Portfolio Selection via Composite Measure Analysis: Evidence from the U.S. Stock Market

The aim of this research is to examine the pricing anomalies existing in the U.S. market during 1986 to 2011. The sample of stocks is divided into decile portfolios based on seven individual valuation ratios (E/P, B/P, S/P, EBIT/EV, EVITDA/EV, D/P, and CE/P) and price momentum to investigate the efficiency of individual valuation ratio and their combinations as portfolio formation criteria. This is the first time in financial literature when CE/P is employed as a constituent of composite value measure. The combinations are based on median scaled composite value measures and TOPSIS method. During the sample period value portfolios significantly outperform both the market portfolio and comparable glamour portfolios. The results show the highest return for the value portfolio that was based on the combination of S/P & CE/P ratios. The outcome of this research will increase the understanding on the suitability of different methodologies for portfolio selection. It will help managers to take advantage of the results of different methodologies in order to gain returns above the market.

Added Value of Combining Value and Momentum Indicators in the Swiss Stock Market

The purpose of the thesis is to examine the added value of combining value and momentum indicators in the Swiss stock exchange. Value indicators employed are P/E, EV/EBITDA, P/CF, P/B ja P/S. Momentum indicators examined are 52-week high, acceleration rate, 12-month past return and 6-month past return. The thesis examines whether the composite value measures based on the above mentioned ratios can add value and whether the inclusion of momentum can further improve the risk return profile of the value portfolios. The data is gathered from the Swiss equity market during the sample period from May 2001 to May 2011. Previous studies have shown that composite value measures can somewhat add value to the value portfolio strategy. Similarly, recent academic literature have found evidence that momentum works well as a timing indicator for time to entry to value stocks. This study indicates that the added value of composite value measures exists. It also shows that momentum combined to acceleration rate can significantly improve the risk adjusted performance of value-only portfolios.

Arvostrategioiden menestys Suomen osakemarkkinoilla

Tämän tutkimuksen tavoitteena on selvittää saavutetaanko passiivisilla arvostrategioilla riskikorjattuna ylisuuria tuottoja Suomen osakemarkkinoilla. Tuottaako matalien tunnuslukujen perusteella valittujen osakkeiden portfolio enemmän kuin korkeiden tunnuslukujen portfolio? Ovatko alfat tilastollisesti merkitseviä? Tutkimuksen tavoitteena on myös selvittää, ovatko korkeimman ja matalimman arvostustason portfolioiden menestyserot tilastollisesti merkitseviä. Tunnuslukuina on tarkasteltu P/E-, EV/EBIT- ja EV/EBITDA-tunnuslukuja sekä P/B- ja P/S–lukuja. Lisäksi on tutkittu yhdistelmätunnuslukuina P/E- ja P/B–lukujen tulon muodostamaa tunnuslukua, sekä suhteellisiin EV/EBITDA-, P/B- ja P/S-lukuihin perustuvaa arvostusmittaria. Tutkimusaineisto koostuu Suomen osakemarkkinoilla julkisesti noteeratuista yrityksistä toukokuusta 1991 toukokuuhun 2006. Osakkeet järjestettiin tunnuslukujen arvostustason perusteella kvintiiliportfolioihin. Myöhemmin portfoliot muodostettiin uudelleen kolmen ja viiden vuoden välein. Lopuksi tarkasteltiin kvintiiliportfolioiden kuukausittaisia tuottoja tunnuslukukohtaisesti koko tutkimusjakson ajalta. Tulosten perusteella on selkeästi havaittavissa, että matalan tunnusluvun kvintiiliportfoliot menestyivät paremmin kuin korkean tunnusluvun kvintiiliportfoliot. Kolmen vuoden jaksoissa P/E-, EV/EBITDA-, P/B-, P/S- ja kolmen tunnusluvun yhdistelmällä muodostetuilla kvintiiliportfolioilla arvopreemio oli selkeästi havaittavissa. Viiden vuoden jaksoissa vastaava ilmiö toistui EV/EBITDA-tunnusluvulla muodostetuilla kvintiiliportfolioilla. Eniten tuotti absoluuttisesti sekä riskikorjattuna tutkimuksessa esiteltävä kolmen vuoden jaksoissa kolmen tunnusluvun yhdistelmällä muodostettu matalimman arvostustason kvintiiliportfolio, joka tuotti riskikorjattuna tilastollisesti erittäin merkitsevästi positiivista alfaa matalalla riskitasolla.

