Management motivation for using financial derivatives in Australia

This study takes a direct approach to determine management motivation for the use of financial derivatives. We survey a sample of Australian firms on attitudes to derivative use and financial risk management. Management views are sought on the importance of a series of theoretical reasons for using derivatives. Generally, we find that managers are focused on the broad reduction of risk and volatility of cash flows and earnings in using derivatives. Specific issues such as reducing bankruptcy costs, debt levels and taxation are not considered as important. A further interesting result from this research is that even though firms may use derivatives they may not necessarily hedge all of their annual exposures across different financial risks. This helps explain the inconsistency of results in many empirical studies on the determinants of derivative use.

Two conceptions of reason

Two conceptions of reason are considered - the planning conception, embodied, for example, in rational choice theory and other familiar paradigms, and the improvisational conception, emerging from work on artificial intelligence and organization theory. Two illustrations are given of the problematic nature of the planning conception: ( 1) the inevitability of incompleteness in contracting and ( 2) the burdens of reason identified by John Rawls. Two diagnoses are provided for these infirmities: ( 1) the inexhaustibility of description and ( 2) the constructed nature of preferences and values. An alternative improvisational model is sketched and risk-spreading and bet-hedging are identified as two of its key technologies.

The exchange rate exposure of UK non-financial companies

Purpose – The purpose of this paper is to investigate the exchange rate exposure of UK nonfinancial companies from January 1981 to December 2001. Design/methodology/approach – The study employs different exchange rate measures and adopts an equally weighted exchange rate. The analyses are conducted at the firm level. All analyses are conducted by regressing the firm’s exchange rate exposure coefficients on its size, foreign activity variables and financial hedging proxies over the whole sample period. Findings – The findings show that a higher percentage of UK non-financial companies are exposed to exchange rate changes than those reported in previous studies. Generally, the results provide a stronger support for the suggested equally weighted rate as an economic variable, which affects firms’ stock returns. The results also show a high proportion of positive exposure coefficients among firms with significant exchange rate exposure, indicating a higher proportion of firms benefiting from an appreciation of the pound. Finally, the results also indicate evidence that firms’ foreign operations and hedging variables affect their sensitivity to exchange rate exposure. Practical implications – This study provides important implications for public policymakers who wish to understand links between policies that affect exchange rates and relative wealth effects. Originality/value – The empirical results of this study should help investors to examine how common stock returns react to exchange rate fluctuations when making financial decisions, and prove useful for financial managers when measuring exposure to foreign exchange rate changes.

The sensitivity of US banks' stock returns to interest and exchange rate changes

Purpose – The purpose of this paper is to investigate the impact of foreign exchange and interest rate changes on US banks’ stock returns. Design/methodology/approach – The approach employs an EGARCH model to account for the ARCH effects in daily returns. Most prior studies have used standard OLS estimation methods with the result that the presence of ARCH effects would have affected estimation efficiency. For comparative purposes, the standard OLS estimation method is also used to measure sensitivity. Findings – The findings are as follows: under the conditional t-distributional assumption, the EGARCH model generated a much better fit to the data although the goodness-of-fit of the model is not entirely satisfactory; the market index return accounts for most of the variation in stock returns at both the individual bank and portfolio levels; and the degree of sensitivity of the stock returns to interest rate and FX rate changes is not very pronounced despite the use of high frequency data. Earlier results had indicated that daily data provided greater evidence of exposure sensitivity. Practical implications – Assuming that banks do not hedge perfectly, these findings have important financial implications as they suggest that the hedging policies of the banks are not reflected in their stock prices. Alternatively, it is possible that different GARCH-type models might be more appropriate when modelling high frequency returns. Originality/value – The paper contributes to existing knowledge in the area by showing that ARCH effects do impact on measures of sensitivity.

Schematic structure and the modulation of propositions in economics forecasting text

Working within the framework of the branch of Linguistics known as discourse analysis, and more specifically within the current approach of genre analysis, this thesis presents an analysis of the English of economic forecasting. The language of economic forecasting is highly specialised and follows certain conventions of structure and style. This research project identifies these characteristics and explains them in terms of their communicative function. The work is based on a corpus of texts published in economic reports and surveys by major corporate bodies. These documents are targeted at an international expert readership familiar with this genre. The data is analysed at two broad levels: firstly, the macro-level of text structure which is described in terms of schema-theory, a currently influential model of analysis, and, secondly, the micro-level of authors' strategies for modulating the predictions which form the key move in the forecasting schema. The thesis aims to contribute to the newly developing field of genre analysis in a number of ways: firstly, by a coverage of a hitherto neglected but intrinsically interesting and important genre (Economic Forecasting); secondly, by testing the applicability of existing models of analysis at the level of schematic structure and proposing a genre-specific model; thirdly by offering insights into the nature of modulation of propositions which is often broadly classified as `hedging' or `modality', and which has been recently described as lq`an area for prolonged fieldwork'. This phenomenon is shown to be a key feature of this particular genre. It is suggested that this thesis, in addition to its contribution to the theory of genre analysis, provides a useful basis for work by teachers of English for Economics, an important area of English for Specific Purposes.

