Does the Optimal Size of a Fish Stock Increase with Environmental Uncertainties?

We analyze the effect of environmental uncertainties on optimal fishery management in a bio-economic fishery model. Unlike most of the literature on resource economics, but in line with ecological models, we allow the different biological processes of survival and recruitment to be affected differently by environmental uncertainties. We show that the overall effect of uncertainty on the optimal size of a fish stock is ambiguous, depending on the prudence of the value function. For the case of a risk-neutral fishery manager, the overall effect depends on the relative magnitude of two opposing effects, the ‘convex-cost effect’ and the ‘gambling effect’. We apply the analysis to the Baltic cod and the North Sea herring fisheries, concluding that for risk neutral agents the net effect of environmental uncertainties on the optimal size of these fish stocks is negative, albeit small in absolute value. Under risk aversion, the effect on optimal stock size is positive for sufficiently high coefficients of constant relative risk aversion.     

When Do Opening Stock Returns Tend to be Higher?

Abstract

In this study, I make an effort to formulate a trading rule that would make use of some systematic interday patterns in individual stocks’ opening returns. I analyze intraday price data on all the stocks that were S&P 500 Index constituents during the period from 1993 to 2012. I document that if the general market direction of the previous day's opening session is controlled for, then a stock's opening return tends to be higher if, on the previous trading day, its opening return was relatively high (either positive, or higher than the same day's opening market return) and its open-to-close return was relatively low (either non-positive, or lower than or equal to the same day's open-to-close market return). Finally, for the sampling period, I construct two different investment portfolios involving a long position in the stocks on the days when, according to the findings, their opening returns are expected to be high and a short position in the stocks on the days when, according to the findings, their opening returns are expected to be low. Both portfolios are found to yield significantly positive returns, providing evidence for the practical applicability of the documented patterns in opening stock prices.     

Financial Market Data Versus Accounting Data: Which Better Explains Stock Returns?

This paper presents the comparison of how financial market and accounting data affect stock prices and returns. The goal was to ascertain whether financial information or accounting data dominate in evaluating stock prices. Most valuation techniques used by firms are based on models using either accounting variables (earnings, book value, cash flows, research and development expenses) or financial market data (e.g. beta, market value, interest). The answer is of great importance for valuators and investors as it will help them focus on the most important variables and make better valuations and choices. This answer is also important for accounting standard setters as the preferred method will serve as an indicator for the quality of financial statements and their importance to users. The paper contributes to the existing literature in the fields of value relevance of accounting information and firm valuation and accounting standards (e.g. International Financial Reporting Standards, United States General Accepted Accounting Principles). To answer this question, share prices were estimated based on financial data using the capital asset pricing model and for accounting data, using Ohlson’s model. The results were tested for both methodologies by comparing estimated share prices with actual ones. The greater the correlation between the two variables the better the explanatory power of the model. The focus was on S&P 500 firms for the period 2002–2017.

     

Does Democracy Increase Growth More in New Countries?

Countries face governing challenges at their inception, albeit not of the same degree or type. Challenges such as creating governing structures and forming one nation from disparate groups can create uncertainty and so lower economic growth. Does democracy exacerbate or lessen such problems? This paper considers an empirical specification where the effect of democracy upon economic growth is allowed to vary over time. I find that democracy is more greatly associated with economic growth in newer countries. This suggests that democracy helps to mitigate governing challenges that can lower economic growth.     

Does Analyst Optimism About Future Earnings Distort Stock Prices?

Monthly returns to firms with optimistic expectations are 1.5% lower versus firms with pessimistic expectations, while annual buy-and-hold returns to firms with optimistic expectations are 20% lower. The optimistic component of stock prices lingers months after the optimism is revealed to the market. It also exists separately from the component related to analyst forecast dispersion. The possibility that forecast dispersion is related to transitory versus permanent earnings is proposed.     

How Does Foreign Direct Investment Really Affect Developing Countries' Growth?

Two main contributions to literature on foreign direct investment (FDI) and economic growth are made in this paper. First, the paper examines the effect of FDI on economic growth for 44 developing countries using heterogeneous panel cointegration techniques that are robust to omitted variables and endogenous regressors. The main result is that FDI has, on average, a negative effect on growth in developing countries, but there are large differences in the effect across countries. Second, a general‐to‐specific model‐selection approach is used to systematically search for country‐specific factors explaining the cross‐country differences in the growth effects of FDI. The results suggest that the cross‐country heterogeneity in the growth effect of FDI can be explained mainly by cross‐country differences in freedom from government intervention, business freedom, FDI volatility, and primary export dependence.     