Arvo- ja momentum-strategioiden yhdistäminen Suomen osakemarkkinoilla

Tämän tutkielman tavoitteena on selvittää pystytäänkö momentum-strategiaa hyödyntämällä parantamaan arvostrategian tuottoja Suomen osakemarkkinoilla. Yhdistetyn arvo- ja momentum-strategian lisäksi tutkitaan myös arvosrategian menestystä. Tutkimuksessa arvostusmittareina on käytetty P/E-, P/B-, P/CF-, P/S-, P/D-, EV/EBITDA-lukuja sekä kolmea näistä muodostettua yhdistelmätunnuslukua. Tutkimusaineisto koostuu Suomen osakemarkkinoilla julkisesti noteerattujen osakkeiden tuottoaikasarjoista vuosilta 1992-2008. Osakkeet on järjestetty tunnuslukujen ja momentum-indikaattorien perusteella kolmeen tertiiliportfolioon. Sijoitusten pitoaikana on käytetty yhtä ja kolmea vuotta. Portfolioista on raportoitu keskimääräisen vuosituoton lisäksi riskikorjattu tuotto Sharpen luvulla ja Jensenin alfalla mitattuna sekä näiden tilastollinen merkitsevyys. Tulosten perusteella voidaan päätellä, ettei momentum-strategian avulla pystytä parantamaan arvostrategian tuottoja Suomen osakemarkkinoilla. Arvostrategia menestyi kuitenkin erittäin hyvin etenkin yhdistelmätunnuslukujen sekä P/D-, EV/EBITDA- ja P/E-lukujen osalta.

Pricing anomalies in the Finnish stock market

The aim of this thesis is to examine whether the pricing anomalies exists in the Finnish stock markets by comparing the performance of quantile portfolios that are formed on the basis of either individual valuation ratios, composite value measures or combined value and momentum indicators. All the research papers included in the thesis show evidence of value anomalies in the Finnish stock markets. In the first paper, the sample of stocks over the 1991-2006 period is divided into quintile portfolios based on four individual valuation ratios (i.e., E/P, EBITDA/EV, B/P, and S/P) and three hybrids of them (i.e. composite value measures). The results show the superiority of composite value measures as selection criterion for value stocks, particularly when EBITDA/EV is employed as earnings multiple. The main focus of the second paper is on the impact of the holding period length on performance of value strategies. As an extension to the first paper, two more individual ratios (i.e. CF/P and D/P) are included in the comparative analysis. The sample of stocks over 1993- 2008 period is divided into tercile portfolios based on six individual valuation ratios and three hybrids of them. The use of either dividend yield criterion or one of three composite value measures being examined results in best value portfolio performance according to all performance metrics used. Parallel to the findings of many international studies, our results from performance comparisons indicate that for the sample data employed, the yearly reformation of portfolios is not necessarily optimal in order to maximally gain from the value premium. Instead, the value investor may extend his holding period up to 5 years without any decrease in long-term portfolio performance. The same holds also for the results of the third paper that examines the applicability of data envelopment analysis (DEA) method in discriminating the undervalued stocks from overvalued ones. The fourth paper examines the added value of combining price momentum with various value strategies. Taking account of the price momentum improves the performance of value portfolios in most cases. The performance improvement is greatest for value portfolios that are formed on the basis of the 3-composite value measure which consists of D/P, B/P and EBITDA/EV ratios. The risk-adjusted performance can be enhanced further by following 130/30 long-short strategy in which the long position of value winner stocks is leveraged by 30 percentages while simultaneously selling short glamour loser stocks by the same amount. Average return of the long-short position proved to be more than double stock market average coupled with the volatility decrease. The fifth paper offers a new approach to combine value and momentum indicators into a single portfolio-formation criterion using different variants of DEA models. The results throughout the 1994-2010 sample period shows that the top-tercile portfolios outperform both the market portfolio and the corresponding bottom-tercile portfolios. In addition, the middle-tercile portfolios also outperform the comparable bottom-tercile portfolios when DEA models are used as a basis for stock classification criteria. To my knowledge, such strong performance differences have not been reported in earlier peer-reviewed studies that have employed the comparable quantile approach of dividing stocks into portfolios. Consistently with the previous literature, the division of the full sample period into bullish and bearish periods reveals that the top-quantile DEA portfolios lose far less of their value during the bearish conditions than do the corresponding bottom portfolios. The sixth paper extends the sample period employed in the fourth paper by one year (i.e. 1993- 2009) covering also the first years of the recent financial crisis. It contributes to the fourth paper by examining the impact of the stock market conditions on the main results. Consistently with the fifth paper, value portfolios lose much less of their value during bearish conditions than do stocks on average. The inclusion of a momentum criterion somewhat adds value to an investor during bullish conditions, but this added value turns to negative during bearish conditions. During bear market periods some of the value loser portfolios perform even better than their value winner counterparts. Furthermore, the results show that the recent financial crisis has reduced the added value of using combinations of momentum and value indicators as portfolio formation criteria. However, since the stock markets have historically been bullish more often than bearish, the combination of the value and momentum criteria has paid off to the investor despite the fact that its added value during bearish periods is negative, on an average.

