Relative price changes and deviations from purchasing power parity

During recent years, exchange rate fluctuations have exceeded variation in price indices. As a result, a number of theories have been developed to explain the apparent ‘overshooting’ of the exchange rate. The purpose of this paper is to argue that such elaborate extensions may be unnecessary, because the law of one price is more robust than previously believed. In particular, it can be shown that the law of one price is consistent with the observed variability of exchange rates and that it outperforms the overshooting models in explaining the stochastic behavior of exchange rates and interest rates.     

Short-run deviations and time-varying hedge ratios: Evidence from agricultural futures markets

This paper investigates the hedging effectiveness of time-varying hedge ratios in the agricultural commodities futures markets using four different versions of the GARCH models. The GARCH models applied are the standard bivariate GARCH, the bivariate BEKK GARCH, the bivariate GARCH-X and the bivariate BEKK GARCH-X. Futures data for corn, coffee, wheat, sugar, soybeans, live cattle and hogs are applied. Comparison of the hedging effectiveness is done for the within sample period (1980–2004), and two out-of-sample periods (2002–2004 and 2003–2004). Results indicate superior performance of the portfolios based on the GARCH-X model estimated hedge ratio during all periods.     

Persistence in law of one price deviations: Evidence from micro-data

Using an extensive micro-price panel, we find a positive cross-sectional relationship between LOP persistence and the distribution margin, which we measure using sectoral U.S. data, as suggested by the classical dichotomy. The median level of persistence (across goods) is low, and there is no evidence of a border effect: the half-life of a deviation is about 19 months across OECD cities and just 1 month lower across cities in the U.S. Aggregating our micro-data using a variety of weighting methods shows PPP persistence to be in the range of 1-2 years, over the 1990-2005 period. These results challenge three widely held views: (i) the classical dichotomy is irrelevant; (ii) high persistence is a robust feature of aggregate real exchange rates; and (iii) border crossings necessarily generate greater real exchange rate persistence.     

Macroeconomic fundamentals, price discovery, and volatility dynamics in emerging bond markets

This study characterizes volatility dynamics in external emerging bond markets and examines how prices and volatility respond to macroeconomic news. As in mature bond markets, surprises about macroeconomic conditions in emerging markets are found to affect both conditional returns and volatility of external bonds, with the effects on volatility being more pronounced and longer lasting than those on prices. Yet the process of information absorption tends to be more drawn-out than in mature bond markets. Global and regional macroeconomic news is at least as important as local news for both price and volatility dynamics.     

Valuation of insurers’ contingent capital with counterparty risk and price endogeneity

This study develops a structural framework to value insurers’ contingent capital with counterparty risk (CR) and overcomes the problem of price endogeneity (PE) in the valuation model. Our results on the focal contingent capital instrument – catastrophe equity put option (CatEPut) – indicate that prices can be significantly overestimated without considering CR and be significantly underestimated without considering PE. This study also examines how CatEPuts affect the buyer’s probability of default (PD). Our results show that buying a CatEPut lowers the PD for high-risk insurers, but not necessarily so for low-risk insurers; however, without taking CR and PE into account, one may significantly overestimate the credit enhancement provided by the CatEPuts.     

Static deviations from purchasing-power parity

The paper examines the ‘real’ effects of monetary policy in a small open economy in full stock-flow equilibrium. In the presence of government debt, an increase in the money supply generally produces deviations from purchasing power parity. Money creation through foreign-exchange purchases results in an overvaluation of the domestic currency. While its short-run effects favor the export industries, its long-run effects are thus in favor of the domestic sector. The same is true for open-market purchases, but the overvaluation is probably smaller in this case.     

Money shocks and deviations from purchasing power parity

This paper applies the island-economy framework of Phelps (1970) to a small open economy under a flexible exchange rate to study the effects of nominal (and real) disturbances on the purchasing power parity relation. Incomplete information about the aggregate state of the economy (and informational differences between agents) implies that a monetary shock that has finite variance can induce deviations from purchasing power parity while also affecting production, consumption and the current account. The real effects of money, however, become smaller as the variance of money gets larger. A type of ‘Lucas slope effect’ of money on deviations from purchasing power parity is obtained.     

