REIT Operational Efficiency: Performance,Risk, and Return

The Journal of Real Estate Finance and Economics - Relations between Real Estate Investment Trust (REIT) efficiency and operational performance, risk, and stock return are examined. REIT-level...     

Risk,Mispricing, and Value Investing

We evaluate the stock return performance of a modified version of the book-to-market strategy and its implications for market efficiency. If the previously documented superior stock return of the book-to-market strategy represents mispricing, its performance should be improved by excluding fairly valued firms with extreme book-to-market ratios. To attain this, we classify stocks as value or glamour on book-to-market ratios and accounting accruals jointly. This joint classification is likely to exclude stocks with extreme book-to-market ratios due to mismeasured accounting book values reflecting limitations underlying the accounting system. Using both 12-month buy-and-hold returns and earnings announcement returns, our results show that this joint classification generates substantially higher portfolio returns in the post-portfolio-formation year than the book-to-market classification alone with no evidence of increased risk. In addition, this superior stock return performance is more pronounced among firms held primarily by small (unsophisticated) investors and followed less closely by market participants (stock price <$10). Finally, and most importantly, financial analysts are overly optimistic (pessimistic) about earnings of glamour (value) stock, and for a subset of firms identified as overvalued by our strategy, the earnings announcement raw return, as well as abnormal return, is negative. These last results are particularly important because it is hard to envision a model consistent with rational investors holding risky stocks with predictable negative raw returns for a long period of time rather than holding fT-bills and with financial analysts systematically overestimating the earnings of these stocks while underestimating earnings of stocks that outperform the stock market.     

A benefit/cost model to evaluate educational programs

Essentially, a benefit/cost model provides a procedure to evaluate a project in terms of its economic objectives. The analytic task is to determine the present value of all benefits less the present value of all costs, so that the projects which maximise this difference can be selected. There are private benefits (those appropriated by the persons directly involved in the project), and social benefits (those derived by others because of the project) that should also be taken into account when public policy is involved. Limitations of data preclude us from considering all the benefits, but in the present study of the benefits of an educational program, the following have been incorporated: (1) increases in earnings due to attaining higher levels of education; (2) benefits that accrue to the offspring of the present generation resulting from the influence of the educational attainment of parents on that of their children; and (3) the reduction in juvenile crime.

The model that is used to estimate these benefits includes thirteen separate equations. A major ingredient of all of these equations is represented by equation 4 in the model:

According to this equation, the private benefits of additional education are calculated as the difference between the expected economic returns with the program (designated T) and the expected economic returns without the program. Expected economic returns are estimated by the product of lifetime earnings for each level of education (V_i) times the probability distribution of obtaining the various levels of education (P_i), where i designates a level of education. These benefits will be different for individuals with different characteristics, designated ε.

The parameters of the model have been estimated by the use of Census data for earnings, and various special survey data for the probabilities of educational attainment and committing juvenile crimes. Essentially an educational program changes the probabilities of educational attainment, increasing the probability of graduating from high school and going on to college.

In this study, we applied the model to a Title I ESEA, program in San Francisco, California, during 1966–1967. Since the program was implemented in the elementary grades, we used the mathematics of Markov Chains to estimate the probabilities of eventual grade level attainment. We found that prior to the program, about half of the disadvantaged non-Negro males and considerably more than half of the Negro males could be expected to be dropouts. The model showed, however, that a Title I program in San Francisco costing $220 per child sufficiently raised test scores in elementary grades so that the expected dropout rates were reduced about 3 per cent for non-Negro and 2 per cent for Negro male pupils.     

Technology use on the front line: how information technology enhances individual performance

This study explores and tests a new model that links different types of technology usage to individual-level outcomes. The primary objective of this study is to examine the effects of efficient use (routinization) and effective use (infusion) along with the traditional measure of usage—namely, frequency of use—on two dimensions of individual-level outcomes: information technology-enabled administrative performance and information technology-enabled salesperson performance. To maintain consistency with the existing literature, the authors examine the effects of predeployment attitude toward or acceptance of technology and pre-deployment intended use of technology. The authors discuss managerial implications and provide directions for future research.

