How Fundamental are Fundamental Values? Valuation Methods and their Impact on the Performance of German Venture Capitalists

This paper studies how the use of alternative valuation methodologies affects investment performance for a sample of 53 German venture capitalists. We measure investment performance by the amount of investments they need to write off and by the number of companies they take public. We find that a significant number of investment managers use discounted cash flow (DCF) techniques, but only a minority appears to use a discount rate related to the cost of capital. The majority applies DCF using subjective discount rates. We present evidence that the use of DCF is correlated with superior investment performance only if applied in conjunction with an objectifiable discount rate. Also, funds that invest with a longer horizon perform better. The use of multiples is not significantly correlated with investment performance. We conclude that a focus on fundamental values confers an advantage.     

Predicting the money multiplier

This paper develops a component approach to forecasting the money multiplier. It is found that time-series models of the individual money multiplier components yield forecasts of the multiplier which are more accurate than those produced by other regression methods or time series methods applied to the multiplier itself.     

PUBLIC ENTERPRISES AND LABOR MARKET PERFORMANCE*

This article shows that state control of some industries may have contributed to the increase in European unemployment from the 1970s to the early 1990s. We develop a simple two‐sector model, one privately run and one publicly run, that has risk‐averse workers directing their search into one of the sectors. Assuming that the privately run sector is less able to insure its employees against uncertainty, we show that aggregate unemployment in this economy increases in response to an increase in economic turbulence.     

Testing the causal relationship between the domestic credit and reserve components of a country's monetary base

An important factor that helps distinguish between alternative balance of payments theories is the assumed causal relationship between the domestic credit and reserve components of a country's monetary base. This paper reports test results of this causal relationship in Australia, Belgium, France, Germany, Norway, and Sweden. Three causal detection methods are used: the Haugh test, the Granger test, and the Sims test. Two conclusions are drawn. First, the causal relationship does not run undirectionally from domestic credit to reserves as the Monetary Approach to the Balance of Payments and many tests of that approach assume. Second, the results are quite robust across alternative causality tests.     

Estimating regional construction cost differences: Theory and evidence

The economic theory of cost functions is employed to derive geographic cost differentials for construction projects located across the United States. Assuming a Cobb-Douglas production technology, cost function estimates are obtained and used to calculate the regional cost differentials for major US cities relative to Washington, DC. Explanations are provided for adjusting these regional cost differentials according to additional information available on input prices or expected future inflation rates specific to particular locations.     

What constitutes a “good assortment”? A scale for measuring consumers' perceptions of an assortment offered in a grocery category

This research investigates how consumers form subjective judgments of what constitutes “a good grocery assortment”. By conducting three exploratory focus groups and a field study, we develop a multi-item scale that reflects consumers' cue utilization processes in forming perceptions of a grocery assortment. Our findings suggest that consumers use only a limited number of informational cues to form perceptions about four higher-level assortment dimensions: (1) the assortment's pricing, (2) its quality, (3) its variety, and (4) its presentation. In line with the attitude theory, we found that consumers integrate these higher-level assortment dimensions into a summary evaluation of the grocery category's attractiveness. Accordingly, we derive the grocery assortment perception (GAP) scale as a second-order construct composed of four first-order factors. Significant positive relationships between the GAP scale and customer satisfaction as well as loyalty intentions provide empirical support for the scale's predictive ability and nomological validity. In the last section of this article, we discuss how the GAP scale will support category managers in their assortment decisions and provide directions for further research.     

Tax enforcement and tax havens under formula apportionment

In this paper, we consider optimal tax enforcement policy in the presence of profit shifting toward tax havens. We show that, under separate accounting, tax enforcement levels may be too high due to negative fiscal externalities. In contrast, under formula apportionment, tax enforcement is likely to be too low due to positive externalities of tax enforcement. Our results challenge recent contributions arguing that, under formula apportionment, there is a tendency toward inefficiently high levels of (effective) tax rates.     

Does Germany Collect Revenue from Taxing the Normal Return to Capital?*

A widespread objection to the introduction of consumption tax systems claims that this would lead to high tax revenue losses. This paper investigates the revenue effects of a consumption tax reform in Germany. Our results suggest that the revenue losses would be surprisingly low. We find a maximum revenue loss of 1.6 per cent of annual GDP. In some years, we even find tax revenue gains. This implies that the current tax system collects little revenue from taxing the normal return to capital. Based on these results, we calculate a macroeconomic measure of the effective tax rate on capital income.     

A SHORT NOTE ON SECOND-ORDER STOCHASTIC DOMINANCE PRESERVING COHERENT RISK MEASURES

We improve results on law invariant coherent risk measures satisfying the Fatou property due to Kusuoka (2001; Adv. Math. Econ . 3, 83–95) by considering risk measures which are in addition second order stochastic dominance preserving. In particular, we derive a representation result for such risk measures.     

Changing factor market conditions in South Africa: The capital market – a sectoral description of the period 1970–97

This article explores changing conditions in South African real capital markets. Noteworthy is the evidence of strong restructuring in this market during the 1990s. Whereas the 1970s and 1980s showed the best investment performance among primary commodity sectors and sectors with strong parastatal involvement, the highest investment rates of the 1990s have been associated with the manufacturing industry. We show that the real user cost of capital and capital productitivity contribute plausible determinants of investment rates in South Africa. The extent to which market forces are allowed to bring in line marginal cost and marginal return on capital appears to influence the sustainability of investment.