企业价值评估与注册企业价值评估分析师

财政部副部长丁学东与国际企业价值评估师分析师协会（IACVA）主席威廉·汉林于2009年12月进行了会谈,双方就有关中国注册资产评估师和企业价值评估师的培训、执业范围及其评估行为对社会经济的影响等问题阐述了看法并交换了意见。为了让广大读者了解国外企业价值评估分析师及其执行企业价值评估业务的有关情况,我们摘编部分内容供读者交流。     

Credit cycles and macro fundamentals

We use an intensity-based framework to study the relation between macroeconomic fundamentals and cycles in defaults and rating activity. Using Standard and Poor's U.S. corporate rating transition and default data over the period 1980–2005, we directly estimate the default and rating cycle from micro data. We relate this cycle to the business cycle, bank lending conditions, and financial market variables. In line with earlier studies, the macro variables appear to explain part of the default cycle. However, we strongly reject the correct dynamic specification of these models. The problem is solved by adding an unobserved dynamic component to the model, which can be interpreted as an omitted systematic credit risk factor. By accounting for this latent factor, many of the observed macro variables loose their significance. There are a few exceptions, but the economic impact of the observed macro variables for credit risk remains low. We also show that systematic credit risk factors differ over transition types, with risk factors for downgrades being noticeably different from those for upgrades. We conclude that portfolio credit risk models based only on observable systematic risk factors omit one of the strongest determinants of credit risk at the portfolio level. This has obvious consequences for current modeling and risk management practices.     

Trade concentration, openness, and deviations from purchasing power parity

Economists have often explained deviations from PPP in terms of random relative price changes. While all countries are subject to such real shock, empirical studies indicate that PPP seems to hold closer for some countries than others. This paper emphasizes two major reasons why we should expect systematic differences across countries in deviations from PPP: (a) the concentration of trade and (b) openness. The more diversified trade, the less susceptible the country to random shocks affecting individual goods, so that shifts in the PPP ratio are lower. The more open the economy, the greater the weight of traded goods in the overall price indices, so that if exchange rates are determined by traded goods prices, yet empirical tests of PPP use national price indices, PPP should hold better in more open economies.     

Accounting fundamentals and CEO bonus compensation

Research indicates that there is a positive association between accounting earnings and chief executive officer (CEO) cash compensation; however, evidence also suggests that this positive association ceases to exist when earnings performance is poor or declining. This latter result has led some critics of corporate compensation policies to conclude that CEOs are not penalized for poor or declining firm performance. The purpose of this study is to further illuminate the pay-performance debate by expanding the traditional executive bonus compensation model to include a set of accounting fundamentals that prior research indicates are related to both current and future firm performance. Our results indicate that there is a highly significant relationship between accounting fundamentals and the level of and change in CEO bonus compensation. Moreover, we find a highly significant relationship between accounting fundamentals and both bonus omissions and bonus reductions. When earnings are negative or declining, we find that the above relationships remain intact. In contrast, when earnings are negative or declining, we find that the relationship between aggregate earnings and bonus compensation is weak or insignificant in most of our analyses. Taken together, our results suggest that the apparently weak relationship between accounting earnings and CEO bonus compensation (particularly when earnings are negative or declining) is partly due to the fact that the bonus compensation model excludes accounting fundamentals which are strongly associated with bonus compensation. Thus, we conclude that (i) bonus compensation is more closely tied to firm performance than critics sometimes claim and (ii) bonus compensation awarded to CEOs when earnings performance is poor is at least partially explained by the presence of favorable accounting fundamentals.     

Information Producers and Valuation: Evidence from Real Estate Markets

This paper examines valuation and its relation to information production by licensed appraisers across real estate markets. The testable implications are discussed for either a peer monitoring or a crowding out effect in the data. The empirical model is estimated with data for all 50 US states and DC covering the sample period from 1999 to 2008. While analysis is primarily cross-sectional and not causal, the evidence is consistent with theory stating that the minimum quality associated with residential licensure standards may be too low. In contrast, the evidence suggests certified residential standards afford information producers the opportunity to signal or information consumers the ability to screen based on quality.     