Impact of derivatives trading on emerging stock markets:some evidence from India

It is generally accepted that the introduction of financial derivatives that facilitate hedging is an important step in the development of stock markets. However, financial derivatives can potentially increase volatility in the underlying cash market, which might be detrimental to the development of the stock market itself. Using data from India, we examine one possible route through which derivatives trading can increase cash market volatility: expiration day effect. Our results indicate that expiration of equity derivatives contracts does not have any effect on the intra-day volatility of the market index, and it reduces the volatility of inter-day returns to the index.

The exchange rate exposure of UK non-financial companies

Purpose – The purpose of this paper is to investigate the exchange rate exposure of UK nonfinancial companies from January 1981 to December 2001. Design/methodology/approach – The study employs different exchange rate measures and adopts an equally weighted exchange rate. The analyses are conducted at the firm level. All analyses are conducted by regressing the firm’s exchange rate exposure coefficients on its size, foreign activity variables and financial hedging proxies over the whole sample period. Findings – The findings show that a higher percentage of UK non-financial companies are exposed to exchange rate changes than those reported in previous studies. Generally, the results provide a stronger support for the suggested equally weighted rate as an economic variable, which affects firms’ stock returns. The results also show a high proportion of positive exposure coefficients among firms with significant exchange rate exposure, indicating a higher proportion of firms benefiting from an appreciation of the pound. Finally, the results also indicate evidence that firms’ foreign operations and hedging variables affect their sensitivity to exchange rate exposure. Practical implications – This study provides important implications for public policymakers who wish to understand links between policies that affect exchange rates and relative wealth effects. Originality/value – The empirical results of this study should help investors to examine how common stock returns react to exchange rate fluctuations when making financial decisions, and prove useful for financial managers when measuring exposure to foreign exchange rate changes.

International risk management:systems, internal control and corporate governance

This book is very practical in its international usefulness (because current risk practice and understanding is not equal across international boundaries). For example, an accountant in Belgium would want to know what the governance regulations are in that country and what the risk issues are that he/she needs to be aware of. This book covers the international aspect of risk management systems, risk and governance, and risk and accounting. In doing so the book covers topics such as: internal control and corporate governance; risk management systems; integrating risk into performance management systems; risk and audit; governance structures; risk management of pensions; pension scheme risks e.g. hedging derivatives, longevity bonds etc; risk reporting; and the role of the accountant in risk management. There are the case studies through out the book which illustrate by way of concrete practical examples the major themes contained in the book. The book includes highly topical areas such as the Sarbanes Oxley Act and pension risk management.

Candidate knowledge? Exploring epistemic claims in scientific writing:a corpus-driven approach

In this article I argue that the study of the linguistic aspects of epistemology has become unhelpfully focused on the corpus-based study of hedging and that a corpus-driven approach can help to improve upon this. Through focusing on a corpus of texts from one discourse community (that of genetics) and identifying frequent tri-lexical clusters containing highly frequent lexical items identified as keywords, I undertake an inductive analysis identifying patterns of epistemic significance. Several of these patterns are shown to be hedging devices and the whole corpus frequencies of the most salient of these, candidate and putative, are then compared to the whole corpus frequencies for comparable wordforms and clusters of epistemic significance. Finally I interviewed a ‘friendly geneticist’ in order to check my interpretation of some of the terms used and to get an expert interpretation of the overall findings. In summary I argue that the highly unexpected patterns of hedging found in genetics demonstrate the value of adopting a corpus-driven approach and constitute an advance in our current understanding of how to approach the relationship between language and epistemology.

