a smile for index calls in the bear but not bull market. Implied volatilities of out-of-the money puts tend to be upwards biased whilst those of calls tend to be downwards biased. We also find that the bias in implied volatilities yields excess returns based on unhedged and delta-neutral trading strategies, suggesting that implied volatilities are related to option mispricing. Net buying pressure from market participants appears to be a source of mispricing in the case of out-of-the-money index puts with excess demand particularly pronounced during the bull period before the global financial crisis unfolded.

Multiple states of financially distressed companies: Tests using a competing-risks model

This study examines the determinants of multiple states of financial distress by applying a competing-risks model. It investigates the effect of financial ratios, market-based variables and company-specific variables, including company age, size and squared size on three different states of corporate financial distress: active companies; distressed external administration companies; and distressed takeover, merger or acquisition companies. A sample of 1,081 publicly listed Australian non-financial companies over the period 1989 to 2005 using a competing-risks model is used to determine the possible differences in the factors of entering various states of financial distress. It is found that specifically, distressed external administration companies have a higher leverage, lower past excess returns and a larger size; while distressed takeover, merger or acquisition companies have a lower leverage, a higher capital utilisation efficiency and a larger size compared to active companies. Comparing the results from both the single-risk model and the competing-risks model reveals the need to distinguish between financial distress states.

Price discovery and asset pricing

This paper tests the hypothesis that price discovery influences asset pricing. Our innovations are twofold. First, we estimate time-varying price discovery for a large number (21) of Islamic stock portfolios. Second, we test using a predictive regression model whether or not price discovery predicts stock excess returns. We find from both in-sample and out-of-sample tests that all 21 portfolio excess returns are predictable. We show that a mean-variance investor by tracking price discovery is able to devise profitable trading strategies.

Preventing tobacco use and harm: what is evidence based policy?

The majority of tobacco users commence in early to mid-adolescence. Tobacco smoking can be characterised as a chronic, relapsing disorder. While risk increases with amount smoked, there is no safe level of use (i.e., all use is risky). Duration of use is the most important predictor of premature death with the majority of excess morbidity and mortality avoidable if people quit before middle age. Investment in initiatives that reduce smoking among pregnant women and those at risk of cardiovascular disease provide quickest returns -in reduced health care episodes and expenditure.  Measures that successfully reduce smoking among parents probably reduce smoking uptake by children, and high levels of smoking among both children and parents appear to be associated with higher levels of illicit drug use.
The evidence base for pharmcotherapies in the treatment of tobacco dependence is very strong. Population-level initiatives such as tax increases, mass media-led campaigns and smoke-free policies are all highly cost-effective in reducing population-smoking levels, including among children and young people.
Australian tobacco control initiatives have been based on "social ecology" conceptualisations of the problem, which acknowledge the pivotal role of the media in shaping social values, and public and political opinion.
Broad social change, as well as more focused prevention and cessation initiatives, has drawn heavily on research findings from the behavioural sciences. Considerable effort (mainly, in Australian, in the NGO sector) has gone into documenting policy inputs and monitoring impact and outcome measures.
This chapter discusses why conceptualising tobacco-related harm from legal, economic and social policy perspectives should also help build support for tobacco control policy among academic and practising economists and lawyers, and in the business, welfare and government sectors.

Diet, nutrition and the prevention of excess weight gain and obesity

Objective: To review the evidence on the diet and nutrition causes of obesity and to recommend strategies to reduce obesity prevalence.
Design: The evidence for potential aetiological factors and strategies to reduce obesity prevalence was reviewed, and recommendations for public health action, population nutrition goals and further research were made.
Results: Protective factors against obesity were considered to be: regular physical activity (convincing); a high intake of dietary non-starch polysaccharides (NSP)/fibre (convincing); supportive home and school environments for children (probable); and breastfeeding (probable). Risk factors for obesity were considered to be sedentary lifestyles (convincing); a high intake of energy-dense, micronutrient-poor foods (convincing); heavy marketing of energy-dense foods and fast food outlets (probable); sugar-sweetened soft drinks and fruit juices (probable); adverse social and economic conditions—developed countries, especially in women (probable).
A broad range of strategies were recommended to reduce obesity prevalence including: influencing the food supply to make healthy choices easier; reducing the marketing of energy dense foods and beverages to children; influencing urban environments and transport systems to promote physical activity; developing community-wide programmes in multiple settings; increased communications about healthy eating and physical activity; and improved health services to promote breastfeeding and manage currently overweight or obese people.
Conclusions: The increasing prevalence of obesity is a major health threat in both low- and high income countries. Comprehensive programmes will be needed to turn the epidemic around.

Hindu temples in the Sri Lankan ethnic conflict : capture and excess

Developing Deleuze and Guattari's concepts of territorialization and the apparatus of capture, this article explores the role that Sri Lankan Hindu temples have played in the formation of ethnicity and ethnic conflict. Analyzing three contemporary events, the article introduces ways in which many different Sri Lankans (Sinhalese and Tamil) interpret their country's predicament and seek to resolve or prolong it. The events also reveal how scholarship becomes entangled in ethnic nationalism. I then examine in greater detail a village in which temple construction was a critical feature of identity formation during the creation of Sri Lanka as a colonialist and capitalist bureaucratic space. Through this account, I argue that the formation of polarized ethnicity in Sri Lanka is the product of multiple refractive forces, of which temples are one, and not the end result of a singular colonialist bureaucratic agency.

