Predicting future earnings growth: a test of the dividend payout ratio in the Australian market

This paper examines the use of the payout ratio as a predictor of a firm’s future earnings growth. Recent evidence rejects the hypothesis that firm which retain a large portion of their earnings have strong future earnings growth. Higher dividend payout ratios instead correspond to higher future earnings growth. Examining both listed and delisted firms on the Australian stock exchange over the period 1989 to 2008, we provide further evidence that the dividend payout ratio is positively linked to future earnings growth. The results hold over both one, three and five year periods. Furthermore, our results rejected claims that such a relationship was caused by simple mean reversion in earnings. We find no evidence to support the cash flow signaling and free cash flow hypotheses as an explanation for this relationship.

Leverage, Volatile Future Earnings Growth and Expected Stock Returns

We provide theory and evidence to complement Choi's [RFS, 2013] important new insights on the returns to equity in `value' firms. We show that higher future earnings growth ameliorates the value-reducing effect of leverage and, because the market for earnings is incomplete, reduces the earnings-risk sensitivity of the default option. Ceteris paribus, a levered firm with low (high) earnings growth is more sensitive to the first (second) of these effects thus generating higher (lower) expected returns. We demonstrate this by modeling equity as an Asian-style call option on net earnings and find significant empirical support for our hypotheses.

Future Earnings Growth Volatility and the Value Premium

The value premium is well established in empirical asset pricing, but to date there is little understanding as to its fundamental drivers. We use a stochastic earnings valuation model to establish a direct link between the volatility of future earnings growth and firm value. We illustrate that risky earnings growth affects growth and value firms differently. We provide empirical evidence that the volatility of future earnings growth is a significant determinant of the value premium. Using data on individual firms and characteristic-sorted test portfolios, we also find that earnings growth volatility is significant in explaining the cross-sectional variation of stock returns. Our findings imply that the value premium is the rational consequence of accounting for risky earnings growth in the firm valuation process.

IFPA Meeting 2011 workshop report I: Placenta: Predicting future health; roles of lipids in the growth and development of feto-placental unit; placental nutrient sensing; placental research to solve clinical problems--a translational approach

Workshops are an important part of the IFPA annual meeting as they allow for discussion of specialized topics. At IFPA meeting 2011 there were twelve themed workshops, four of which are summarized in this report. These workshops related to both basic science and clinical research into placental growth and nutrient sensing and were divided into 1) placenta: predicting future health; 2) roles of lipids in the growth and development of feto-placental unit; 3) placental nutrient sensing; 4) placental research to solve clinical problems: a translational approach.

A new future for growth factor complexes as wound therapies?

Background: Topical administration of growth factors (GFs) has displayed some potential in wound healing, but variable efficacy, high doses and costs have hampered their implementation. Moreover, this approach ignores the fact that wound repair is driven by interactions between multiple GFs and extracellular matrix (ECM) proteins. The Problem: Deep dermal partial thickness burn (DDPTB) injuries are the most common burn presentation to pediatric hospitals and also represent the most difficult burn injury to manage clinically. DDPTB often repair with a hypertrophic scar. Wounds that close rapidly exhibit reduced scarring. Thus treatments that shorten the time taken to close DDTPB’s may coincidently reduce scarring. Basic/Clinical Science Advances: We have observed that multi-protein complexes comprised of IGF and IGF-binding proteins bound to the ECM protein vitronectin (VN) significantly enhance cellular functions relevant to wound repair in human skin keratinocytes. These responses require activation of both the IGF-1R and the VN-binding αv integrins. We have recently evaluated the wound healing potential of these GF:VN complexes in a porcine model of DDTPB injury. Clinical Care Relevance: This pilot study demonstrates that GF:VN complexes hold promise as a wound healing therapy. Enhanced healing responses were observed after treatment with nanogram doses of the GF:VN complexes in vitro and in vivo. Critically healing was achieved using substantially less GF than studies in which GFs alone have been used. Conclusion: These data suggest that coupling GFs to ECM proteins, such as VN, may ultimately prove to be an improved technique for the delivery of novel GF-based wound therapies.

Adolescent involvement in anti-social and delinquent behaviours : predicting future injury risk

The purpose of this study was to challenge the broadly based focus of injury prevention strategies towards concern with the needs of young adolescents who engage in multiple anti-social and delinquent behaviours. Five hundred and forty 13-14 year olds reported on injuries and truancy, violence, illegal road behaviours, drug, and alcohol use. Engagement in these behaviours was found to contribute to the likelihood of an injury. Those engaging in the most anti-social and delinquent behaviours were around five times more likely to report medically-treated injuries in the past three months. Their likelihood of future injury was 1.8 times more likely when they were followed up three months later. The engagement in multiple delinquent and illegal behaviours thus significantly increased the likelihood of injury and identifies a particularly vulnerable group. The findings also suggest that reaching these young people represents a key target for change strategies in injury prevention programs.

