The Underlying Return-Generating Factors for REIT Returns: An Application of Independent Component Analysis

Multifactor approaches to real estate returns have emphasized a macro-variables approach in preference to the latent factor approach originally used in arbitrage pricing theory. Use of high-frequency data, trading strategies and growing emphasis on the risks of extreme events makes the macrovariable procedure problematic. This article explores an alternative to the principal components analysis approach: independent components analysis (ICA). ICA seeks independence and maximizes a chosen risk parameter. We apply an ICA procedure based on a kurtosis maximization algorithm to real estate investment trust (REIT) data. The results show that ICA successfully captures kurtosis characteristics of REIT returns, offering possibilities for developing of risk management strategies that are sensitive to extreme events and tail distributions, augmenting traditional mean–variance approaches.     

How can we reliably measure the occurrence of non-fatal injury?

Introduction In England, there is no reliable indicator for measuring the occurrence of non-fatal injury. As a consequence, we do not know whether the rates of non-fatal injury are increasing or decreasing. Purpose This paper addresses two questions: what criteria should an indicator of non-fatal injury satisfy, and can we identify an indicator that satisfies these criteria? Method Criteria for a good indicator of non-fatal injury are postulated, and an indicator based on serious long-bone fractures is proposed. Inferences from the literature and the various non-fatal injury data to which we have access are used to justify the criteria, and to test the proposed indicator of serious injury against the criteria. Findings There is significant evidence to justify the use of the following criteria to assess indicators of non-fatal injury: the indicator should reflect the occurrence of injury satisfying some case definition of anatomical damage; the injury cases ascertained should be important in terms of incapacity, impairment, disability, quality of life, cost, and/or threat-to-life; cases should be completely ascertained from routinely or easily collected data; and the probability of a case being ascertained should be independent of social, health services supply and access factors. Our analysis indicates that an indicator based on serious long-bone fracture admitted to hospital is likely to satisfy each of these criteria for a good indicator. Conclusion An indicator of non-fatal injury occurrence based on serious long-bone fractures exhibits favourable characteristics when judged against our criteria for a good indicator.     

Explaining participation in the self-service economy

To explain participation in the self-service economy, competing theorisations have variously depicted participants as rational economic actors, dupes, seekers of self-identity, or simply doing so out of economic necessity or choice. To evaluate motives for self-servicing in the home improvement and maintenance sector, a survey of 120 households in an English locality is reported. This will reveal that all theorisations are valid to differing degrees, and through a process of induction, will offer a typology that combines the existing theorisations by differentiating between ‘willing’ (rational economic actors, choice, identity seeking) and ‘reluctant’ (economic and market necessity, dupes) participants in self-servicing. The outcome is a call to evaluate the broader applicability of this typology when explaining the wider self-service economy.     

The Annuity Puzzle and an Outline of Its Solution

In his seminal 1965 paper, Yaari showed that, assuming actuarially fair annuity prices, uncertain lifetimes, and no bequest motives, utility-maximizing retirees should annuitize all of their wealth on retirement. Nevertheless, the markets for individual immediate life annuities in the United States, the United Kingdom, and several other developed countries have been small relative to other financial investment outlets competing for retirement savings. Researchers have found this situation puzzling, hence the so-called “annuity puzzle.” There are many possible explanations for the annuity puzzle, including “rational” explanations such as adverse selection, bequest motives, and incomplete markets; and “behaviorial” explanations, such as mental accounting, cumulative prospect theory, and mortality salience. We review the literature on the various plausible explanations given for the existence of the annuity puzzle, suggest ways of stimulating the demand for annuities, and suggest a few of the ingredients needed for further development of hybrid annuity products that may provide a solution to the puzzle.     

Information dynamics, dividend displacement, conservatism, and earnings measurement: a development of the Ohlson (1995) valuation framework

This paper extends the Ohlson (Contemp Account Res 11, 661–687, 1995) equity valuation framework by demonstrating that dividend displacement continues to hold when dividends have a positive forecast coefficient in the linear abnormal earnings dynamic. The analysis demonstrates that such a predictive role for dividends implies a positive association between cum div book value of equity and the present value of expected abnormal earnings, consistent with both dividend displacement and accounting conservatism. While a signaling role for dividends is ruled out, a link between dividends, expected performance, and equity value is, however, demonstrated. The paper also considers a linear information model where an undefined variable replaces realized abnormal comprehensive earnings as an indicator of future performance. The role of this variable as a predictor of future abnormal comprehensive earnings is highlighted and the special case where it corresponds to recurring abnormal earnings is considered. This latter case provides useful implications for implementation of asset revaluations.     

On the Weighted Average Cost of Capital with Personal Taxes

This paper considers the impact of personal taxation on the Miles and Ezzell (1980) result that the weighted average cost of capital is the appropriate rate for discounting after corporation tax cash flows in an MM (Modigliani and Miller, 1958, 1963) perfect capital market with corporation tax. An analogous result, incorporating a capital gains tax adjustment, is derived for the personal tax case, and its application to the UK tax system is considered.     

Good in a crisis: the ontological institutionalism of social constructivism

This paper seeks to recover and establish the distinct (and distinctly) institutionalist social ontology that underpins social constructivism as an approach to political economic analysis. It views social constructivism as a profoundly normative mode of political inquiry which seeks to discern, interrogate and elucidate the contingency of social, political and economic change – restoring politics (broadly understood) to processes and practices typically seen to be inevitable, necessary and non-negotiable. More controversially, perhaps, it also sees social constructivism, after both Berger and Luckmann and Searle, as ontologically institutionalist. Social constructivism, it is argued, has its origins in the attempt to establish the ontological distinctiveness of institutions as ‘social’ (as distinct from natural or ‘brute’) facts. This leads it to a distinct understanding of the relationship between actors and the environment (both natural and social) in which they find themselves and to its characteristic emphasis on the ideational mediation of that relationship. That in turn leads it to a particular type of analytic purchase on political economic realities, reflected in its distinctive emphasis on interpretive ambiguity, the social construction of political and economic imperatives and on disequilibrium. The argument is illustrated and developed further through an elucidation of the implications of such a social constructivism for the analysis of the period of crisis through which we now acknowledge ourselves to be living.     

Electricity sector reform in developing countries: an econometric assessment of the effects of privatization,competition and regulation

Electricity sectors in both developed and developing countries have been subject to restructuring to introduce private capital and increase competition. Although the effects of such reforms in a number of the developed economies are now well documented, the experience of developing countries is much less well researched. This paper provides an econometric assessment of the effects of privatization, competition and regulation on the performance of the electricity generation industry using panel data for 36 developing and transitional countries, over the period 1985–2003. The study identifies the impact of these reforms on generating capacity, electricity generated, labor productivity in the generating sector and capacity utilization. The main conclusions are that on their own privatization and regulation (PR) do not lead to obvious gains in economic performance, though there are some positive interaction effects. By contrast, introducing competition does seem to be effective in stimulating performance improvements.