Does short-term virologic failure translate to clinical events in antiretroviral-naïve patients initiating antiretroviral therapy in clinical practice?

OBJECTIVE: To determine whether differences in short-term virologic failure among commonly used antiretroviral therapy (ART) regimens translate to differences in clinical events in antiretroviral-naïve patients initiating ART. DESIGN: Observational cohort study of patients initiating ART between January 2000 and December 2005. SETTING: The Antiretroviral Therapy Cohort Collaboration (ART-CC) is a collaboration of 15 HIV cohort studies from Canada, Europe, and the United States. STUDY PARTICIPANTS: A total of 13 546 antiretroviral-naïve HIV-positive patients initiating ART with efavirenz, nevirapine, lopinavir/ritonavir, nelfinavir, or abacavir as third drugs in combination with a zidovudine and lamivudine nucleoside reverse transcriptase inhibitor backbone. MAIN OUTCOME MEASURES: Short-term (24-week) virologic failure (>500 copies/ml) and clinical events within 2 years of ART initiation (incident AIDS-defining event, death, and a composite measure of these two outcomes). RESULTS: Compared with efavirenz as initial third drug, short-term virologic failure was more common with all other third drugs evaluated; nevirapine (adjusted odds ratio = 1.87, 95% confidence interval (CI) = 1.58-2.22), lopinavir/ritonavir (1.32, 95% CI = 1.12-1.57), nelfinavir (3.20, 95% CI = 2.74-3.74), and abacavir (2.13, 95% CI = 1.82-2.50). However, the rate of clinical events within 2 years of ART initiation appeared higher only with nevirapine (adjusted hazard ratio for composite outcome measure 1.27, 95% CI = 1.04-1.56) and abacavir (1.22, 95% CI = 1.00-1.48). CONCLUSION: Among antiretroviral-naïve patients initiating therapy, between-ART regimen, differences in short-term virologic failure do not necessarily translate to differences in clinical outcomes. Our results should be interpreted with caution because of the possibility of residual confounding by indication.

Regional Differences in Living Standards in Eastern European Countries - Changes During the Transition

This research aimed to discover how differences in living standards between regional units changed during the period of transformation from 1990 to 1995 in Poland, the Slovak Republic, the Czech Republic and Hungary. The standard of living was measured by the so-called Living Standard Index (LSI), a composite taxonomic measure. Fixed reference points make it possible to compare the standard of living in regional administrative units and to study its dynamics. The analysis was country-specific, since the lists of variable were not fully identical for all the countries studied. The main tools used were LSI variability measures (mainly variance and standard deviation). By identifying trend patterns in the characteristics of LSIs, it was possible to compare the different countries. It was found that * differences in living standards between regional units have been decreasing during the transformation in Poland and in the Czech Republic. In the latter this process is slow and smooth, while in Poland there was a relatively sharp decline which then stopped entirely in 1994 * the only country with increasing differences between regions is Hungary and these differences are growing at a constant rate * the lowest level of regional differences in the LSI was found in Poland, followed by the Slovak Republic and the Czech Republic * the regional differences in Hungary are almost twice as high as in the Czech Republic

Does short-term virologic failure translate to clinical events in antiretroviral-naïve patients initiating antiretroviral therapy in clinical practice?

