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.

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.

The responsiveness of LPT returns and their attributes

The Australian listed property sector has experienced substantial growth over the past decade. Relative to international property markets, Australia has the highest percentage of listed real estate and the highest proportion that makes up the total equity market in the world, hence, making it an important component of domestic financial markets. This study employs the Stone (1974) two factor asset pricing model to investigate the sensitivity of Listed Property Trust (LPT) returns to market and interest rate returns from 2000 to 2005, and the characteristics (namely, management structure, specialisation and the degree of financial leverage) that may be driving these sensitivities. Our results indicate an increase in the market risk profile of LPTs, suggesting an erosion of the defensive benefits of LPTs against stockmarket volatilities.

Hot issues, new economy stocks and Australian industry IPO returns in the late 1990s

This paper analyses Australian IPOs at an industry level for the period 1994 to 1999. We find a significant relationship between capital weighted IPO industry returns and contemporaneous index returns suggesting that capital raising and money left on the table arguments matter. We do not find any hot issue years at an industry level. Further at an industry level we find that new economy listings are not different to listings from other sectors of the economy.

Multifractality and long-range dependence of asset returns: the scaling behavior of the Markov-switching multifractal model with lognormal volatility components

In this paper, we consider daily financial data from various sources (stock market indices, foreign exchange rates and bonds) and analyze their multiscaling properties by estimating the parameters of a Markov-switching multifractal (MSM) model with Lognormal volatility components. In order to see how well estimated models capture the temporal dependency of the empirical data, we estimate and compare (generalized) Hurst exponents for both empirical data and simulated MSM models. In general, the Lognormal MSM models generate "apparent" long memory in good agreement with empirical scaling provided that one uses sufficiently many volatility components. In comparison with a Binomial MSM specification [11], results are almost identical. This suggests that a parsimonious discrete specification is flexible enough and the gain from adopting the continuous Lognormal distribution is very limited.

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.

Downside beta and the cross-sectional determinants of listed property trust returns

This study examines the importance of downside beta when seeking to explain variations in listed property trust (LPT) returns in Australia between 1993 and 2005. The results reveal that downside beta outperforms conventional beta and provides higher explanatory power to the cross-sectional LPT return variations. The results also indicate that investors only require a premium for downside risk. However, the explanatory power of downside beta has diminished once the co-kurtosis of LPTs is controlled. Interestingly, the results also reveal that by itself downside beta is unable to fully explain returns in line with strong evidence for momentum and book-to-market ratio. The findings provide additional insights for investors and real estate analysts into the pricing of LPTs.