Diminishing and negative welfare returns of economic growth : an index of sustainable economic welfare (ISEW) for Thailand

Thailand has achieved remarkable levels of economic growth over the last three decades. This sustained economic growth has played a major role in reducing absolute poverty levels from nearly one third of the population in 1975 to presently less than 10%, thus increasing the welfare of many Thais. This performance ranks Thailand as one of the world's most successful economies during this period. However, an increasing number of studies have begun to find that at a certain point achieving economic growth stops improving welfare and actually begins to diminish it due to the hidden and traditionally unreported costs of associated with this growth. With one exception, these new studies have focussed on high-income countries. This study will estimate an index of sustainable economic welfare (ISEW) for a developing country, Thailand, over a 25-year period, 1975–1999. This paper concludes that even low–middle income countries are beginning to approach the point in which economic growth produces both diminishing and, at times, negative welfare returns as the costs of achieving economic growth begin to outweigh the benefits. These results are important for policy makers and highlight the importance of implementing alternative welfare enhancing interventions that must be considered in place of simply achieving economic growth. The emphasis of this paper is not on the methodology of estimating the ISEW for Thailand, but rather on the policy implications for developing countries of diminishing and negative welfare returns brought about through the achievement of economic growth.

Excess and mimesis in organization theory: emancipation from within?

In organizational analysis it can be argued that 'radical separatism'—in the guise of the original 'agenda' for Radical Organization Theory (see Benson, 1977a; Burrell and Morgan, 1979; Clegg and Dunkerley, 1980) or more recently that for Critical Management Studies (see Alvesson and Willmott, 1992; Fournier and Grey, 2000; Casey, 2002; Grey, 2004)—has failed to breach the hegemony of functionalist orthodoxy, and notably so when it comes to practice. Given this failure, we speculate, upon the potential for a different emancipatory approach, one based theoretically on the fluid process of 'undecidability'. Unusually our approach attempts to undermine the conventions of functionalist organization theory from within. In brief, we speculate upon the adoption and enactment of Luce Irigaray's (1985, 1991) strategy of mimicry as a means to illuminate the notion of 'excess' in organization theory. To liberate the feminine, Irigaray mimics the symbolic representation of the female body to excess so as to expose the contradictions of phallocentric discourse. When applied to organization theory, this sees a deliberate mimicking of critiques of radical separatism so as to make explicit the latter's imprisonment within functionalism. Through excessive mimicking of the functionalists' critique, the radical/critical organization theorist may become cognizant of, but perhaps not so subjugated by, the hegemony of functionalist discourse.

Hormonal regulation of the Menkes and Wilson copper-transporting ATPases in human placental Jeg-3 cells

Copper deficiency during pregnancy results in early embryonic death and foetal structural abnormalities including skeletal, pulmonary and cardiovascular defects. During pregnancy, copper is transported from the maternal circulation to the foetus by mechanisms which have not been clearly elucidated. Two coppertransporting ATPases, Menkes (ATP7A; MNK) and Wilson (ATP7B; WND), are expressed in the placenta and both are involved in placental copper transport, as copper accumulates in the placenta in both Menkes and Wilson disease. The regulatory mechanisms of MNKand WNDand their exact role in the placenta are unknown. Using a differentiated polarized Jeg-3 cell culture model of placental trophoblasts, MNK and WND were shown to be expressed within these cells. Distinct roles forMNKandWND are suggested on the basis of their opposing responses to insulin. Insulin and oestrogen increased both MNK mRNA and protein levels, altered the localization of MNK towards the basolateral membrane in a copper-independent manner, and increased the transport of copper across this membrane. In contrast, levels of WND were decreased in response to insulin, and the protein was located in a tight perinuclear region, with a corresponding decrease in copper efflux across the apical membrane. These results are consistent with a model of copper transport in the placenta in which MNK delivers copper to the foetus and WND returns excess copper to the maternal circulation. Insulin and oestrogen stimulate copper transport to the foetus by increasing the expression of MNK and reducing the expression of WND. These data show for the first time that MNK and WND are differentially regulated by the hormones insulin and oestrogen in human placental cells.

Differences in underpricing returns between REIT IPOs and industrial company IPOs

This paper follows Chan, Stohs, andWang (2001), which argues that the underlying value of the real estate is not by itself the reason for the very substantial differences in underpricing returns between real estate investment trust (REIT) IPOs and industrial company IPOs.We use variables identified in previous studies that have helped explain the underpricing of industrial company IPOs to help explain the underpricing of property trust IPOs. We find that the prospectus forecast dividend yield is a critical variable in the valuation and hence underpricing of REIT IPOs compared to industrial company IPOs. The sentiment towards the market and whether or not the issue is underwritten also impact the underpricing of REITs but the impact is much less than on industrial company IPOs.