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.

Uncertainty associated with Monte Carlo radiation transport in radionuclide metrology

In radionuclide metrology, Monte Carlo (MC) simulation is widely used to compute parameters associated with primary measurements or calibration factors. Although MC methods are used to estimate uncertainties, the uncertainty associated with radiation transport in MC calculations is usually difficult to estimate. Counting statistics is the most obvious component of MC uncertainty and has to be checked carefully, particularly when variance reduction is used. However, in most cases fluctuations associated with counting statistics can be reduced using sufficient computing power. Cross-section data have intrinsic uncertainties that induce correlations when apparently independent codes are compared. Their effect on the uncertainty of the estimated parameter is difficult to determine and varies widely from case to case. Finally, the most significant uncertainty component for radionuclide applications is usually that associated with the detector geometry. Recent 2D and 3D x-ray imaging tools may be utilized, but comparison with experimental data as well as adjustments of parameters are usually inevitable.

Example of Monte Carlo uncertainty assessment in the field of radionuclide metrology

This chapter presents possible uses and examples of Monte Carlo methods for the evaluation of uncertainties in the field of radionuclide metrology. The method is already well documented in GUM supplement 1, but here we present a more restrictive approach, where the quantities of interest calculated by the Monte Carlo method are estimators of the expectation and standard deviation of the measurand, and the Monte Carlo method is used to propagate the uncertainties of the input parameters through the measurement model. This approach is illustrated by an example of the activity calibration of a 103Pd source by liquid scintillation counting and the calculation of a linear regression on experimental data points. An electronic supplement presents some algorithms which may be used to generate random numbers with various statistical distributions, for the implementation of this Monte Carlo calculation method.

Uncertainty of combined activity estimations

This paper discusses basic theoretical strategies used to deal with measurement uncertainties arising from different experimental situations. It attempts to indicate the most appropriate method of obtaining a reliable estimate of the quantity to be evaluated depending on the characteristics of the data available. The theoretical strategies discussed are supported by experimental detail, and the conditions and results have been taken from examples in the field of radionuclide metrology. Special care regarding the correct treatment of covariances is emphasized because of the unreliability of the results obtained if these are neglected

Uncertainty evaluation in activity measurements using ionization chambers

Pressurized re-entrant (or 4 pi) ionization chambers (ICs) connected to current-measuring electronics are used for activity measurements of photon emitting radionuclides and some beta emitters in the fields of metrology and nuclear medicine. As a secondary method, these instruments need to be calibrated with appropriate activity standards from primary or direct standardization. The use of these instruments over 50 years has been well described in numerous publications, such as the Monographie BIPM-4 and the special issue of Metrologia on radionuclide metrology (Ratel 2007 Metrologia 44 S7-16, Schrader1997 Activity Measurements With Ionization Chambers (Monographie BIPM-4) Schrader 2007 Metrologia 44 S53-66, Cox et al 2007 Measurement Modelling of the International Reference System (SIR) for Gamma-Emitting Radionuclides (Monographie BIPM-7)). The present work describes the principles of activity measurements, calibrations, and impurity corrections using pressurized ionization chambers in the first part and the uncertainty analysis illustrated with example uncertainty budgets from routine source-calibration as well as from an international reference system (SIR) measurement in the second part.

Dismissal of the illusion of uncertainty in the assessment of a likelihood ratio

The use of the Bayes factor (BF) or likelihood ratio as a metric to assess the probative value of forensic traces is largely supported by operational standards and recommendations in different forensic disciplines. However, the progress towards more widespread consensus about foundational principles is still fragile as it raises new problems about which views differ. It is not uncommon e.g. to encounter scientists who feel the need to compute the probability distribution of a given expression of evidential value (i.e. a BF), or to place intervals or significance probabilities on such a quantity. The article here presents arguments to show that such views involve a misconception of principles and abuse of language. The conclusion of the discussion is that, in a given case at hand, forensic scientists ought to offer to a court of justice a given single value for the BF, rather than an expression based on a distribution over a range of values.