The relationship between educational placement, instructional practices, and achievement gains of Black students with specific learning disabilities in secondary urban school settings

Black students, in general, are underserved academically (Darling-Hammond, 2000; Townsend, 2002) and overrepresented in special education (Donovan & Cross, 2002). Black students with disabilities are further overrepresented in more restrictive educational environments (Skiba, Poloni-Staudinger, Gallini, Simmons & Feggins-Azziz, 2006). Although the National Longitudinal Transition Study 2 (NLTS2) revealed that the academic performance of students with learning disabilities is positively related to the percentage of courses taken in the general education setting (Newman, 2006), the research specifically on placement of Black students with disabilities, particularly at the secondary level, as it relates to academic achievement is lacking. While previous studies have sought to determine which placement is better for students with disabilities, no study was found that specifically examined the impact of placement specific to Black students with specific learning disabilities (SLD) in urban settings (Fore, III, Hagan-Burke, Burke, Boon & Smith, 2008; Rea, McLaughlin & Walther-Thomas, 2002). This study examined educational placement, instructional best practices, and achievement gains of Black students with SLD in urban secondary settings using an ex post facto research design. Achievement, placement, and demographic data were collected and analyzed on approximately 314 Black eighth grade students with SLD. The Teacher Instructional Practices Survey was developed and used to collect and analyze data from the teachers of 78 of these students as it relates to instructional best practices. Results indicate no significant difference in reading but a significant difference in math gains of students served in inclusive settings as compared to resource settings with a small effect size. Also, no significant relationship was found between achievement gains and the reported use of instructional best practices. However, there was a relationship between educational placement and the use of instructional best practices. The results implied that there is a need for training with both general and special education teachers on instructional best practices for SWD and that there should be certain IEP team considerations when making placement decisions for this population of students with disabilities. It is recommended that future research in this area include classroom observations and factors other than test scores to measure growth in achievement.

Radiation fluxes, soil heat flux, air temperature, soil temperature, soil moisture and vegetation at dwarf shrubs and wet sedges in Kytalyk, NE Siberia

Vegetation changes, such as shrub encroachment and wetland expansion, have been observed in many Arctic tundra regions. These changes feed back to permafrost and climate. Permafrost can be protected by soil shading through vegetation as it reduces the amount of solar energy available for thawing. Regional climate can be affected by a reduction in surface albedo as more energy is available for atmospheric and soil heating. Here, we compared the shortwave radiation budget of two common Arctic tundra vegetation types dominated by dwarf shrubs (Betula nana) and wet sedges (Eriophorum angustifolium) in North-East Siberia. We measured time series of the shortwave and longwave radiation budget above the canopy and transmitted radiation below the canopy. Additionally, we quantified soil temperature and heat flux as well as active layer thickness. The mean growing season albedo of dwarf shrubs was 0.15 ± 0.01, for sedges it was higher (0.17 ± 0.02). Dwarf shrub transmittance was 0.36 ± 0.07 on average, and sedge transmittance was 0.28 ± 0.08. The standing dead leaves contributed strongly to the soil shading of wet sedges. Despite a lower albedo and less soil shading, the soil below dwarf shrubs conducted less heat resulting in a 17 cm shallower active layer as compared to sedges. This result was supported by additional, spatially distributed measurements of both vegetation types. Clouds were a major influencing factor for albedo and transmittance, particularly in sedge vegetation. Cloud cover reduced the albedo by 0.01 in dwarf shrubs and by 0.03 in sedges, while transmittance was increased by 0.08 and 0.10 in dwarf shrubs and sedges, respectively. Our results suggest that the observed deeper active layer below wet sedges is not primarily a result of the summer canopy radiation budget. Soil properties, such as soil albedo, moisture, and thermal conductivity, may be more influential, at least in our comparison between dwarf shrub vegetation on relatively dry patches and sedge vegetation with higher soil moisture.

Multi-year weather data in the remote semi-arid to arid mountain region of the Saharan flank of the Atlas Mountains

In 2001, a weather and climate monitoring network was established along the temperature and aridity gradient between the sub-humid Moroccan High Atlas Mountains and the former end lake of the Middle Drâa in a pre-Saharan environment. The highest Automated Weather Stations (AWS) was installed just below the M'Goun summit at 3850 m, the lowest station Lac Iriki was at 450 m. This network of 13 AWS stations was funded and maintained by the German IMPETUS (BMBF Grant 01LW06001A, North Rhine-Westphalia Grant 313-21200200) project and since 2011 five stations were further maintained by the GERMAN DFG Fennec project (FI 786/3-1), this way some stations of the AWS network provided data for almost 12 years from 2001-2012. Standard meteorological variables such as temperature, humidity, and wind were measured at an altitude of 2 m above ground. Other meteorological variables comprise precipitation, station pressure, solar irradiance, soil temperature at different depths and for high mountain station snow water equivalent. The stations produced data summaries for 5-minute-precipitation-data, 10- or 15-minute-data and a daily summary of all other variables. This network is a unique resource of multi-year weather data in the remote semi-arid to arid mountain region of the Saharan flank of the Atlas Mountains. The network is described in Schulz et al. (2010) and its further continuation until 2012 is briefly discussed in Redl et al. (2015, doi:10.1175/MWR-D-15-0223.1) and Redl et al. (2016, doi:10.1002/2015JD024443).

