Valuation models and Simon's bounded rationality

This paper aims at reconciling the evidence that sophisticated valuation models are increasingly used by companies in their investment appraisal with the literature of bounded rationality, according to which objective optimization is impracticable in the real world because it would demand an immense level of sophistication of the analytical and computational processes of human beings. We show how normative valuation models should rather be viewed as forms of reality representation, frameworks according to which the real world is perceived, fragmented for a better understanding, and recomposed, providing an orderly method for undertaking a task as complex as the investment decision.

THE ROLE OF EARNINGS PERSISTENCE IN VALUATION ACCURACY AND THE TIME HORIZON

ABSTRACT Based on the assumption that earnings persistence has implications for both financial analysis and compensation contracts, the aim of this paper is to investigate the role of earnings persistence assuming that (i) more persistent earnings are likely to be a better input to valuation models and (ii) more persistent earnings are likely to serve as a proxy for long-term market and managerial orientation. The analysis is based on Brazilian listed firms from 1995 to 2013, and while we document strong support for the relevance of earnings persistence in financial analysis and valuation, we fail to document a significant relationship between earnings persistence and long-term value orientation. These results are sensitive to different specifications, and additional results suggest that firms' idiosyncratic risk (total risk) is relevant to explain the focus on short-term outcomes (short-termism) across firms. The main contribution of this paper is to offer empirical evidence for the relevance of accounting numbers in both valuation and contractual theories in an emergent market.

Portfolio valuation in banks

Frequent references are made to the use of portfolio spread rates in managing financial risks in banks, but indications as to the procedures for determining such rates are very scant.The purpose of this article is to present some initial ideas on the subject: a Standard Funding system indicates what each portfolio should have earned, while an Actual Funding system points out what each portfolio did, in fact, earn; additionally, by comparing the outcomes of the two funding systems for each portfolio, it is possible to determine what each portfolio earned (or lost) in the way of arbitrage.

ABOUT PSYCHOLOGICAL VARIABLES IN APPLICATION SCORING MODELS

The purpose of this study is to investigate the contribution of psychological variables and scales suggested by Economic Psychology in predicting individuals’ default. Therefore, a sample of 555 individuals completed a self-completion questionnaire, which was composed of psychological variables and scales. By adopting the methodology of the logistic regression, the following psychological and behavioral characteristics were found associated with the group of individuals in default: a) negative dimensions related to money (suffering, inequality and conflict); b) high scores on the self-efficacy scale, probably indicating a greater degree of optimism and over-confidence; c) buyers classified as compulsive; d) individuals who consider it necessary to give gifts to children and friends on special dates, even though many people consider this a luxury; e) problems of self-control identified by individuals who drink an average of more than four glasses of alcoholic beverage a day.

ANIMAL MODELS FOR THE STUDY OF LEISHMANIASIS IMMUNOLOGY

Leishmaniasis remains a major public health problem worldwide and is classified as Category I by the TDR/WHO, mainly due to the absence of control. Many experimental models like rodents, dogs and monkeys have been developed, each with specific features, in order to characterize the immune response to Leishmania species, but none reproduces the pathology observed in human disease. Conflicting data may arise in part because different parasite strains or species are being examined, different tissue targets (mice footpad, ear, or base of tail) are being infected, and different numbers (“low” 1×102 and “high” 1×106) of metacyclic promastigotes have been inoculated. Recently, new approaches have been proposed to provide more meaningful data regarding the host response and pathogenesis that parallels human disease. The use of sand fly saliva and low numbers of parasites in experimental infections has led to mimic natural transmission and find new molecules and immune mechanisms which should be considered when designing vaccines and control strategies. Moreover, the use of wild rodents as experimental models has been proposed as a good alternative for studying the host-pathogen relationships and for testing candidate vaccines. To date, using natural reservoirs to study Leishmania infection has been challenging because immunologic reagents for use in wild rodents are lacking. This review discusses the principal immunological findings against Leishmania infection in different animal models highlighting the importance of using experimental conditions similar to natural transmission and reservoir species as experimental models to study the immunopathology of the disease.

