Green Buildings: Similar to Other Premium Buildings?

The statistics, finance, and real estate literature regularly rely on propensity score matching techniques to balance samples of data where randomized treatment assignment is not possible. In the sustainable commercial real estate literature the technique has seen substantive use. To analyze price and rent premiums for green buildings, several studies have used propensity scores to ensure samples that contains eco-labeled and un-labeled buildings reflect a randomized assignment of the treatment. Underpinning the argument for the use of propensity scores is the notion that green buildings contain similar attributes to non-green buildings. However, if the green labels were ignored, would premium buildings be otherwise statistically similar to premium buildings in the market? Here, we analyze a research question focusing on the extent to which propensity scores can predict a green building using the standard building attributes and whether propensity scoring is an econometric necessity?     

Building the green way

Just five or six years ago, the term "green building" evoked visions of barefoot, tie-dyed, granola-munching denizens. There's been a large shift in perception. Of course, green buildings are still known for conserving natural resources by, for example, minimizing on-site grading, using alternative materials, and recycling construction waste. But people now see the financial advantages as well. Well-designed green buildings yield lower utility costs, greater employee productivity, less absenteeism, and stronger attraction and retention of workers than standard buildings do. Green materials, mechanical systems, and furnishings have become more widely available and considerably less expensive than they used to be-often cheaper than their standard counterparts. So building green is no longer a pricey experiment; just about any company can do it on a standard budget by following the ten rules outlined by the author. Reliable building-rating systems like the U.S. Green Building Council's rigorous Leadership in Energy and Environmental Design (LEED) program have done much to underscore the benefits of green construction. LEED evaluates buildings and awards points in several areas, such as water efficiency and indoor environmental quality. Other rating programs include the UK's BREEAM (Building Research Establishment's Environmental Assessment Method) and Australia's Green Star. Green construction is not simply getting more respect; it is rapidly becoming a necessity as corporations push it fully into the mainstream over the next five to ten years. In fact, the author says, the owners of standard buildings face massive obsolescence. To avoid this problem, they should carry out green renovations. Corporations no longer have an excuse for eschewing environmental and economic sustainability. They have at their disposal tools proven to lower overhead costs, improve productivity, and strengthen the bottom line.     

Green Design and the Market for Commercial Office Space

This paper considers the relationship between energy-efficient design and the leasing/sales markets for commercial real estate. An economic model is provided that considers lease rates and occupancy in simultaneous equilibrium. The behavior of both is predicted to be influenced by efficient design attributes. Selling price is determined by both rents and occupancy; therefore the impact of efficient design on commercial sales activity should be distributed through the leasing market. The model is tested empirically using a national sample of sales and leasing data for class A office buildings. The evidence indicates that “green” buildings achieve superior rents and sustain significantly higher occupancy. The improved performance in the rental market is reflected in a significant premium for the selling price of Energy Star-labeled and LEED-certified properties.     

Medical savings accounts: why do they work?

This article analyzes and reviews the cost and design characteristics of medical savings accounts (MSAs). By placing premium savings from high-deductible health insurance in medical savings accounts, individuals have an incentive to shop for medical services. A more market-oriented health insurance and delivery system results, as individuals are now both users and buyers of health care. Data show that most families would accumulate balances in their MSAs that may be used for future medical expenses or savings. Through program design, the potential problems of adverse selection and cost to risk can be greatly reduced.     

The smart money is in cash? Financial literacy and liquid savings among U.S. families

Most financial advisors recommend storing three to six months of expenses in liquid assets in case of an emergency. Yet we estimate that more than half of U.S. families do not have at least three months of their non-discretionary expenses in liquid savings. We find that financial literacy is strongly predictive of having three months of liquid savings, controlling for income, income variability, and even parental resources. We also find that financial literacy predicts liquid savings across the income distribution. These results indicate that accumulation of an emergency fund is not simply a function of income. Finally, financial literacy is predictive of liquid savings even among high illiquid wealth households. This suggests that the phenomenon of “wealthy hand-to-mouth” families may reflect financial mistakes rather than portfolio optimization. Our paper highlights the importance of financial knowledge in explaining families’ preparedness to deal with unexpected expenses or disruption in their income.     

Portfolio greenness and the financial performance of REITs

This paper investigates the effects of the energy efficiency and sustainability of commercial properties on the operating and stock performance of a sample of US REITs, providing insight into the net benefits of green buildings. We match data on LEED- and Energy Star-certified buildings with detailed information on REIT portfolios and calculate the share of green properties for each REIT over the 2000–2011 period. We estimate a two-stage regression model and document that the greenness of REITs is positively related to three measures of operating performance – return on assets, return on equity and the ratio of funds from operations to total revenue. We also document that there is no significant relationship between the greenness of property portfolios and abnormal stock returns, suggesting that stock prices already reflect the higher cash flows deriving from investments in more efficient properties. However, REITs with a higher fraction of green properties display significantly lower market betas.     