Risk Management or Uncertainty Governance? The Challenge of an Interdiscplinary Approach

Peer-reviewed

Mobility Among Social Education Students at the University of Girona: Taking Stock of a Decade of Fieldwork Practice Abroad

The following article is divided into five sections, each one with a specific objective. The first section briefly presents the student mobility experiences obtained basically through the fieldwork practice course in social education studies at the University of Girona. The second section delves more deeply to explore the value of the exchange and the student mobility experience over one semester of intensive fieldwork practice. The third section presents data about the students who have participated in this experience inall ten of the graduating classes. The fourth part offers an assessment of the experience and reports which aspects are considered essential to a good student mobility experience. Finally, various actions to be taken to improve these educational experiences within the social education studies at the University of Girona are specified

Time-varying Risk Premiums and Conditional Market Risk: Empirical Evidence from European Stock Markets

This study investigates the relationship between the time-varying risk premiums and conditional market risk in the stock markets of the ten member countries of Economy and Monetary Union. Second, it examines whether the conditional second moments change over time and are there asymmetric effects in the conditional covariance matrix. Third, it analyzes the possible effects of the chosen testing framework. Empirical analysis is conducted using asymmetric univariate and multivariate GARCH-in-mean models and assuming three different degrees of market integration. For a daily sample period from 1999 to 2007, the study shows that the time-varying market risk alone is not enough to explain the dynamics of risk premiums and indications are found that the market risk is detected only when its price is allowed to change over time. Also asymmetric effects in the conditional covariance matrix, which is found to be time-varying, are clearly present and should be recognized in empirical asset pricing analyses.

Comovement of stock price risk in strategic alliance — Case: mobile internet

The focus of this study has been comovement of stock price risk level between two companies as they form strategic alliance. Thus the main reason has been to shed more light to possible increased risk level that the stockholder confronts when a company he owns forms a strategic alliance with another company. This study has centralized to interfirm cooperation between mobile and internet companies, which have furthered the development of mobile internet. The study has been divided into theoretical and empirical part. In theoretical part the main concepts riskiness of a stock (volatility), comovement and strategic alliance have been run through. In empirical part seven strategic alliances formed by mobile internet companies have been examined. Based on this, strategic alliance seems to increase comovement of stock price risk in some degree. This comovement seems to be stronger when core businesses or operating environments of cooperating companies differ more from each other.

Tests of International Asset Pricing Models in Scandinavian Stock Markets

This thesis examines whether global, local and exchange risks are priced in Scandinavian countries’ equity markets by using conditional international asset pricing models. The employed international asset pricing models are the world capital asset pricing model, the international asset pricing model augmented with the currency risk, and the partially segmented model augmented with the currency risk. Moreover, this research traces estimated equity risk premiums for the Scandinavian countries. The empirical part of the study is performed using generalized method of moments approach. Monthly observations from February 1994 to June 2007 are used. Investors’ conditional expectations are modeled using several instrumental variables. In order to keep system parsimonious the prices of risk are assumed to be constant whereas expected returns and conditional covariances vary over time. The empirical findings of this thesis suggest that the prices of global and local market risk are priced in the Scandinavian countries. This indicates that the Scandinavian countries are mildly segmented from the global markets. Furthermore, the results show that the exchange risk is priced in the Danish and Swedish stock markets when the partially segmented model is augmented with the currency risk factor.

Performance persistence of equity funds in the Russian stock market

This thesis investigates performance persistence among the equity funds investing in Russia during 2003-2007. Fund performance is measured using several methods including the Jensen alpha, the Fama-French 3- factor alpha, the Sharpe ratio and two of its variations. Moreover, we apply the Bayesian shrinkage estimation in performance measurement and evaluate its usefulness compared with the OLS 3-factor alphas. The pattern of performance persistence is analyzed using the Spearman rank correlation test, cross-sectional regression analysis and stacked return time series. Empirical results indicate that the Bayesian shrinkage estimates may provide better and more accurate estimates of fund performance compared with the OLS 3-factor alphas. Secondly, based on the results it seems that the degree of performance persistence is strongly related to length of the observation period. For the full sample period the results show strong signs of performance reversal whereas for the subperiod analysis the results indicate performance persistence during the most recent years.

Risk-Return Trade-Off for European Stock Markets

This paper adopts dynamic factor models with macro-finance predictors to test the intertemporal risk-return relation for 13 European stock markets. We identify country specific, euro area, and global macro-finance factors to determine the conditional risk and return. Empirically, the risk- return trade-off is generally negative. However, a Markov switching model documents that there is time-variation in this trade-off that is linked to the state of the economy. Keywords: Risk-return trade-off; Dynamic factor model; Macro-finance predictors; European stock markets; Markov switching model JEL Classifications: C22; G11; G12; G17