Returns to buying earnings and book value: accounting for growth and risk

Historical cost accounting deals with uncertainty by deferring the recognition of earnings until the uncertainty has largely been resolved. Such accounting affects both earnings and book value and produces expected earnings growth deemed to be at risk. This paper shows that the earnings-to-price and book-to-price ratios that are the product of this accounting forecast both earnings growth and the risk to that growth. The paper also shows that the market pricing of earnings and book values in these ratios aligns with the risk imbedded in the accounting: the returns to buying stocks on the basis of their earnings yield and book-to-price are explained as a rational pricing of the risk of expected earnings growth not being realized. Accordingly, the paper provides a rationalization of the well-documented book-to-price effect in stock returns: book-to-price indicates the risk in buying earnings growth. However, growth identified by a high book-to-price as yielding a higher return in this paper is quite different from “growth” typically attributed to a low book-to-price as yielding a lower return. Accordingly, the notion of “growth” versus “value” requires modification.     

Anomalous waiting times in high-frequency financial data

In high-frequency financial data not only returns, but also waiting times between consecutive trades are random variables. Therefore, it is possible to apply continuous-time random walks (CTRWs) as phenomenological models of the high-frequency price dynamics. An empirical analysis performed on the 30 DJIA stocks shows that the waiting-time survival probability for high-frequency data is non-exponential. This fact imposes constraints on agent-based models of financial markets.     

NEUTRAL TECHNOLOGY SHOCKS AND THE DYNAMICS OF LABOR INPUT: RESULTS FROM AN AGNOSTIC IDENTIFICATION*

This article studies the dynamic response of labor input to neutral technology shocks. It uses benchmark dynamic, stochastic, general equilibrium models enriched with labor market search and matching frictions and investment‐specific technological progress that enables a new, agnostic, identification scheme based on sign restrictions on a structural vector autoregression (SVAR). The estimation supports an increase of labor input in response to neutral technology shocks. This finding is robust across different perturbations of the SVAR model.     

Scenario planning for tourism management: a participatory and system dynamics model applied to the Galapagos Islands of Ecuador

This paper presents a decision-support system based on a system dynamics model designed to examine tourism management in the Galapagos Islands. A participatory approach was used to integrate the views of multiple stakeholders in the Galapagos Islands and to build an understandable, graphical representation of the impacts of tourism and residential population growth. Each subsystem is examined through hypotheses involving three scenarios of tourism growth that are associated with different residential population expansions. A number of integrative and linked social-ecological effects in our model have been shown to severely shock the natural environment of the Galapagos and saturate the capacity of several socio-economic subsystems. Major concerns of the expanding human dimension in the Galapagos are represented by (1) the growing number of introduced species that threaten the Islands’ unique natural environment, and (2) the rapid saturation of the Galapagos National Park's tourism reception capacity. The model relies upon real data to specify rules, relationships, and rates of exchange that are derived through statistical functions and/or functions specified in theory or practice. The presented decision-support system is a quantitative scenario-planning tool that can be used by policy-makers to achieve an enhanced understanding of the Galapagos Islands as a coupled human–natural system.     

Extracting information or resource? The Hotelling rule revisited under asymmetric information

A concessionaire has private information on the initial stock of resource. A “virtual Hotelling rule” describes how the resource price evolves over time and how extraction costs are compounded with information costs along the optimal extraction path. Fields which are heterogeneous in terms of their initial stocks follow different extraction paths. Resource might be left unexploited in the long run as a way to foster incentives. The optimal contract may sometimes be implemented through royalties and license fees. With a market of concessionaires, asymmetric information leads to a “virtual Herfindahl principle” and to another form of heterogeneity across active concessionaires.     

Climate change management: a resilience strategy for flood risk using Blockchain tools

Decisions in Economics and Finance - This work aims to offer a contribution in the analysis and management, from an economic and financial point of view, of the flood risk, and extended to the...     

Europe After COVID-19: A New Role for German Leadership?

Intereconomics - The German change of attitude concerning fiscal policy and the mutualisation of efforts to fight the pandemic is driven by self-interest, and as such might be structural.     

Innovation and knowledge sharing in crowdfunding: how social dynamics affect project success

The aim of this study is to contribute to the existing literature on innovation and knowledge sharing in crowdfunding, by exploring the importance of internal social capital, and how the previous failure of a campaign may lead to the success of a second one from the same project creator. Thus, the research question of the study is: how do social dynamics affect project success in a crowdfunding context? The paper reports an illustrative case study which has been promoted on the Kickstarter platform. The authors analysed data, documentation and physical artefacts, especially regarding the network size during the funding period. The results show that the self-learning which project creators gain from previous failure supports them in relaunching their crowdfunding campaign. However, various revisions take place during the second campaign (e.g. social capital size, product redesign and knowledge sharing) to achieve success.