Analysis of Earnings, Stock Prices and Bond Yields: The Fed Model Approach

Prediction of the stock market valuation is a common interest to all market participants. Theoretically sound market valuation can be achieved by discounting future earnings of equities to present. Competing valuation models seek to find variables that affect the equity market valuation in a way that the market valuation can be explained and also variables that could be used to predict market valuation. In this paper we test the contemporaneous relationship between stock prices, forward looking earnings and long-term government bond yields. We test this so-called Fed model in a long- and short-term time series analysis. In order to test the dynamics of the relationship, we use the cointegration framework. The data used in this study spans over four decades of various market conditions between 1964-2007, using data from United States. The empirical results of our analysis do not give support for the Fed model. We are able to show that the long-term government bonds do not play statistically significant role in this relationship. The effect of forward earnings yield on the stock market prices is significant and thus we suggest the use of standard valuation ratios when trying to predict the future paths of equity prices. Also, changes in the long-term government bond yields do not have significant short-term impact on stock prices.

The determination of total nitrogen and total phosphorus concentrations in freshwaters from land use, stock headage and population data: testing of a model for use in conservation and water quality management

1. Nutrient concentrations (particularly N and P) determine the extent to which water bodies are or may become eutrophic. Direct determination of nutrient content on a wide scale is labour intensive but the main sources of N and P are well known. This paper describes and tests an export coefficient model for prediction of total N and total P from: (i) land use, stock headage and human population; (ii) the export rates of N and P from these sources; and (iii) the river discharge. Such a model might be used to forecast the effects of changes in land use in the future and to hindcast past water quality to establish comparative or baseline states for the monitoring of change. 2. The model has been calibrated against observed data for 1988 and validated against sets of observed data for a sequence of earlier years in ten British catchments varying from uplands through rolling, fertile lowlands to the flat topography of East Anglia. 3. The model predicted total N and total P concentrations with high precision (95% of the variance in observed data explained). It has been used in two forms: the first on a specific catchment basis; the second for a larger natural region which contains the catchment with the assumption that all catchments within that region will be similar. Both models gave similar results with little loss of precision in the latter case. This implies that it will be possible to describe the overall pattern of nutrient export in the UK with only a fraction of the effort needed to carry out the calculations for each individual water body. 4. Comparison between land use, stock headage, population numbers and nutrient export for the ten catchments in the pre-war year of 1931, and for 1970 and 1988 show that there has been a substantial loss of rough grazing to fertilized temporary and permanent grasslands, an increase in the hectarage devoted to arable, consistent increases in the stocking of cattle and sheep and a marked movement of humans to these rural catchments. 5. All of these trends have increased the flows of nutrients with more than a doubling of both total N and total P loads during the period. On average in these rural catchments, stock wastes have been the greatest contributors to both N and P exports, with cultivation the next most important source of N and people of P. Ratios of N to P were high in 1931 and remain little changed so that, in these catchments, phosphorus continues to be the nutrient most likely to control algal crops in standing waters supplied by the rivers studied.

Automatic model selection for forecasting brazilian stock returns

This study aims to contribute on the forecasting literature in stock return for emerging markets. We use Autometrics to select relevant predictors among macroeconomic, microeconomic and technical variables. We develop predictive models for the Brazilian market premium, measured as the excess return over Selic interest rate, Itaú SA, Itaú-Unibanco and Bradesco stock returns. We nd that for the market premium, an ADL with error correction is able to outperform the benchmarks in terms of economic performance. For individual stock returns, there is a trade o between statistical properties and out-of-sample performance of the model.

Automatic model selection for forecasting Brazilian stock returns

This study aims to contribute on the forecasting literature in stock return for emerging markets. We use Autometrics to select relevant predictors among macroeconomic, microeconomic and technical variables. We develop predictive models for the Brazilian market premium, measured as the excess return over Selic interest rate, Itaú SA, Itaú-Unibanco and Bradesco stock returns. We find that for the market premium, an ADL with error correction is able to outperform the benchmarks in terms of economic performance. For individual stock returns, there is a trade o between statistical properties and out-of-sample performance of the model.

Consumption asymmetry and the stock market: New evidence through a threshold adjustment model

This paper investigates whether stock market wealth affects real consumption asymmetrically through a threshold adjustment model. The empirical findings for the US show that wealth produces an asymmetric effect on real consumption, with negative 'news' affecting consumption less than positive 'news.' Thus, policy makers may want to focus more attention on preventing asset 'bubbles' than on responding to negative asset shocks.

Model experiment on optimal size of a fish stock with environmental uncertainties

We analyze the effect of environmental uncertainties on optimal fishery management in a bio-economic fishery model. Unlike most of the literature on resource economics, but in line with ecological models, we allow the different biological processes of survival and recruitment to be affected differently by environmental uncertainties. We show that the overall effect of uncertainty on the optimal size of a fish stock is ambiguous, depending on the prudence of the value function. For the case of a risk-neutral fishery manager, the overall effect depends on the relative magnitude of two opposing effects, the 'convex-cost effect' and the 'gambling effect'. We apply the analysis to the Baltic cod and the North Sea herring fisheries, concluding that for risk neutral agents the net effect of environmental uncertainties on the optimal size of these fish stocks is negative, albeit small in absolute value. Under risk aversion, the effect on optimal stock size is positive for sufficiently high coefficients of constant relative risk aversion.

Southern Ocean CO2 uptake and buffer factor from model run 2012-2100, with links to model results

The Southern Ocean is a key region for global carbon uptake and is characterised by a strong seasonality with the annual CO2 uptake being mediated by biological carbon draw-down in summer. Here, we show that the contribution of biology to CO2 uptake will become even more important until 2100. This is the case even if biological production remains unaltered and can be explained by the decreasing buffer capacity of the ocean as its carbon content increases. The same amount of biological carbon draw-down leads to a more than twice as large reduction in CO2 (aq) concentration and hence to a larger CO2 gradient between ocean and atmosphere that drives the gas-exchange. While the winter uptake south of 44°S changes little, the summer uptake increases largely and is responsible for the annual mean response. The combination of decreasing buffer capacity and strong seasonality of biological carbon draw-down introduces a strong and increasing seasonality in the anthropogenic carbon uptake.

Hand receipt manual covering end item/components of end item (COEI), basic issue items (BII), and additional authorization list (AAL) related to compressor, reciprocating, air, receiver, mounted, electric motor driven, 5 cfm, 175 psi (Champion Pneumatic model 60CAW20HM-1) (national stock no. 4310-00-930-7147) ...

"February 1979."

Operator's manual : fixture, lathe, metal cutting for 2 inch diameter round or 2 inch square stock, 360 degree index ring, 12-1/2 high, 5 wide, 3-7/8 vertical travel (Numeric Products Company model 312) (3465-022-8817).

"29 November 1967."

Field and depot maintenance manual : truck, lift, fork, gasoline, pneumatic-tired wheels, 15,000-pound capacity, (Hyster model H150C, Army model MHE 178), federal stock number 3930-897-4632.

Includes index.

Operator's manual : truck, lift, fork, gasoline, pneumatic-tired wheels, 15,000-pound capacity, (Clark model CY 150 B, Army model MHE-175), federal stock number 3930-621-7413.

"22 October 1962."

Organizational maintenance manual : truck, lift, fork, gasoline, pneumatic-tired wheels, 15,000-pound capacity (Hyster model H150C, Army model MHE-178), federal stock number 3930-897-4632.

"December 1962."