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An extension of the validity of »Student»-Fisher's law of distribution

Abstract

One of the fundamental laws of the distribution of errors within modern theoretical statistics is the »Student»-Fisher law of distribution, which answers the question:     

Analysts’ estimates of the cost of equity capital

We explore a large sample of analysts' estimates of the cost of equity capital (CoE) to evaluate their usefulness as expected return proxies (ERP). We find that the CoE estimates are significantly related to a firm's beta, size, book-to-market ratio, leverage, and idiosyncratic volatility but not other risk proxies. Even after controlling for the popular return predictors, the CoE estimates incrementally predict future stock returns. This predictive ability is better explained as the CoE estimates containing ERP information rather than reflecting stock mispricing. When evaluated against traditional ERPs, including the implied costs of capital, the CoE estimates are found to be the least noisy. Finally, we document CoE responses around earnings announcements, demonstrating their usefulness to study discount-rate reactions of market participants. We conclude that analysts' CoE estimates are meaningful ERPs that can be fruitfully employed in a variety of asset pricing contexts.     

Perceptions of climate change among members of the House of Peoples’ Representatives,Ethiopia

Climate change has become an issue which touches upon all spheres of life. To combat the problem, understanding the perceptions of all that have stake in it provides with stronger ground for decision-making. Ethiopia is one those countries that are or going to be severely affected by climate change, the solution of which partly depends on how its key decision-makers perceive the problem. In light of this a questionnaire survey was conducted on 195 volunteering members of the House of People’s Representatives in Ethiopia. The results of data analysis reveal that most identified rainfall variability, declining hydrology and increasing temperature as manifestations of climate change, and emission reduction and forest protection as its key solutions.     

Approximating functionals of local martingales under lack of uniqueness of the Black–Scholes PDE solution

When the underlying stock price is a strict local martingale process under an equivalent local martingale measure, the Black–Scholes PDE associated with a European option may have multiple solutions. In this paper, we study an approximation for the smallest hedging price of such an European option. Our results show that a class of rebate barrier options can be used for this approximation. Among them, a specific rebate option is also provided with a continuous rebate function, which corresponds to the unique classical solution of the associated parabolic PDE. Such a construction makes existing numerical PDE techniques applicable for its computation. An asymptotic convergence rate is also studied when the knock-out barrier moves to infinity under suitable conditions.     

Heart of Darkness： A ＂Parody＂ of Metafiction

约瑟夫·康拉德的小说《黑暗之心》除了具有反殖民主义的高度和探索人性的深度,其叙事手法与后来出现的元小说十分相似,因此极为引人入胜。本文以元小说的叙事手法为背景,通过对比和比较,发现康拉德在《黑暗之心》中采用的其中一种叙事手法与"叙述的叙述"这一典型的元小说叙事手法实则貌合神离,或者说前者是对后者的戏拟,二者的异同也折射出了现代文学与后现代文学之间存在的本质差异与相似之处。     

Analysis of Consumers’ Perceptions of Buying Conditions for Houses

This paper examines the determinants of consumers’ buying attitudes for houses from January 1984 through June 2005. Data on buying attitudes are from responses to the Surveys of Consumer Attitudes conducted by the Survey Research Center, University of Michigan. The determinants considered include current and expected interest rates, wealth, expected real disposable income, expected change in financial status and house prices. The empirical estimates show that a long-run relationship exists between buying attitudes for houses and each of the above variables. Each of these determinants also Granger cause buying perceptions. Generalized impulse responses show that shocks to each of the above variables have a predictable and permanent impact on buying attitudes. Furthermore, generalized variance decompositions suggest that both current and expected interest rates explain a large proportion of the variation in consumers’ perceptions towards buying houses. Since consumers’ attitudes towards buying houses are likely to be translated into actual purchases, this study shows that in order of importance, interest rates—both current and future—have the maximum impact on decisions to purchase houses followed by expectations of real disposable income.

Discussion of ‘The antecedents of the use of continuous auditing in the internal auditing context’

Gonzalez et al. (2012) apply the Unified Theory of Acceptance and Use of Technology (UTAUT, Venkatesh et al., 2003) to the issue of adoption of continuous auditing (CA) by internal auditors. The authors make a very convincing case for the slow evolution of CA and propose that this can be explained by the four factors contained in the UTAUT as well as annual sales and voluntariness of use. They find, in their revised model, that effort expectancy and social influence directly impact intentions to use the technology, while performance expectancy is moderated by annual sales and social influence is moderated by voluntariness of use. Interestingly, the authors also identify geographical differences in these influences. I offer commentary on these findings and suggest avenues for future research in the domain of technology adoption and use in accounting.     

The use of multi‐level modelling in risk research. A secondary analysis of a study of public perceptions of genetically modified food

Many studies have examined the relationship between various individual variables and people's perceptions of genetically modified (GM) food. A problem with this type of research is that contextual factors are completely ignored. This article explores the use of multi‐level modelling in the field of risk research, by re‐analysing a recent British study of public perceptions of GM food. As the study employed a multi‐stage sampling strategy, it could be used to examine simultaneously the individual and spatial variation in trust and the acceptability of GM food. While the geographical variation in acceptability was largely due to compositional differences between the sampling points, a geographical variation in trust remained after controlling for individual differences. The analysis demonstrated that city‐dwellers commonly have more trust in the regulation of GM food than other respondents. Next to being associated with a number of socio‐demographic variables, both acceptability and trust were related strongly to voting intention. Moreover, the results suggest that there is a link between vulnerable groups, feelings of exclusion, and (dis)trust. The article is concluded by arguing that multi‐level modelling provides new opportunities for simultaneously examining the individual and contextual basis of public perceptions of controversial risk issues.     