英国评估行业自律管理体制的变化及其借鉴作用

2000年以前,英国的评估中介行业主要有三个行业自律组织,即英国皇家特许测量师学会(RICS)、估价师与拍卖师联合会(ISVA)和税收评估协会(IRRV)。其中RICS占绝对主导地位。三个行业协会曾经试图寻找相互统一的途径,并由三家协会共同发布全国统一的评估准则《估价与评估指南》。经过不懈的努力,2000年,RICS与ISVA成功地实现了相互联合的愿望。由于ISVA与RICS的融合,从根本上改变了RICS在评估领域的执业范围,也就是说,从经典的不动产评估走向包括动产评估和不动产评估在内的全方位多目标评估,也从一定程度上改变了英国的评估行业…     

Industry and time specific deviations from fundamental values in a random coefficient model

The paper analyzes the relationship between stock prices and fundamentals for a large sample of US stocks in the last 10 years using a random coefficient model. Heterogeneity and omitted variable bias are properly taken into account with model coefficients being allowed to vary across time and industries. The random coefficient model allows to track waves of reliance on analysts’ forecasts and nonfundamental stock price components across time and clearly identifies the growth of the nonfundamental component in the long 1991–2000 swing.      

艺术品价值评估的影响因素与基本框架

随着中国艺术品市场的火爆,艺术品价值评估的重要性也日渐受到重视。但在目前,艺术品价值的评估问题还很少有人研究。这可能与主流经济学的基本假设密切相关。主流经济学的基本假设之一是商品具有所谓的同质性。这样一来,商品的数量就可以被“加总”,     

The Valuation Accuracy of the Price-Earnings and Price-Book Benchmark Valuation Methods

This paper evaluates the valuation accuracy of the price-earnings (P/E), the price-book (P/B) and a combined price-earnings and price-book (P/E-P/B) benchmark valuation methods. Performance of the benchmark valuation methods relies on the definition of comparable firms. In this paper, comparable firms are selected based on industry membership, size and return on equity as well as combinations of industry membership with size and with return on equity. We find that within the P/E and P/B benchmark valuation methods, the best definition of the comparable firms are based on industry membership combined with return on equity. However, only the industry membership is necessary to define the comparable firms for the combined P/E-P/B method. In sum, the results suggest that, when firm's value is unknown, the combined P/E-P/B valuation approach selecting comparable firms based on industry membership performs the best among all the approaches evaluated in this paper.We also find that the P/E benchmark valuation method performs better than the P/B benchmark valuation method and the combined method outperforms either the P/E or the P/B method. These results imply that earnings are more important than book value as a single-number firm valuator over our sample years (from 1973 to 1992) and that both earnings and book values are value relevant, one does not substitute perfectly for the other.     

行业国际化与资产评估专业的教育改革

随着经济全球化和全球资本市场的发展,资产评估行业的国际合作不断深入,这对于资产评估行业的国际化提出了迫切的要求;同时对于高校培养国际型的资产评估人才也提出了更高的要求。本文提出了资产评估行业国际型人才的培养目标、课程设置、培养模式等方面的改革设想。     

关于资产评估方法及其选择的研究与探讨——学习《资产评估准则——基本准则》的体会

由于资产评估方法在资产评估中的重要地位和作用,包括注册资产评估师在内的资产评估执业人员,对资产评估方法给予了极高的重视,以至于在某种程度上这种认识已经出现了某些片面化的倾向.第一,对资产评估中的基本方法与具体技术方法没有划分和界定,人为将资产评估方法限制在市场法、收益法和成本法三种方法的范围内.第二,评估人员普遍认为资产评估方法在资产评估中具有决定性的作用,使用不同的资产评估方法,即使是在评估对象相同,评估条件相同的情况下,也会得出截然不同的评估结果.对资产评估方法只有三种方法的片面认识,一方面使得资产评估技术的运用受到了人为的局限,加剧了资产评估实践中的资产评估方法的有限性与资产评估业务广泛性和复杂性的矛盾.并且使得评估人员在评估报告中关于本次评估所使用评估方法的表述变得不规范、模糊和难以表达.另一方面,评估人员过分看重资产评估方法对评估结论的作用,以及夸大了资产评估方法对资产评估结论的影响,这就加重了注册资产评估师对资产评估方法选择的压力.     

Flight-to-quality,economic fundamentals,and stock returns

We find that the order flow differential (OFD), a flight-to-quality measure constructed as the difference between large- and small-cap stock order flows, strongly and negatively forecasts output growth and interest rates in the U.S. The predictive ability of OFD for future macroeconomic fundamentals is robust to the inclusion of return factors and business cycle predictors, and it is thus a state variable candidate in the spirit of Merton (1973). Consistent with this view, we document that OFD commands a statistically significant negative risk premium in cross-sectional asset pricing tests.