International asset pricing under segmentation and PPP deviations

We analyze the impact of both purchasing power parity (PPP) deviations and market segmentation on asset pricing and investor's portfolio holdings. The freely traded securities command a world market risk premium and an inflation risk premium. The securities that can be held by only a subset of investors command two additional premiums: a conditional market risk premium and a segflation risk premium. Our model is empirically supported with important implications for tests of international asset pricing.     

现收现付制与基金制的养老保险制度成本比较——基于养老保险收支平衡数理模型

养老保险的制度成本是指提供一定的养老金给付所需要的缴费和管理费用。若不考虑管理费用,养老保险的制度成本就是缴费水平。本文不考虑养老保险的管理费用,运用养老保险收支平衡数理模型,来比较分析现收现付制与基金制的养老保险制度成本。     

Energy Savings and Economic Impact of Green Roofs: A Pilot Study

This study focuses on the energy savings and economic impact of green roof systems applied to Central Bodrum, a district in southwestern Turkey. Energy savings of the buildings were evaluated based on the added thermal resistance on the roofs and corresponding heat transmission through the roofs. Four different scenarios, two without green financing and two with green consumer loans for retrofitting financed by the central government via the state-owned banks, were studied. The economic impact of this activity on the economy is estimated based on sectoral employment multipliers for a period of 10 years. Based on the scenario analysis and the priorities of the Turkish economy, given the employment benefits and energy savings which would reduce the energy demand in the area in the peak season, we propose that the government implements green consumer loans for retrofitting through the state-owned banks.     

An analysis of the Medical Savings Account as an alternative retirement savings Vehicle

Personal savings as a percentage of disposable income have dropped steadily since the early 1980s. Savings have continued to decline in 1999, as the savings rate—savings as a percentage of after-tax income—dropped to a record low of minus 0.7% in April 1999, according to the Department of Commerce. The study finds that MSA-type accounts are a viable supplement to retirement savings, but should not be used as a replacement for existing retirement alternatives given their current structure. Results show that future health care expenditures are an important factor in the success or failure of MSAs as supplemental retirement accounts. Medical Savings Accounts are currently eligible for long-term care expenses, and to the extent that such expenses occur during retirement, MSA balances could be used to pay for retirement expenses. In that respect the accounts already capture the characteristics of a retirement savings account. A comparison of the Roth IRA with the MSA as defined by the 1996 HIPAA legislation is also conducted.     

Evaluating the operational and profitability efficiency of a UAE-based commercial bank

This study investigates the operating and profitability efficiency of 15 branches of UAE-based commercial bank utilising the data envelopment analysis method. The results indicate that efficiency levels among the various branches vary and that there is room for improvement. Profitability efficiency appears to be higher than operational efficiency. Regarding the financial ratios analysis, a consistent effect cannot be obtained and it cannot be determined which branch has an overall position in terms of higher performance. The historical analysis of the branch network performance indicates that management should consider major operational improvement efforts to reduce employees' expenses and other operating expenses combined with an increase in the total loans portfolio. Improvement in both interest and non-interest revenues is required to increase profitability efficiency of the whole branch network.     

Corporate Multinationality and Acquirer Returns

This paper provides evidence on how corporate multinationality from the perspective of acquiring firms relates to M&A returns. Using multivariate regressions and a large dataset of over 6,000 M&As (both cross-border and domestic) by UK firms during 1987 to 2014, the paper finds multinationality to be associated with significantly higher short-run announcement returns and long-run operating performance. While the multinationality premium (higher M&A returns for multinationals) persists over time, it seems to be restricted to firms with superior resource/managerial capabilities and minimal agency problems. Finally, the multinationality premium appears to be driven by foreign acquisitions into advanced economies. The results are robust to correcting for sample selection bias and controlling for several firm and deal characteristics, as well as accounting for firm-, industry-, and year-fixed effects. Collectively, the findings imply that multinationality could be a source of value creation for acquiring firms, particularly in foreign acquisitions, which tend to be complex, and, thereby, require superior managerial capabilities to succeed.     

Sustainable technologies and the innovation–regulation paradox

This article examines the paradox between innovation and regulation and its implication for the adoption of sustainable technologies in the domestic sector of the construction industry. The case of UK is examined, where progress towards the inclusion of social and environmental considerations has been slow. Recent change in attitude in the private sector, combined with government initiatives, has prompted a more sustainable agenda in construction. With significant reductions in greenhouse gas emissions required to meet climate change targets, the case for a particular energy-saving technology—natural thermal insulation materials for cavity wall insulation—suitable for widespread use in residential buildings, is assessed. In addition to the inherent conservatism in the construction industry, additional barriers inhibiting the uptake of new sustainable thermal insulation technologies include capital costs, the failure of the market to account for social and environmental costs and savings and their perceived cost-effectiveness and performance over a 50-year lifetime. Policy implications are drawn from the analysis.     

