Are the Fama–French factors proxying news related to GDP growth? The Australian evidence

Inspired by Vassalou (J Financ Econ 68:47–73, 2003), we investigate the contention that the Fama and French (J Financ Econ 33:3–56, 1993) model’s ability to explain the cross sectional variation in equity returns is because the Fama–French factors are proxying for risk associated with future GDP growth in the Australian equities market. To assess the validity of Vassalou’s findings, we augment the CAPM and the Fama–French model with a GDP growth factor and run system regressions of the GDP-enhanced models using the GMM approach. Our results suggest that news about future GDP growth is not priced in equity returns and that any ability that SMB and HML exhibit in explaining equity returns is not because they contain information about future GDP growth.

REINVESTED EARNINGS IN THE NATIONAL ACCOUNTS

The paper raises three questions. Firstly, is it warranted that a significant part of primary (property) income is not shown in the national accounts as being distributed to the owners of the assets to which it accrues but ends up as capital gains in the revaluation account? Secondly, why has the SNA chosen not to record reinvested earnings of corporations as flows of property income with the exception of foreign direct investment, and thirdly why the asymmetrical recording of stock investments constituting more than 10 percent of equity capital depending on whether domestic or foreign transactions are concerned? Reinvested earnings on domestic equity investment above 10 percent of a corporation are not recorded as property income in the system. The paper looks at these three questions from the perspective of the analytical uses of national accounts. The consequences for the analysis of income distribution both between nations and within nations are examined.     

The challenges of police-community collaboration: identity manoeuvres and power struggles in a neighbourhood based meeting

The turn to collaborative governance is a key feature of the New Public Governance environment in many Western economies. Within the UK, successive governments have mandated policing organizations to engage in public service partnerships and collaborate with communities. This paper examines one such collaborative arrangement, namely, neighbourhood public meetings. Drawing on a theoretical framing of the dynamic relationship between identities, agency and power, we critically explore how individuals seek to persuade, defend and legitimate their values, beliefs and practices in collaborative situations. The paper provides a nuanced exploration of the challenges of collaboration for both public servants and community members.     

Optimal Insurance Policy Indemnity Schedules With Policyholders’ Limited Liability and Background Risk

This article makes two contributions to the insurance literature by studying optimal insurance policy indemnity schedules with policyholders’ limited liability and background risk. First, generalizing a prominent approach by Huberman, Mayers, and Smith (1983), it is shown that a welfare subsidy in the case of a ruinous loss may make the insurance premium “overly fair” for nonbankrupting losses and full insurance for this event becomes optimal. Second, introducing correlated background risk into this limited liability framework relativizes or even turns results by Doherty and Schlesinger (1983) as to the impact of background risk on optimal coverage into its opposite.     

Pairs trading with partial cointegration

Partial cointegration is a weakening of cointegration that allows for the ‘cointegrating’ residual to contain a random walk and a mean-reverting component. We derive its representation in state space, provide a maximum likelihood-based estimation routine, and a suitable likelihood ratio test. Then, we explore the use of partial cointegration as a means for identifying promising pairs and for generating buy and sell signals. Specifically, we benchmark partial cointegration against several classical pairs trading variants from 1990 until 2015, on a survivor bias free data-set of the S&P 500 constituents. We find annualized returns of more than 12% after transaction costs. These results can only partially be explained by common sources of systematic risk and are well superior to classical distance-based or cointegration-based pairs trading variants on our data-set.     

New development: What works now? Continuity and change in the use of evidence to improve public policy and service delivery

This article highlights 10 key strands of continuity and change in the use of evidence over the past two decades. Interest in evidence use continues, as do the many challenges encountered when seeking to deliver on this aspiration. There have been developments in ideas and actions, which foster some optimism that better use of varying forms of evidence can be encouraged.     

Selling,general, and administrative expense (SGA)-based metrics in marketing: conceptual and measurement challenges

Many studies use variables from the Compustat database to measure various marketing constructs, yet no clear guidelines detail which metrics correspond with which constructs. Justifications rest mainly on the ready availability of easy-to-use measures that seem related to a particular construct. As a result, various metrics have been utilized to capture the same construct, and the same metric—such as selling, general, and administrative expenses (SGA)—has been applied to capture vastly different constructs. But using SGA inappropriately can lead to biased estimates, questionable support for the hypotheses, and potentially misleading implications for research and practice. To test the validity of SGA for multiple relevant marketing and sales constructs, this study gathers data on benchmark variables from alternative data sources and applies a multitrait-multimethod (MTMM) approach. Results show that, in general, SGA has been applied too liberally in marketing contexts; SGA is an appropriate operationalization only for some constructs. This article provides guidelines for the proper conceptualization and operationalization of marketing constructs.     

Dividend Taxes and Income Shifting

In this paper, we analyze whether a dividend tax cut for owner‐managers of closely held corporations encourages income shifting, income generation, or both. We use rich Swedish administrative micro data from 2000 to 2011 comprising detailed firm‐ and individual‐level information. We find robust evidence of extensive income shifting across tax bases in response to the 2006 Swedish dividend tax cut. Owner‐managers of closely held corporations reclassify earned income as dividend income but do not increase total income. The response is more pronounced for owner‐managers with tax incentives and with easier access to income shifting through a high ownership share.