First-year and second-year snow properties on sea ice in the Weddell Sea during POLARSTERN cruise ANT-XXII/2 (ISPOL) during the drift

Observations of snow properties, superimposed ice, and atmospheric heat fluxes have been performed on first-year and second-year sea ice in the western Weddell Sea, Antarctica. Snow in this region is particular as it does usually survive summer ablation. Measurements were performed during Ice Station Polarstern (ISPOL), a 5-week drift station of the German icebreaker RV Polarstern. Net heat flux to the snowpack was 8 W/m**2, causing only 0.1 to 0.2 m of thinning of both snow cover types, thinner first-year and thicker second-year snow. Snow thinning was dominated by compaction and evaporation, whereas melt was of minor importance and occurred only internally at or close to the surface. Characteristic differences between snow on first-year and second-year ice were found in snow thickness, temperature, and stratigraphy. Snow on second-year ice was thicker, colder, denser, and more layered than on first-year ice. Metamorphism and ablation, and thus mass balance, were similar between both regimes, because they depend more on surface heat fluxes and less on underground properties. Ice freeboard was mostly negative, but flooding occurred mainly on first-year ice. Snow and ice interface temperature did not reach the melting point during the observation period. Nevertheless, formation of discontinuous superimposed ice was observed. Color tracer experiments suggest considerable meltwater percolation within the snow, despite below-melting temperatures of lower layers. Strong meridional gradients of snow and sea-ice properties were found in this region. They suggest similar gradients in atmospheric and oceanographic conditions and implicate their importance for melt processes and the location of the summer ice edge.

Baseline characteristics of climate, permafrost, and land cover from Samoylov Island, Lena River Delta, Siberia

Samoylov Island is centrally located within the Lena River Delta at 72° N, 126° E and lies within the Siberian zone of continuous permafrost. The landscape on Samoylov Island consists mainly of late Holocene river terraces with polygonal tundra, ponds and lakes, and an active floodplain. The island has been the focus of numerous multidisciplinary studies since 1993, which have focused on climate, land cover, ecology, hydrology, permafrost and limnology. This paper aims to provide a framework for future studies by describing the characteristics of the island's meteorological parameters (temperature, radiation and snow cover), soil temperature, and soil moisture. The land surface characteristics have been described using high resolution aerial images in combination with data from ground-based observations. Of note is that deeper permafrost temperatures have increased between 0.3 to 1.3 °C over the last five years. However, no clear warming of air and active layer temperatures is detected since 1998, though winter air temperatures during recent years have not been as cold as in earlier years.

Meteorological observations and eddy covariance raw data from polygonal tundra in the Lena River Delta, Siberia

We present the first ecosystem-scale methane flux data from a northern Siberian tundra ecosystem covering the entire snow-free period from spring thaw until initial freeze-back. Eddy covariance measurements of methane emission were carried out from the beginning of June until the end of September in the southern central part of the Lena River Delta (72°22' N, 126°30' E). The study site is located in the zone of continuous permafrost and is characterized by Arctic continental climate with very low precipitation and a mean annual temperature of -14.7°C. We found relatively low fluxes of on average 18.7 mg/m**2/d, which we consider to be because of (1) extremely cold permafrost, (2) substrate limitation of the methanogenic archaea, and (3) a relatively high surface coverage of noninundated, moderately moist areas. Near-surface turbulence as measured by the eddy covariance system in 4 m above the ground surface was identified as the most important control on ecosystem-scale methane emission and explained about 60% of the variance in emissions, while soil temperature explained only 8%. In addition, atmospheric pressure was found to significantly improve an exponential model based on turbulence and soil temperature. Ebullition from waterlogged areas triggered by decreasing atmospheric pressure and near-surface turbulence is thought to be an important pathway that warrants more attention in future studies. The close coupling of methane fluxes and atmospheric parameters demonstrated here raises questions regarding the reliability of enclosure-based measurements, which inherently exclude these parameters.