What explains the value premium? The case of adjustment costs,operating leverage and financial leverage

This paper empirically examines and compares the different theoretical predictions on how adjustment costs, operating and financial leverage influence the value premium. Consistent with Ozdagli (2012), financial leverage plays a dominant role, supported by adjustment costs (which represent the degree of investment irreversibility). Specifically, the observed value premium is driven by the financial leverage differences between value and growth firms, partially neutralized by investment irreversibility. The relation between the value premium and investment irreversibility is contrary to the intuition in Zhang (2005) and Cooper (2006). Operating leverage does not significantly influence the value premium.     

Split Bond Ratings and Information Opacity Premiums

This paper examines the relationship between split bond ratings and bond yields at the notch level for newly issued corporate bonds. We find that split rated bonds average a 7-basis-point yield premium over nonsplit rated bonds of similar credit risk. The yield premium increases from 5 basis points for one-notch splits to 15 (20) basis points for two-notch (three-notch) splits. These findings indicate that investors demand higher yields for split rated bonds to compensate for the information opacity of such bonds. In addition, the yield premium for split rated bonds is higher during economic recessions, indicating investors are more risk averse during economic downturns. Consequently, split ratings impose higher borrowing costs for firms, especially during economic downturns.     

The impact of the Arab Spring and the Ebola outbreak on African equity mutual fund investor decisions

Financial development and stock markets have been widely considered to be key factors in economic growth. Among institutional investors, mutual funds play a key role in providing financial resources to stock markets, particularly in developing countries. Different from other investments, mutual fund flows could be affected by retail investors’ behavior and their overreaction to specific events. We considered 78 equity mutual funds that are geographically specialized in African countries and observed monthly flows and performance for the period of 2006–2015. We find that two major events, Ebola and the Arab Spring, significantly affected the fund flows, controlling for fund performance, expenses and market returns. Retail investors over-reacted to these major events, withdrawing their savings from the African mutual funds. This result is particularly strong when connected to the media coverage of these events: the higher the number of articles about Arab Spring and Ebola, the higher the withdrawals. These irrational investors’ behavior damaged the funds’ managers market timing ability, and reduced the equity capital injection into African stock markets. Our results have several implications for both holders of frontier market mutual funds and the overall asset management industry.     

Unconventional monetary policy announcements and risk aversion: evidence from the U.S. and European equity markets

ABSTRACT

This paper examines the role of unconventional monetary policy announcements on risk aversion – as proxied by the variance premium – by using panel data analysis. The objective of this empirical analysis is to investigate the risk-taking channel of monetary policy for the major European and U.S. equity markets by studying the impact that the announcements of an unconventional monetary policy has on market uncertainty and risk perception. By measuring the difference between risk-neutral and realised and conditional variance, we estimate the variance premium, which captures the impact that pricing concerns have on the prices of options. The empirical analysis indicates that easing monetary policies can significantly reduce the variance premium. In addition, we examine the risk premium structure across markets to determine the potential differences in investors’ risk aversion.     

Model Misspecification, the Equilibrium Natural Interest Rate, and the Equity Premium

This paper analyzes the natural rate of interest and the equity premium in a nonlinear model where agents are uncertain over both future technology growth and the future course of monetary policy. I show that model uncertainty, and notably uncertainty on the future course of monetary policy, can give rise to a sizable precautionary savings motive. This result is potentially problematic for both the estimation of the natural rate and its use as a policy indicator. Monetary uncertainty can also contribute to amplify the equity premium, and to account for its apparent, positive link with inflation.     

Is mandated independence necessary for audit quality?

Independence (in fact as well as in appearance) is widely thought to be necessary for the quality of audits, and audit quality is often equated with independence. Private incentives to demand (and supply) independent certification of financial statements are thought to be insufficient, thus the need to mandate independence through regulation. This study presents data from a field experiment on the unregulated market for certification of baseball cards to assess the role of independence vis-à-vis other auditor attributes such as competence, price, and service on audit quality. In our field experiment, we examine prices of baseball cards sold on eBay with or without third party certification. In addition, the certifier was either independent or deeply immersed in providing other services to market participants. We find that market participants pay a significant premium for certified cards. Certifiers who are deeply immersed (and therefore apparently less independent) also provide higher quality service in the form of being stricter graders, command larger price premiums, and dominate in market share. Implications for independence and audit quality are discussed.     

Worries and plans as individuals approach retirement

The primary objective of an employment-based retirement plan is to provide a secure and adequate income for workers throughout retirement. In the defined contribution (DC) framework, asset accumulation is a means to the end, but not the end. Drawing retirement income from savings and paying for health care expenses in retirement are the two issues that concern individuals the most as they approach retirement. This article examines the attitudes of near-retirees regarding these risks and their plans for managing them. The author discusses how DC plan design can have a major impact on how individuals convert their retirement savings to retirement income; differences in survey responses between those who have consulted a financial advisor or other financial professional and those who have not; and the role of trust in implementing advice.