The contextual nature of the predictive power of statistically-based quarterly earnings models

We present new empirical evidence on the contextual nature of the predictive power of five statistically-based quarterly earnings expectation models evaluated on a holdout period spanning the twelve quarters from 2000–2002. In marked contrast to extant time-series work, the random walk with drift (RWD) model provides significantly more accurate pooled, one-step-ahead quarterly earnings predictions for a sample of high-technology firms (n = 202). In similar predictive comparisons, the Griffin-Watts (GW) ARIMA model provides significantly more accurate quarterly earnings predictions for a sample of regulated firms (n = 218). Finally, the RWD and GW ARIMA models jointly dominate the other expectation models (i.e., seasonal random walk with drift, the Brown-Rozeff (BR) and Foster (F) ARIMA models) for a default sample of firms (n = 796). We provide supplementary analyses that document the: (1) increased frequency of the number of loss quarters experienced by our sample firms in the holdout period (2000–2002) vis-à-vis the identification period (1990–1999); (2) reduced levels of earnings persistence for our sample firms relative to earnings persistence factors computed by Baginski et al. (2003) during earlier time periods (1970s–1980s); (3) relative impact on the predictive ability of the five expectation models conditioned upon the extent of analyst coverage of sample firms (i.e., no coverage, moderate coverage, and extensive coverage); and (4) sensitivity of predictive performance across subsets of regulated firms with the BR ARIMA model providing the most accurate predictions for utilities (n = 87) while the RWD model is superior for financial institutions (n = 131).

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A REVISED GEOMETRY OF MEAN-VARIANCE EFFICIENT PORTFOLIOS

A revised definition of efficiency compares portfolios with different net worths. One axiom rules out instantaneous riskless gains, the other asserts that it costs money to buy good portfolios. Unlimited short sales are allowed. Portfolios which cannot be improved at any price are called absolutely efficient. The geometry of the mean-standard deviation frontiers is governed by three “efficient set constants”. A few results regarding efficient portfolios must be modified, and a new version of the security line equation is proposed. Explicit formulas are given: no need to use different formulas for singular or non-singular covariance matrix.     

Structured packings for use in oxygen service: Flammability considerations

Metallic structured packings have found increasing use in the cryogenic distillation of air. An experimental program was performed to test the flammability of selected metal packings under simulated high oxygen concentration operating conditions. Aluminum flammability in gaseous oxygen has been shown to be very dependent upon argon dilution, and in the presence of liquid oxygen, strong energy releases have been observed. Brass packing exhibited an unexpectedly high relative flammability whereas copper has been found to be non-flammable in all tested oxygen purities. These findings suggest the use of copper structured packing in higher purity GOX/LOX regions of an air separation distillation column and aluminum structured packing in the remainder of the column.     

BOOK REVIEWS

Dynamics and Conflict in Regional Structura1 Change—Essay in Honor of Walter Isard Volume 2 Practical Methods of Regional Science and Empirical Applications—Selected Papers of Walter Isard, Volume 2 Department of Economics Loughborough University Export Promotion Strategies—Theory and Evidence from Developing Countries Commonwealth Secretariat Export Market Development Division Human Development Report 1990 for the United Nations Development Programme (UNDP) (New York and Oxford: University of Nottingham The World Bank and the Environment—First Annual Report Fiscal 1990, The World Bank (New York: The World Bank, 1990 London Environmental Economics Centre University College London The European Communities' Single Market: The Challenge of 1992 for Sub-Saharan Africa Loughborough University     

An overview of exposures and exposure control in the ethylene oxide producer and ethoxylation industries

This paper presents the results of an industry survey that was sponsored by the Ethylene Oxide Industry Council (EOIC). The EOIC operates as a special program of the Chemical Manufacturers Association. The members of EOIC account for over 85 percent of domestic production of EtO and cover a broad range of EtO users, including ethoxylators and sterilizers. The survey was done to collect current information in anticipation of responding to a proposed OSHA rulemaking for a short-term exposure limit for EtO. Specifically, the study was designed to collect information on the following:

• 1. History of the establishment of company EtO exposure guidelines.
• 2. Current EtO workplace exposure monitoring practices, capabilities and methods.
• 3. Current workplace exposure levels: Eight hour and short-term.
• 4. Engineering control, respirator, and ancillary costs for compliance with the 1.0 Permissible Exposure Limit (PEL) and projected costs for compliance with a 5.0 ppm or 10.0 ppm Short–term Exposure Limit (STEL).

     

IMPERFECT INFORMATION AND THE CHOICE BETWEEN COLLUSION AND HORIZONTAL MERGER

If the payoff obtained by the parties of an agreement depends on the values set for variables the value of which cannot be described precisely or monitored accurately, then the first best outcome may not be achieved. It is shown here that in some cases a second best long term agreement gives the parties a higher payoff, in other cases a short term arrangement is preferred. The interpretation of this result given in the paper is that when a long term contract is preferable, then firms are unable to commit themselves to it through a collusive agreement, and they will try to merge. Vice versa, no need to integrate arises when the preferred second best agreement is the short term one. The last section provides an example, where advertisement effort is non-contractible, while prices are.     

TRAINING AND LABOUR MARKET SEGMENTATION

A two period model of the training decision is analysed using a human capital approach. The segmented labour market model where training opportunities distinguish entrants is compared with a competitive structure with homogeneous entrants. The main conclusions in the paper are the clear effects of training wages and the different effects in the two market structures of both wages and employment prospects in the unskilled market on training.