Completeness,interconnectedness and distribution of interbank exposures—a parameterized analysis of the stability of financial networks

This paper assesses the impact of a certain structure of interbank exposures on the stability of a stylized financial system. Given a certain balance sheet structure of financial institutions, a large number of valid matrices of interbank exposures is created by a random generator. Assuming a certain loss given default, domino effects are simulated. The main results are, first, that financial stability depends not only on the completeness and interconnectedness of the network, but also on the distribution of interbank exposures within the system (measured by entropy). Second, looking at random graphs, the sign of the correlation between the degree of equality of the distribution of claims and financial stability depends on the connectivity of the financial system as well as on additional parameters that affect the vulnerability of the system to interbank contagion. Third, the more concentrated the assets are within a money center model, the less stable it is. Fourth, a money center model with asset concentration among core banks is less stable than a random graph with banks of homogeneous size.     

The Propellent of ReneSola

In the beginning of 2007, ReneSola was named ＂IPO of the Year＂ at Growth Company Investor＇s Quoted Company Awards 2007. The shortlisted for the IPO of The Year Company were Carluccio＇s, May Gurney Integrated Services, Worthington Nicholls, Morson, and Scott Wilson, ReneSola was the winner.     

A practitioner’s view of the future of futures studies

This article looks at the future of futures studies (FS) over the next 20 years from a practitioner’s viewpoint. It begins with favorable developments for FS in the organizational context. The main body covers how FS can take advantage of these more favorable developments. It then anticipates some key methodological and professional challenges and how FS might meet them. It concludes with a few comments about the prospects for a self-actualized FS.The single biggest challenge for FS over the next generation from my practitioner’s point-of-view is to get beyond the cyclicality of interest in the future and get FS firmly integrated into the organizational context. Our experience to date convinces me that we have earned “the right to practice,” and we must now focus the next few decades on sinking roots “inside”. The good news is that there are several developments suggesting that this is not just a preferable but also a probable future.     

The Proverb of Friendship

U.S.Treasury Secretary Herry M.Pauison said on Decerrber 11,2006 that U.S.-China economic relationship is vital to U.S.future prosperity.     

Beating market expectations and the pricing of firms’ probability of default

This study explores the impact of beating analysts' forecasts on investors' perceptions about firms' default probability. The information contained in analysts’ forecasts, both earnings and revenues, provides additional information to investors in pricing CDSs. While previous research has focused on the impact of beating analysts’ earnings forecasts, this study shows that firms that beat analysts' revenue forecasts also experience, on average, a decrease in the CDS premium around the earnings announcement date. This study also documents that the effect is stronger when firms beat/miss both earnings and revenue forecasts. When firms beat (miss) earnings and miss (beat) revenues, the effect of earnings is the dominant signal. These effects are stronger for firms with high levels of default risk.     

Processes of auditability in sustainability assurance – the case of materiality construction

This study examines how financial audit-styled concepts such as materiality are transferred to non-financial audit arenas. Drawing on a case study of assurors working within a Big 4 professional services firm, we uncover a number of interrelated features of the materiality determination and assessment process within sustainability assurance (assurance on sustainability reports). We illustrate how assuror flexibility, underpinned by assuror intuition, is central to uncovering assurance technologies deemed capable of addressing the materiality of ambiguous sustainability data. Assurors with no financial audit background retrospectively rationalise their intuition using the assumed authority of structured financial audit methodologies. This facilitates the tentative translation of financial audit knowledge to the sustainability assurance domain. Collaborative, holistic decision-making processes inform the assurors’ continual construction of materiality and are characterised by alliances of (accountant and non-accountant) ‘expert’ assurors merging formal and tacit knowledge. These alliances seek social cohesion within sustainability assurance teams in order to establish a social consensus among assurors around the materiality determination and assessment process. Our analysis develops and extends Power’s theorisation of how new areas are made auditable and advances our understanding of the more practical aspects of non-financial assurance services offered by Big 4 professional services firms.     

Spenders or Savers? An Examination of the Reserves of Australian NGOs

Not‐for‐profit (NFP) organisations experience a tension between societal perceptions about maximising mission expenditure on one hand, and their need to accumulate reserves to ensure longer term financial sustainability on the other. While studies have examined the level of reserves in UK and US contexts, there is little Australian research or guidance about what constitutes an appropriate level of NFP reserves. This paper examines the levels and implications of the reserves of 52 Australian NFP non‐governmental organisations (NGOs) over eight years, identifying two groups. Spenders, with less than three months of expenditure in reserve, were more financially vulnerable, had higher levels of debt, yet spent a relatively greater proportion of their revenue on mission‐related activities than savers. Savers, with more than three months’ reserves, demonstrated a greater proportion of revenue from fundraising, proportionately greater equity levels, and higher returns on assets. Providing unique insights into the financial reserves of Australian NGOs, this empirical study contributes to existing NFP literature on reserves, which to date has focused primarily on US and UK contexts. Further, we propose that by developing, monitoring and communicating their reserves’ strategies, NFP boards and managers will be able to improve their organisations’ financial sustainability and manage societal perceptions about reserves.     

Note respecting the application of »The reduced number of deaths»

Abstract

This note is merely intended to supplement the remarks on the reduced number of deaths made by Olav Aabakken III his paper in this number of the journal ¹ Olav Aabakken: Appraisement of Under-average Lives in Norway, p. 126. .