Predicting future thermal habitat suitability of competing native and invasive fish species: from metabolic scope to oceanographic modelling

Global increase in sea temperatures has been suggested to facilitate the incoming and spread of tropical invaders. The increasing success of these species may be related to their higher physiological performance compared with indigenous ones. Here, we determined the effect of temperature on the aerobic metabolic scope (MS) of two herbivorous fish species that occupy a similar ecological niche in the Mediterranean Sea: the native salema (Sarpa salpa) and the invasive marbled spinefoot (Siganus rivulatus). Our results demonstrate a large difference in the optimal temperature for aerobic scope between the salema (21.8°C) and the marbled spinefoot (29.1°C), highlighting the importance of temperature in determining the energy availability and, potentially, the distribution patterns of the two species. A modelling approach based on a present-day projection and a future scenario for oceanographic conditions was used to make predictions about the thermal habitat suitability (THS, an index based on the relationship between MS and temperature) of the two species, both at the basin level (the whole Mediterranean Sea) and at the regional level (the Sicilian Channel, a key area for the inflow of invasive species from the Eastern to the Western Mediterranean Sea). For the present-day projection, our basin-scale model shows higher THS of the marbled spinefoot than the salema in the Eastern compared with the Western Mediterranean Sea. However, by 2050, the THS of the marbled spinefoot is predicted to increase throughout the whole Mediterranean Sea, causing its westward expansion. Nevertheless, the regional-scale model suggests that the future thermal conditions of Western Sicily will remain relatively unsuitable for the invasive species and could act as a barrier for its spread westward. We suggest that metabolic scope can be used as a tool to evaluate the potential invasiveness of alien species and the resilience to global warming of native species.

Ocean acidification with (de)eutrophication will alter future phytoplankton growth and succession.

Human activity causes ocean acidification (OA) though the dissolution of anthropogenically generated CO2 into seawater, and eutrophication through the addition of inorganic nutrients. Eutrophication increases the phytoplankton biomass that can be supported during a bloom, and the resultant uptake of dissolved inorganic carbon during photosynthesis increases water-column pH (bloom-induced basification). This increased pH can adversely affect plankton growth. With OA, basification commences at a lower pH. Using experimental analyses of the growth of three contrasting phytoplankton under different pH scenarios, coupled with mathematical models describing growth and death as functions of pH and nutrient status, we show how different conditions of pH modify the scope for competitive interactions between phytoplankton species. We then use the models previously configured against experimental data to explore how the commencement of bloom-induced basification at lower pH with OA, and operating against a background of changing patterns in nutrient loads, may modify phytoplankton growth and competition. We conclude that OA and changed nutrient supply into shelf seas with eutrophication or de-eutrophication (the latter owing to pollution control) has clear scope to alter phytoplankton succession, thus affecting future trophic dynamics and impacting both biogeochemical cycling and fisheries.

Predicting long-term growth in students' mathematics achievement: the unique contributions of motivation and cognitive strategies

This research examined how motivation (perceived control, intrinsic motivation, and extrinsic motivation), cognitive learning strategies (deep and surface strategies), and intelligence jointly predict long-term growth in students' mathematics achievement over 5 years. Using longitudinal data from six annual waves (Grades 5 through 10; Mage = 11.7 years at baseline; N = 3,530), latent growth curve modeling was employed to analyze growth in achievement. Results showed that the initial level of achievement was strongly related to intelligence, with motivation and cognitive strategies explaining additional variance. In contrast, intelligence had no relation with the growth of achievement over years, whereas motivation and learning strategies were predictors of growth. These findings highlight the importance of motivation and learning strategies in facilitating adolescents' development of mathematical competencies.

The metabolic syndrome as a tool for predicting future diabetes : the AusDiab study

Objective. To compare the ability of the metabolic syndrome (MetS), a diabetes prediction model (DPM), a noninvasive risk questionnaire and individual glucose measurements to predict future diabetes.

Design. Five-year longitudinal cohort study. Tools tested included MetS definitions [World Health Organization, International Diabetes Federation, ATPIII and European Group for the study of Insulin Resistance (EGIR)], the FINnish Diabetes RIsk SCore risk questionnaire, the DPM, fasting and 2-h post load plasma glucose.

Setting. Adult Australian population.

Subjects. A total of 5842 men and women without diabetes ≥25 years. Response 58%. A total of 224 incident cases of diabetes.

Results. In receiver operating characteristic curve analysis, the MetS was not a better predictor of incident diabetes than the DPM or measurement of glucose. The risk for diabetes among those with prediabetes but not MetS was almost triple that of those with MetS but not prediabetes (9.0% vs. 3.4%). Adjusted for component parts, the MetS was not a significant predictor of incident diabetes, except for EGIR in men [OR 2.1 (95% CI 1.2–3.7)].

Conclusions. A single fasting glucose measurement may be more effective and efficient than published definitions of the MetS or other risk constructs in predicting incident diabetes. Diagnosis of the MetS did not confer increased risk for incident diabetes independent of its individual components, with an exception for EGIR in men. Given these results, debate surrounding the public health utility of a MetS diagnosis, at least for identification of incident diabetes, is required.

Predicting future intensive care demand in Australia

BACKGROUND: Predicting future demand for intensive care is vital to planning the allocation of resources.

METHOD: Mathematical modelling using the autoregressive integrated moving average (ARIMA) was applied to intensive care data from the Australian and New Zealand Intensive Care Society (ANZICS) Core Database and population projections from the Australian Bureau of Statistics to forecast future demand in Australian intensive care.

RESULTS: The model forecasts an increase in ICU demand of over 50% by 2020, with current total ICU bed-days (in 2007) of 471 358, predicted to increase to 643 160 by 2020. An increased rate of ICU use by patients older than 80 years was also noted, with the average bed-days per 10 000 population for this group increasing from 396 in 2006 to 741 in 2007.

CONCLUSION: An increase in demand of the forecast magnitude could not be accommodated within current ICU capacity. Significant action will be required.