OBJECTIVE: To determine whether differences in short-term virologic failure among commonly used antiretroviral therapy (ART) regimens translate to differences in clinical events in antiretroviral-naïve patients initiating ART. DESIGN: Observational cohort study of patients initiating ART between January 2000 and December 2005. SETTING: The Antiretroviral Therapy Cohort Collaboration (ART-CC) is a collaboration of 15 HIV cohort studies from Canada, Europe, and the United States. STUDY PARTICIPANTS: A total of 13 546 antiretroviral-naïve HIV-positive patients initiating ART with efavirenz, nevirapine, lopinavir/ritonavir, nelfinavir, or abacavir as third drugs in combination with a zidovudine and lamivudine nucleoside reverse transcriptase inhibitor backbone. MAIN OUTCOME MEASURES: Short-term (24-week) virologic failure (>500 copies/ml) and clinical events within 2 years of ART initiation (incident AIDS-defining event, death, and a composite measure of these two outcomes). RESULTS: Compared with efavirenz as initial third drug, short-term virologic failure was more common with all other third drugs evaluated; nevirapine (adjusted odds ratio = 1.87, 95% confidence interval (CI) = 1.58-2.22), lopinavir/ritonavir (1.32, 95% CI = 1.12-1.57), nelfinavir (3.20, 95% CI = 2.74-3.74), and abacavir (2.13, 95% CI = 1.82-2.50). However, the rate of clinical events within 2 years of ART initiation appeared higher only with nevirapine (adjusted hazard ratio for composite outcome measure 1.27, 95% CI = 1.04-1.56) and abacavir (1.22, 95% CI = 1.00-1.48). CONCLUSION: Among antiretroviral-naïve patients initiating therapy, between-ART regimen, differences in short-term virologic failure do not necessarily translate to differences in clinical outcomes. Our results should be interpreted with caution because of the possibility of residual confounding by indication.

Is the relation between early post-session reports and treatment outcome an epiphenomenon of intake distress and early response? A multi-predictor analysis in outpatient psychotherapy

The early phase of psychotherapy has been regarded as a sensitive period in the unfolding of psychotherapy leading to positive outcomes. However, there is disagreement about the degree to which early (especially relationship-related) session experiences predict outcome over and above initial levels of distress and early response to treatment. The goal of the present study was to simultaneously examine outcome at post treatment as a function of (a) intake symptom and interpersonal distress as well as early change in well-being and symptoms, (b) the patient's early session-experiences, (c) the therapist's early session-experiences/interventions, and (d) their interactions. The data of 430 psychotherapy completers treated by 151 therapists were analyzed using hierarchical linear models. Results indicate that early positive intra- and interpersonal session experiences as reported by patients and therapists after the sessions explained 58% of variance of a composite outcome measure, taking intake distress and early response into account. All predictors (other than problem-activating therapists' interventions) contributed to later treatment outcomes if entered as single predictors. However, the multi-predictor analyses indicated that interpersonal distress at intake as well as the early interpersonal session experiences by patients and therapists remained robust predictors of outcome. The findings underscore that early in therapy therapists (and their supervisors) need to understand and monitor multiple interconnected components simultaneously

A case study on the eco-efficiency performance of a composite processing industry: evaluation and quantification of potential improvements

In this study, an attempt was made in order to measure and evaluate the eco-efficiency performance of a pultruded composite processing company. For this purpose the recommendations of World Business Council for Sustainable Development (WCSD) and the directives of ISO 14301 standard were followed and applied. The main general indicators of eco-efficiency, as well as the specific indicators, were defined and determined. With basis on indicators’ figures, the value profile, the environmental profile, and the pertinent eco-efficiency ratios were established and analyzed. In order to evaluate potential improvements on company eco-performance, new indicators values and eco-efficiency ratios were estimated taking into account the implementation of new proceedings and procedures, at both upstream and downstream of the production process, namely: i) Adoption of a new heating system for pultrusion die-tool in the manufacturing process, more effective and with minor heat losses; ii) Recycling approach, with partial waste reuse of scrap material derived from manufacturing, cutting and assembly processes of GFRP profiles. These features lead to significant improvements on the sequent assessed eco-efficiency ratios of the present case study, yielding to a more sustainable product and manufacturing process of pultruded GFRP profiles.

Assessing the eco-efficiency of a composite processing industry: evaluation and quantification of potential improvements’

In this study, an attempt was made in order to measure and evaluate the eco-efficiency performance of a pultruded composite processing company. For this purpose the recommendations of World Business Council for Sustainable Development (WCSD) and the directives of ISO 14301 standard were followed and applied. The main general indicators of eco-efficiency, as well as the specific indicators, were defined and determined. With basis on indicators’ figures, the value profile, the environmental profile, and the pertinent ecoefficiency’s ratios were established and analyzed. In order to evaluate potential improvements on company eco-performance, new indicators values and eco-efficiency ratios were estimated taking into account the implementation of new proceedings and procedures, both in upstream and downstream of the production process, namely: a) Adoption of new heating system for pultrusion die in the manufacturing process, more effective and with minor heat losses; c) Recycling approach, with partial waste reuse of scrap material derived from manufacturing, cutting and assembly processes of GFRP profiles. These features lead to significant improvements on the sequent assessed eco-efficiency ratios of the present case study, yielding to a more sustainable product and manufacturing process of pultruded GFRP profiles.

