Long-term return reversals-Value and growth or tax? UK evidence

This paper examines (i) whether value-growth characteristics have more power than past performance in predicting return reversals; and (ii) whether typical rational behaviour such as incentives to delay paying capital gain taxes can better explain long-term reversals than past performance. We find that value-growth characteristics generally provide better explanations for long-term stock returns than past performance. The evidence also shows that winners identified by capital gains dominate past performance winners in predicting reversals in the cross-sectional comparison. However, in the time-series analysis, when returns on capital gain winners are adjusted by the Fama and French (1996) risk factors, the predictive power of capital gain winners disappears. Our results show that capital gain winners are heavily featured as growth stocks. Return reversals in capital gain winners potentially reflect market price corrections for growth stocks. We conclude that investors’ incentives to delay paying capital gain taxes cannot fully rationalise long-term reversals in the UK market. Our results also imply that the long-term return pattern potentially reflects a mixture of investor rational and irrational behaviour.

Defining a Research Agenda in Value Driven Design: Questions That Need to be Asked

Value driven design is an innovative design process that utilizes the optimization of a system level value function to determine the best possible design. This contrasts with more traditional systems engineering techniques, which rely on satisfying requirements to determine the design solution. While ‘design for value’ is intuitively acceptable, the transformation of value driven design concepts into practical tools and methods for its application is challenging. This, coupled with the growing popularity of value-centric design philosophies, has led to a proposed research agenda in value driven design. This research agenda asks fundamental questions about the design philosophy and attempts to identify areas of significant challenge. The research agenda is meant to stimulate discussion in the field, as well as prompt research that will lead to the development of tools and methodologies that will facilitate the application of value driven design and further the state of the art.

An Analytical Study of Surplus Value using a Value Driven Design Methodology

People are now becoming more environmentally aware and as a consequence of this, industries such as the aviation industry are striving to design more environmentally friendly products. To achieve this, the current design methodologies must be modified to ensure these issues are considered from product conception through to disposal. This paper discusses the environmental problems in relation to the aviation industry and highlights some logic for making the change from the traditional Systems Engineering approach to the recent design paradigm known as Value Driven Design. Preliminary studies have been undertaken to aid in the understanding of this methodology and the existing surplus value objective function. The main results from the work demonstrate that surplus value works well bringing disparate issues such as manufacture and green taxes together to aid decision making. Further, to date studies on surplus value have used simple sensitivity analysis, but deeper consideration shows non-linear interactions between some of the variables and further work will be needed to fully account for complex issues such as environmental impact and taxes.

A Novel Method to Enable Trade-offs Across the Whole Product Life of an Aircraft Using Value Driven Design

The increasing need to understand complex products and systems with long life spans, presents a significant challenge to designers who increasingly require a broader understanding of the operational aspects of the system. This demands an evolution in current design practice, as designers are often constrained to provide a subsystem solution without full knowledge of the global system operation. Recently there has been a push to consider value centric approaches which should facilitate better or more rapid convergence to design solutions with predictable completion schedules. Value Driven Design is one such approach, in which value is used as the system top level objective function. This provides a broader view of the system and enables all sub-systems and components to be designed with a view to the effect on project value. It also has the capacity to include value expressions for more qualitative aspects, such as environmental impact. However, application of the method to date has been restricted to comparing value in a programme where the lifespan is fixed and known a priori. This paper takes a novel view of value driven design through the surplus value objective function, and shows how it can be used to identify key sensitivities to guide designers in design trade-off decisions. By considering a new time based approach it can be used to identify optimum programme life-span and hence allow trade-offs over the whole product life.

Digital Methods for Process Development in Manufacturing and Their Relevance to Value Driven Design

This paper examines the applicability of a digital manufacturing framework to the implementation of a Value Driven Design (VDD) approach for the development of a stiffened composite panel. It presents a means by which environmental considerations can be integrated with conventional product and process design drivers within a customized, digital environment. A composite forming process is used as an exemplar for the work which creates a collaborative environment for the integration of more traditional design drivers with parameters related to manufacturability as well as more sustainable processes and products. The environmental stakeholder is introduced to the VDD process through a customized product/process/resource (PPR) environment where application specific power consumption and material waste data has been measured and characterised in the process design interface. This allows the manufacturing planner to consider power consumption as a concurrent design driver and the inclusion of energy as a parameter in a VDD approach to the development of efficiently manufactured, sustainable transport systems.

Integrating allowable design strains in composites with whole life value

Fibre-Reinforced Plastics (FRPs) have been used in civil aerospace vehicles for decades. The current state-of-the-art in airframe design and manufacture results in approximately half the airframe mass attributable to FRP materials. The continual increase in the use of FRP materials over metallic alloys is attributable to the material's superior specific strength and stiffness, fatigue performance and corrosion resistance. However, the full potential of these materials has yet to be exploited as analysis methods to predict physical failure with equal accuracy and robustness are not yet available. The result is a conservative approach to design, but one that can bring benefit via increased inspection intervals and reduced cost over the vehicle life. The challenge is that the methods used in practice are based on empirical tests and real relationships and drivers are difficult to see in this complex process and so the trade-off decision is challenging and uncertain. The aim of this feasibility study was to scope a viable process which could help develop some rules and relationships based on the fundamental mechanics of composite material and the economics of production and operation, which would enhance understanding of the role and impact of design allowables across the life of a composite structure.

Trading Activity in Options and Stock Around Price-Sensitive News Announcements

This study investigates the trading activity in options and stock markets around informed events with extreme daily stock price movements. We find that informed agents are more likely to trade options prior to negative news and stocks ahead of positive news. We also show that optioned stocks overreact to the arrival of negative news, but react efficiently to positive news. However, the overreaction patterns are unique to the subsample of stocks with the lowest pre-event abnormal option/stock volume ratio (O/S). This finding suggests that the incremental benefit of option listing is related to the level of option trading activity, over and beyond the presence of an options market on the firm's stock. Finally, we find that the pre-event abnormal O/S is a better predictor of stock price patterns following a negative shock than is the pre-event O/S, implying that the former may contain more information about the future value of stocks than the latter.

Does Cost-Effectiveness Analysis Have a Role in US Managed Care Drug Formularies? An Empirical Study of Utilization, Costs, Outcomes, and Elasticity of Demand of a Value-Based Formulary

Thesis (Ph.D.)--University of Washington, 2015