Does High Stock Price Synchronicity Always Hurt Mutual Fund Industry? Sentiment Matters

Investors have agreed that high synchronicity of stock returns adversely influences professional funds' profitability. However, different market conditions where high synchronicity exists may have different effects on this relationship. This study incorporates aggregate investor sentiment as a market condition in the equation to explore whether and when the negative association between synchronicity and fund performance holds. The authors use a sample of actively managed U.S. equity mutual funds from 2000 to 2014 and employ a portfolio of 11 passively managed funds as the benchmark to measure fund performance and fund management skill. They find empirical evidence that synchronicity negatively impacts mutual funds' profitability when the investor sentiment is low. This negative relationship disappears in high-sentiment periods. They also find that in both low- and high-sentiment states, fund managers with superior stock selection skill make more profits from high synchronicity than the average.     

ITQs,Firm Dynamics and Wealth Distribution: Does Full Tradability Increase Inequality?

Concerns over the re-distributive effects of individual transferable quotas (ITQ’s) have led to restrictions on their tradability. We consider a general equilibrium model with firm dynamics to evaluate the redistributive impact of changing the tradability of ITQs. A change in tradability would happen, for example, if permits are allowed to be traded as a separate asset from ownership of an active firm. If the property right is associated with ownership of an active firm, the permit can be leased in each period but it is not possible to exit the industry and keep the right. However, allowing the permits to be traded as a separate asset has two effects. First, it leads to a greater concentration of production in the industry. Second, it directly converts a non-tradable asset into a tradable one, and this is equivalent to giving a lump sum transfer to all firms. The first effect implies a concentration in revenues, while the second implies a redistribution of wealth. We calibrate our model to match the observed increase in revenue inequality in the Northeast Multispecies (Groundfish) U.S. Fishery. We show that although observed revenue inequality—measured by the Gini coefficient—increases by 12 %, wealth inequality is reduced by 40 %.     

Does Technological Innovation Really Reduce Marginal Abatement Costs? Some Theory,Algebraic Evidence,and Policy Implications

The existing literature models innovation in pollution control as a reduction in marginal abatement costs. We show that this assumption is inappropriate for production process innovations such as fuel switching. Algebraically, we examine the effects of different innovation types on marginal abatement cost curves, showing that some desirable innovations increase marginal abatement costs. Empirically, we estimate marginal abatement costs for sulfur dioxide by measuring the output distance function for electric power in Korea. Regression results confirm that production process innovations did raise marginal abatement costs in this case. One policy implication: economic instruments do not always provide stronger innovation incentives than command-and-control policies.      

Does Occupational Training by the Trade Adjustment Assistance Program Really Help Reemployment? Success Measured as Occupation Matching

The Trade Adjustment Assistance Program provides various retraining opportunities to workers displaced due to import competition. This paper investigates whether successful skill acquisition through training—as opposed to general exposure to federal assistance—improves the post‐participation outcomes using the Trade Act Participant Report. Success in skill acquisition is indicated by a match between occupations of training and entered employment. The average matching rate for the sample is 37.53%. Trainees with a match display wage replacement rates that are 2 to 3 percentage points higher than those without one, while they display very similar post‐participation earnings that are inferior to that of non‐trainees. This generally indicates that participants with limited skill sets with lower pre‐participation earnings select into training, and successful skill acquisition offsets the negative impacts of their lack of marketable skills. Matching itself does not improve the retention at the job. However, participation in various training programs improves retention.     

Does Openness Increase the Efficiency of China’s Manufacturing Firms? Evidence from the World Bank Investment Climate Survey

Based on the World Bank Investment Climate Survey, this paper investigates the openness effects on the efficiency of firms in China’s manufacturing industry using a two-step data envelopment analysis (DEA) approach. In the first step, the aggregate efficiency of open firms and non-open firms is compared in each sub-industry using a group-wise heterogeneous bootstrap procedure. The results show, at a 90% confidence level, that open firms are more efficient than non-open firms in four out of five sub-industries. Furthermore, in the second step, we employ the two-stage bootstrap DEA approach to more specifically evaluate the effects of openness on the efficiency of firms. The regression results show that three openness indicators (foreign capital, import and export) have strong positive effects on firms’ efficiency in China’s manufacturing industry. In addition, the results also suggest that a larger state share, larger firm size, and more capital stock are negatively related to the efficiencies of firms, while a firms’ learning and absorptive capacity is positively related to its efficiency.