The Use of Organic vs. Chemical Fertilizer with a Mineral Losses Tax: The Case of Dutch Arable Farmers

The paper focuses on farm-level nitrogen fertilization strategies of Dutch arable farmers for analyzing the substitution of organic fertilizers (manure) with chemical fertilizers. The model developed investigates the impact of the major parameters affecting the inferiority of manure compared with chemical fertilizers, including the low availability and non-uniformity of the nitrogen in manure, and the low level and high non-uniformity of plant-available nitrogen supplied via manure. The sensitivity of the optimal fertilization decisions and its associated environmental impact to product price, manure cost, and environmental tax is also examined. The theoretical analysis is applied to a representative Dutch grower of ware potatoes in the northern part of the Netherlands. The results suggest that in the absence of a subsidy the representative farmer will prefer to apply nitrogen only via chemical fertilizers.     

Municipal Disclosure Timeliness and the Cost of Debt

A longstanding concern for municipal bond investors is the lack of timely financial statement disclosures. Municipalities are held to lower disclosure standards than corporations. Using continuing disclosure dates for audited financial statements, we find bond issuers with slower disclosure have higher secondary market yields and spreads, less frequent secondary market trading, and are less likely to issue new bonds. We observe that future disclosure is largely predictable based on past disclosure and that disclosure often improves prior to new bond issuances. When municipalities do not capitalize on the benefits of timely disclosure, economic consequences are imposed on bondholders and taxpayers.     

Do firms underreport information on cyber-attacks? Evidence from capital markets

Firms should disclose information on material cyber-attacks. However, because managers have incentives to withhold negative information, and investors cannot discover most cyber-attacks independently, firms may underreport them. Using data on cyber-attacks that firms voluntarily disclosed, and those that were withheld and later discovered by sources outside the firm, we estimate the extent to which firms withhold information on cyber-attacks. We find withheld cyber-attacks are associated with a decline of approximately 3.6% in equity values in the month the attack is discovered, and disclosed attacks with a substantially lower decline of 0.7%. The evidence is consistent with managers not disclosing negative information below a certain threshold and withholding information on the more severe attacks. Using the market reactions to withheld and disclosed attacks, we estimate that managers disclose information on cyber-attacks when investors already suspect a high likelihood (40%) of an attack.     

Rational Versus Intuitive Gatekeeping: Escalation of Commitment in the Front End of NPD

The unwillingness of a gatekeeper to let go of a fruitless new product development (NPD) project wastes valuable resources and hampers NPD performance. The onset of such escalation of commitment is likely to occur already in the front end of NPD, where high ambiguity and complexity make it hard to distinguish fruitless from potentially successful projects. This study investigates if a gatekeeper’s thinking style—whether they think rationally or whether they follow their intuition—can prevent escalation of commitment in the front end. Theory on cognition provides arguments for and against either thinking style’s influence on escalation of commitment, but empirical evidence on this matter is lacking. Our study demonstrates that gatekeepers who think rationally are less likely to escalate their commitment than those who follow their intuition. This result holds both in a correlational study of dispositional thinking styles, as well as in an individual‐level randomized experiment in which the thinking style of experienced practitioners before they take gate decisions is induced. Our findings provide ample opportunities for improving existing front end gate review practices, such as allocating candidates for gatekeeper positions based on their thinking style, training gatekeepers to think rationally, and increasing the use of gate‐decision rules and templates.     

Destination marketing during and following crises: combating negative images in Asia

The goal of this study is to analyze which strategies Asian officials and marketers have adopted in order to combat stereotypes, negative perceptions, and crises in order to repair destination images and bring back visitors. The study includes qualitative content analyses of news reports, press interviews, and campaigns in order to uncover media policy, strategies, events, and marketing initiatives used since 2008. The conceptual framework used was the “multi-step model for altering place image”, which offers three types of strategies to use in order to repair a destination’s negative image during and after a crisis: source, message, and audience.