Use of Poisson spatiotemporal regression models for the Brazilian Amazon Forest: malaria count data

INTRODUCTION: Malaria is a serious problem in the Brazilian Amazon region, and the detection of possible risk factors could be of great interest for public health authorities. The objective of this article was to investigate the association between environmental variables and the yearly registers of malaria in the Amazon region using Bayesian spatiotemporal methods. METHODS: We used Poisson spatiotemporal regression models to analyze the Brazilian Amazon forest malaria count for the period from 1999 to 2008. In this study, we included some covariates that could be important in the yearly prediction of malaria, such as deforestation rate. We obtained the inferences using a Bayesian approach and Markov Chain Monte Carlo (MCMC) methods to simulate samples for the joint posterior distribution of interest. The discrimination of different models was also discussed. RESULTS: The model proposed here suggests that deforestation rate, the number of inhabitants per km², and the human development index (HDI) are important in the prediction of malaria cases. CONCLUSIONS: It is possible to conclude that human development, population growth, deforestation, and their associated ecological alterations are conducive to increasing malaria risk. We conclude that the use of Poisson regression models that capture the spatial and temporal effects under the Bayesian paradigm is a good strategy for modeling malaria counts.

Modelling Amazonian forest eddy covariance data: a comparison of big leaf versus sun/shade models for the C-14 tower at Manaus I. Canopy photosynthesis

In this study, we concentrate on modelling gross primary productivity using two simple approaches to simulate canopy photosynthesis: "big leaf" and "sun/shade" models. Two approaches for calibration are used: scaling up of canopy photosynthetic parameters from the leaf to the canopy level and fitting canopy biochemistry to eddy covariance fluxes. Validation of the models is achieved by using eddy covariance data from the LBA site C14. Comparing the performance of both models we conclude that numerically (in terms of goodness of fit) and qualitatively, (in terms of residual response to different environmental variables) sun/shade does a better job. Compared to the sun/shade model, the big leaf model shows a lower goodness of fit and fails to respond to variations in the diffuse fraction, also having skewed responses to temperature and VPD. The separate treatment of sun and shade leaves in combination with the separation of the incoming light into direct beam and diffuse make sun/shade a strong modelling tool that catches more of the observed variability in canopy fluxes as measured by eddy covariance. In conclusion, the sun/shade approach is a relatively simple and effective tool for modelling photosynthetic carbon uptake that could be easily included in many terrestrial carbon models.

Development and Validation of Predictive Models of Cardiac Mortality and Transplantation in Resynchronization Therapy

AbstractBackground:30-40% of cardiac resynchronization therapy cases do not achieve favorable outcomes.Objective:This study aimed to develop predictive models for the combined endpoint of cardiac death and transplantation (Tx) at different stages of cardiac resynchronization therapy (CRT).Methods:Prospective observational study of 116 patients aged 64.8 ± 11.1 years, 68.1% of whom had functional class (FC) III and 31.9% had ambulatory class IV. Clinical, electrocardiographic and echocardiographic variables were assessed by using Cox regression and Kaplan-Meier curves.Results:The cardiac mortality/Tx rate was 16.3% during the follow-up period of 34.0 ± 17.9 months. Prior to implantation, right ventricular dysfunction (RVD), ejection fraction < 25% and use of high doses of diuretics (HDD) increased the risk of cardiac death and Tx by 3.9-, 4.8-, and 5.9-fold, respectively. In the first year after CRT, RVD, HDD and hospitalization due to congestive heart failure increased the risk of death at hazard ratios of 3.5, 5.3, and 12.5, respectively. In the second year after CRT, RVD and FC III/IV were significant risk factors of mortality in the multivariate Cox model. The accuracy rates of the models were 84.6% at preimplantation, 93% in the first year after CRT, and 90.5% in the second year after CRT. The models were validated by bootstrapping.Conclusion:We developed predictive models of cardiac death and Tx at different stages of CRT based on the analysis of simple and easily obtainable clinical and echocardiographic variables. The models showed good accuracy and adjustment, were validated internally, and are useful in the selection, monitoring and counseling of patients indicated for CRT.