Market Responses to Buy Recommendations Issued by Personal Finance Magazines: Effects of Information, Price-Pressure, and Company Characteristics

This paper analyzes explicit buy recommendations for stockspublished by German Personal Finance Magazines from 1995 to2003. These recommendations earn significant abnormal returnsof 2.58% within the five days around the publication day. Boththe price-pressure hypothesis and the information hypothesiscan be confirmed by our data. The price-pressure effect is mostevident for small stocks and glamour stocks. However, whereasthe initial price reaction to small stocks is additionally drivenby permanent information value, this does not hold true forglamour stocks. In contrast, value stocks are associated withhigh cumulative abnormal returns that are solely driven by informationvalue.     

Reflections on the general theory of second best at its golden jubilee

The origin of the second best article is described and criticisms assessed. Distortions making impossible the achievement of either first or second best optima are outlined. Attempts to establish the applicability of first best rules are criticised, as are general rules for making piecemeal efficiency improvements. Both often use models containing empirically invalid assumptions and a selected few of the full set of distortions. Practical policy advice requires more parochial objective functions than community welfare; must rely on formal and appreciative theory, empirical evidence, and large doses of judgment; and should concentrate on making piecemeal improvements in context-specific situations.     

Dealing with prognostic uncertainty

How do professional futurists contend with prognostic uncertainty? There is an impressive body of medical-sociological research on how medical staff deals with uncertainty. We have used these insights to study patterns and manners in foresight practice that might not be evident otherwise. The question “Do professional futurists use approaches to deal with uncertainty that resemble those of medical staff?” is addressed by ongoing ethnographic research in Dutch foresight practice. The observed manners are grouped into four analytic categories: the construction of solidity, numeric discourse, communication habits and experience as anchor. In this paper, the construction of solidity and experience as anchor are described in detail. It is further more suggested that “certainification” is a possible upshot of these manners in use.     

Value at risk and the cross-section of hedge fund returns

Using two large hedge fund databases, this paper empirically tests the presence and significance of a cross-sectional relation between hedge fund returns and value at risk (VaR). The univariate and bivariate portfolio-level analyses as well as the fund-level regression results indicate a significantly positive relation between VaR and the cross-section of expected returns on live funds. During the period of January 1995 to December 2003, the live funds with high VaR outperform those with low VaR by an annual return difference of 9%. This risk-return tradeoff holds even after controlling for age, size, and liquidity factors. Furthermore, the risk profile of defunct funds is found to be different from that of live funds. The relation between downside risk and expected return is found to be negative for defunct funds because taking high risk by these funds can wipe out fund capital, and hence they become defunct. Meanwhile, voluntary closure makes some well performed funds with large assets and low risk fall into the defunct category. Hence, the risk-return relation for defunct funds is more complicated than what implies by survival. We demonstrate how to distinguish live funds from defunct funds on an ex ante basis. A trading rule based on buying the expected to live funds and selling the expected to disappear funds provides an annual profit of 8–10% depending on the investment horizons.     

The management of R & D technological progress as an object for applied systems analysis

Mankind's prospects both for finding new types of resources and for ensuring efficiency in resource utilization and substitution depend upon our success or failure in solving the problems of organizing and managing technological systems. A generalized scheme describing interaction among the basic elements of the management of national science and technology (ST) activity is outlined, and one particular element isolated for detailed examination: the system analysis and systematic assessment of new technology (SANT). The role of SANT in the context of decision-making in the management of ST progress is described, together with the methodological arsenal available. No one technique is universally good; the problem is to find systematic means of using a selection of methods which mutually compensate for each other's weaknesses. Further difficulties are encountered over the non-comparability or absence of initial data, and a framework for viewing the various classes of data available and making use of them is outlined. Examples are given of the practical application of SANT to problems such as the development of a macro-model., for the planning of national ST policy, and a model of technological change in the area of the science, technology, and exploitation of computers. A system is described which handles the data stores and information flows necessary for performing SANT routines.