Negative earnings,positive earnings and stock return predictability: An empirical examination of market timing

We examine the predictive ability of earnings-price ratios or yields for the S&P 500 index. We decompose the aggregate earnings-price ratio into its positive and negative components (“winners” vs “losers”) and find that the negative component has the most predictive ability. We also find that the earnings-price measures forecast both future returns and earnings growth. Our models display substantial variation in explanatory power over time with forecast power resurfacing in the latter 1990s. We conclude that to the extent that earnings-price yields predict future S&P 500 returns, the negative earnings component is the driving factor.     

Adjoint-based Monte Carlo calibration of financial market models

Adjoint methods have recently gained considerable importance in the finance sector, because they allow to quickly compute option sensitivities with respect to a large number of model parameters. In this paper we investigate how the efficiency of adjoint methods can be exploited to speed up the Monte Carlo-based calibration of financial market models. After analyzing the calibration problem both theoretically and numerically, we derive the associated adjoint equation and propose its application in combination with a multi-layer method, for which we prove convergence to a stationary point of the underlying optimization problem. Detailed numerical examples illustrate the performance of the method. In particular, the proposed algorithm reduces the calibration time for a typical equity market model with time-dependent model parameters from over three hours to less than ten minutes on a usual desktop PC.      

Legal protection of investors,corporate governance,and the cost of equity capital

This study examines the effect of firm-level corporate governance on the cost of equity capital in emerging markets and how the effect is influenced by country-level legal protection of investors. We find that firm-level corporate governance has a significantly negative effect on the cost of equity capital in these markets. In addition, this corporate governance effect is more pronounced in countries that provide relatively poor legal protection. Thus, in emerging markets, firm-level corporate governance and country-level shareholder protection seem to be substitutes for each other in reducing the cost of equity. Our results are consistent with the finding from McKinsey's surveys that institutional investors are willing to pay a higher premium for shares in firms with good corporate governance, especially when the firms are in countries where the legal protection of investors is weak.     

Cost-Effectiveness of Alternative Integrated Pest Management Extension Methods: An Example from Bangladesh

This study examines the cost-effectiveness of alternative methods for diffusing integrated pest management practices in Bangladesh. Methods compared include farmer field schools, field days, and extension agent visits. Farmer field school participants were more likely to adopt integrated pest management practices than recipients of messages from field days and agent visits. However, due to lower costs per participant, field days were the most cost-effective means for stimulating adoption of simpler practices and extension agent visits were the most cost-effective for extending more complex practices.