A case study on the improvement of eco-efficiency ratios: application to a composite processing industry

The World Business Council for Sustainable Development (WBCSD) defines Eco-Efficiency as follows: ‘Eco- Efficiency is achieved by the delivery of competitively priced-goods and services that satisfy human needs and bring quality of life, while progressively reducing ecological impacts and resource intensity throughout the life-cycle to a level at least in line with the earth’s estimated carrying capacity’. Eco-Efficiency is under this point of view a key concept for sustainable development, bringing together economic and ecological progress. Measuring the Eco-Efficiency of a company, factory or business, is a complex process that involves the measurement and control of several and relevant parameters or indicators, globally applied to all companies in general, or specific according to the nature and specificities of the business itself. In this study, an attempt was made in order to measure and evaluate the eco-efficiency of a pultruded composite processing company. For this purpose the recommendations of WBCSD [1] and the directives of ISO 14301 standard [2] were followed and applied. The analysis was restricted to the main business branch of the company: the production and sale of standard GFRP pultrusion profiles. The main general indicators of eco-efficiency, as well as the specific indicators, were defined and determined according to ISO 14031 recommendations. With basis on indicators’ figures, the value profile, the environmental profile, and the pertinent eco-efficiency’s ratios were established and analyzed. In order to evaluate potential improvements on company eco-performance, new indicators values and ecoefficiency ratios were estimated taking into account the implementation of new proceedings and procedures, both in upstream and downstream of the production process, namely: a) Adoption of new heating system for pultrusion die in the manufacturing process, more effective and with minor heat losses; b) Implementation of new software for stock management (raw materials and final products) that minimize production failures and delivery delays to final consumer; c) Recycling approach, with partial waste reuse of scrap material derived from manufacturing, cutting and assembly processes of GFRP profiles. In particular, the last approach seems to significantly improve the eco-efficient performance of the company. Currently, by-products and wastes generated in the manufacturing process of GFRP profiles are landfilled, with supplementary added costs to this company traduced by transport of scrap, landfill taxes and required test analysis to waste materials. However, mechanical recycling of GFRP waste materials, with reduction to powdered and fibrous particulates, constitutes a recycling process that can be easily attained on heavy-duty cutting mills. The posterior reuse of obtained recyclates, either into a close-looping process, as filler replacement of resin matrix of GFRP profiles, or as reinforcement of other composite materials produced by the company, will drive to both costs reduction in raw materials and landfill process, and minimization of waste landfill. These features lead to significant improvements on the sequent assessed eco-efficiency ratios of the present case study, yielding to a more sustainable product and manufacturing process of pultruded GFRP profiles.

A Methodology to measure shareholder value orientation and shareholder value creation aimed at providing a research basis to investigate the link between both magnitudes

Does shareholder value orientation lead to shareholder value creation? This article proposes methods to quantify both, shareholder value orientation and shareholder value creation. Through the application of these models it is possible to quantify both dimensions and examine statistically in how far shareholder value orientation explains shareholder value creation. The scoring model developed in this paper allows quantifying the orientation of managers towards the objective to maximize wealth of shareholders. The method evaluates information that comes from the companies and scores the value orientation in a scale from 0 to 10 points. Analytically the variable value orientation is operationalized expressing it as the general attitude of managers toward the objective of value creation, investment policy and behavior, flexibility and further eight value drivers. The value creation model works with market data such as stock prices and dividend payments. Both methods where applied to a sample of 38 blue chip companies: 32 firms belonged to the share index IBEX 35 on July 1st, 1999, one company represents the “new economy” listed in the Spanish New Market as per July 1st, 2001, and 5 European multinational groups formed part of the EuroStoxx 50 index also on July 1st, 2001. The research period comprised the financial years 1998, 1999, and 2000. A regression analysis showed that between 15.9% and 23.4% of shareholder value creation can be explained by shareholder value orientation.

Visual efficiency detection index : a new composite measure of visual search

Visual search is an important component of our interaction with our surroundings, allowing us to successfully identify external cues that impact our spatial navigation. Previous research has established fixation duration, fixation count, saccade velocity, and saccade amplitude as important indices of visual search. We examined the Visual Efficiency Detection Index (VEDI) comprising multiple aspects of visual search performance into a single measure of global visual performance. Forty participants, 10 adults ages 22-48, and children ages 6, 8, and 10, completed tests of working memory and visual search in response to stimuli relevant to pedestrian decision making. Results indicated VEDI statistically relates to established indices of visual search in relation to their interpretability for human performance. The VEDI was also sensitive to developmental differences in visual search performance, suggesting insight to its utility in the developmental psychological literature.