Earnings guidance and market uncertainty

We study the effect of disclosure on uncertainty by examining how management earnings forecasts affect stock market volatility. Using implied volatilities from exchange-traded options prices, we find that management earnings forecasts increase short-term volatility. This effect is attributable to forecasts that convey bad news, especially when firms release forecasts sporadically rather than on a routine basis. In the longer run, market uncertainty declines after earnings are announced, regardless of whether there is a preceding earnings forecast. This decline is mitigated when the firm issues a forecast that conveys negative news, implying that these forecasts are associated with increased uncertainty.     

Interacting particle systems for the computation of rare credit portfolio losses

In this paper, we introduce the use of interacting particle systems in the computation of probabilities of simultaneous defaults in large credit portfolios. The method can be applied to compute small historical as well as risk-neutral probabilities. It only requires that the model be based on a background Markov chain for which a simulation algorithm is available. We use the strategy developed by Del Moral and Garnier in (Ann. Appl. Probab. 15:2496–2534, 2005) for the estimation of random walk rare events probabilities. For the purpose of illustration, we consider a discrete-time version of a first passage model for default. We use a structural model with stochastic volatility, and we demonstrate the efficiency of our method in situations where importance sampling is not possible or numerically unstable.      

A Theory of Bank Capital

Banks can create liquidity precisely because deposits are fragile and prone to runs. Increased uncertainty makes deposits excessively fragile, creating a role for outside bank capital. Greater bank capital reduces the probability of financial distress but also reduces liquidity creation. The quantity of capital influences the amount that banks can induce borrowers to pay. Optimal bank capital structure trades off effects on liquidity creation, costs of bank distress, and the ability to force borrower repayment. The model explains the decline in bank capital over the last two centuries. It identifies overlooked consequences of having regulatory capital requirements and deposit insurance.     

The economic feasibility of reclaiming phosphate mined lands with short-rotation woody crops in Florida

Fast growing and short-rotation tree crops provide unique opportunities to reclaim phosphate-mined lands in central Florida. Optimum management of the eucalyptus short-rotation woody crop forestry system studied necessitates harvests every 2.5–3.6 years and replanting after 2–5 coppice harvests. The value of phosphate mined land under Eucalyptus amplifolia forestry ranges from $762 to $6507 ha⁻¹ assuming discount rates of 10% and 4%, respectively, establishment costs of $1800 ha⁻¹, planting costs of $1200 ha⁻¹, planting density of 8400 tree ha⁻¹, and a stumpage price of $20 dry Mg⁻¹.     

The impact of rhino poaching on tourist experiences and future visitation to National Parks in South Africa

Wildlife tourism attracts substantial numbers of tourists worldwide with Africa as the major wildlife viewing destination earning the bulk of its tourism revenue from such tourism. Iconic animals, such as the rhino, are major attractions for tourists to South Africa who holds approximately 80% of the World’s rhino population. However, the rapid increase in rhino poaching activities has reached a crisis point and should the rate of poaching continue to increase Africa’s remaining rhino population will become extinct in the wild within 20 years. How this affects tourists and tourism is still largely unknown. This study shows evidence that rhino poaching and anti-poaching measures do impact tourism in the short term and could affect future visitation to Parks.     

Agricultural climate change mitigation: carbon calculators as a guide for decision making

The dairy industry is receiving considerable attention in relation to both its significant greenhouse gas (GHG) emissions, and its potential for reducing those emissions, contributing towards meeting national targets and driving the industry towards sustainable intensification. However, the extent to which improvements can be made is dependent on the decision-making processes of individual producers, so there has been a proliferation of carbon accounting tools seeking to influence those processes. This paper evaluates the suitability of such tools for driving environmental change by influencing on-farm management decisions. Seven tools suitable for the European dairy industry were identified, their characteristics evaluated, and used to process data relating to six scenario farms, emulating processes undertaken in real farm management situations. As a result of the range of approaches taken by the tools, there was limited agreement between them as to GHG emissions magnitude, and no consistent pattern as to which tools resulted in the highest/lowest results. Despite this it is argued, that as there was agreement as to the farm activities responsible for the greatest emissions, the more complex tools were still capable of performing a ‘decision support’ role, and guiding management decisions, whilst others could merely focus attention on key issues.     

Policy uncertainty and the economic outlook

A large cloud of uncertainty hangs over the economic outlook, particularly the outlook for productivity growth and the long-term trend growth of output. This uncertainty stems from three sources: (a) the fiscal outlook, (b) the policy agenda shifting from campaign promises to partisan opportunity, and (c) the large reliance on executive branch actions. I discuss the foundations and likely evolution of policy uncertainty over the initial months of the Trump Administration.     

Venture Capital Investment Duration

This paper examines cross‐country evidence on the duration of venture capital (VC) investment. We formulate a theory of VC investment duration based on the idea that venture capitalists exit when the expected marginal cost of maintaining the investment is greater than the expected marginal benefit, and thereby relate VC investment duration to entrepreneurial firm characteristics, investor characteristics, deal characteristics, and institutional and market conditions. VC investment duration data in Canada and the United States lend strong support to the theoretical predictions developed herein.