Required Rates of Return for Corporate Investment Appraisal in the Presence of Growth Opportunities

Traditional methods of estimating required rates of return overstate hurdle rates in the presence of growth opportunities. We attempt to quantify this effect by developing a simple model which: (i) identifies those companies that have valuable growth opportunities; (ii) splits the value of shares into ‘assets‐in‐place’ and ‘growth opportunities’; and (iii) splits the equity β into β for ‘assets‐in‐place’ and ‘growth opportunities’. We find growth opportunities for UK companies over the 1990–2004 period to average 33% of equity value. Incorporating the effect of growth opportunities, the average cost of capital for investment purposes falls by 1.1 percentage points.     

Search Costs,Behavioral Biases,and Information Intermediary Effects

In many markets, buyers, sellers, and their agents have differential information about the quality of heterogeneous assets. We study negotiated transaction prices in the commercial real estate market, which is characterized by heterogeneous assets, illiquidity, and highly segmented local markets, all of which increase the importance of asymmetric information in negotiated pricing outcomes. Using 114,588 industrial, multi-family and office sale transactions that occurred during 1997–2011, we document that distant commercial real estate buyers pay, on average, premiums of 4 % to 15 % relative to local buyers, controlling for individual property characteristics as well as time fixed-effects. We also examine the extent to which the sources of these observed premiums are a product of higher search costs/information asymmetry problems associated with distance (search cost channel) or a result of reference-dependence preference/anchoring based on the price levels in the investors’ local market (behavioral biases channel). Our results suggest the observed price premiums are explained by distant investors who face higher search costs and are at an information disadvantage compared to investors located in closer proximity to the property. In contrast, anchoring plays a more muted role in explaining observed premiums. The use of an intermediary (broker) increases, on average, the acquisition prices of buyers and decreases the disposition prices of sellers by 3 % to 8 %. This result is consistent with the incentive real estate agents have to convince sellers to dispose of their properties too quickly and to convince buyers to search less and therefore pay higher prices.     

The sentimental city: the lost urbanism of Pierre Mac Orlan and Guy Debord

Behind a high stonewall surrounding a rural farmhouse in Auvergne, Guy Debord, the ex‐Situationist theorist and activist, retreated. The grungy, cheap‐thrill Parisian urbanism of his youth was no more. Paris had died in his arms of a fatal illness that has seen off other great cities. Economic forces and planning initiatives had assassinated his rebel underworld, and culprits are still at large, still awaiting trial in the people's court. This essay embraces Debord the other side of the wall, dialoging with Pierre Mac Orlan, one of his favorite novelists. In so doing, we enter the phantasmal zone of the sentimental city, the city both real and make‐believe, defunct and yet‐to‐be. Mac Orlan's ideas about passive and active adventuring are explored here, to unlock the Pandora's box of Debord's urbanism. The essay approaches the capitalist city with a poetic gloss and reveals a realm richer and deeper than most social scientific urban research can grasp. Alongside Mac Orlan, Debord retraces his steps through urban ruins, and recaptures an everyday melancholy of backstreets and damaged people, of twilight nooks and crannies and shadowy bars. In Debord's sentimental city, it isn't so much the past that one regrets as the future. Derrière un haut mur de pierre entourant une ferme d'Auvergne, s'est retiré Guy Debord, l'ancien théoricien et militant situationniste. L'urbanisme parisien minable et décadent de sa jeunesse n'existait plus. Paris était mort dans ses bras d'une maladie désastreuse qui a emporté d'autres grandes villes. Forces économiques et initiatives d'aménagement ont assassiné son milieu rebelle et les coupables courent encore, dans l'attente d'un procès populaire. Cet essai voit Debord de l'autre côté du mur en train de dialoguer avec Pierre Mac Orlan, l'un de ses écrivains favoris. Ainsi, nous entrons dans l'illusion de la ville sentimentale, ville à la fois réelle et imaginaire, défunte et survivante. Les idées de Mac Orlan sur l'aventurier actif et passif y sont examinées afin d'ouvrir la boîte de Pandore de l'urbanisme selon Debord. L'approche de la ville capitaliste revêt un vernis poétique, révélant un univers plus riche et plus profond que ce qui peut être saisi par la plupart des recherches urbaines en sciences sociales. Aux côtés de Mac Orlan, Debord revient sur ses pas, traversant des ruines urbaines, retrouvant une mélancolie au quotidien des bas‐quartiers et d'une pègre abîmée, des coins et recoins obscurs et des bars mal éclairés. Dans la ville sentimentale de Debord, ce n'est pas tant le passé que l'on regrette, mais plutôt l'avenir.     

Asian development and poverty reduction strategies: Integrating fisheries into the development discourse

Asia is the world’s foremost capture fishery and aquaculture producer. It is also home to the majority of the world’s fishers and marine fleet (decked and undecked). Consequently, there is every reason to expect that this importance is reflected in national development discourses. This article identifies the socio-economic importance of fisheries in the region in terms of its contribution to primary exports, domestic protein consumption, employment and poverty alleviation. We then analyse national development and poverty reduction strategy documents using a content analysis methodology previously applied to measure the extent to which environmental or forestry issues had been mainstreamed into national policy documents. This enables us to identify those countries that have currently integrated fisheries into the national development discourse – and those that have not. We conclude by proposing two strategies to enable the more effective integration of fisheries into the development agenda.     

Creating network bridges for university technology transfer: The medici fellowship programme

This paper evaluates a fellowship scheme aiming to overcome attitudinal and operational barriers towards university technology transfer. We propose barriers exist because of the focus of many academics exclusively within a peer review research network. We explore the case of the Medici Fellowship programme that was implemented in biomedical departments across five universities located in the midlands of England. Our evidence suggests that such fellowship programmes, through the retraining of academics, may have a positive impact on the commercialisation of research. In particular, the fellows, through the enhancement of their social and human capital, are able to act as agents of attitudinal change in their host departments and are seen to build bridges into external business networks that can provide early stage funding, market and legal information and help identify potential customers for nascent academic entrepreneurs.     

A model of market-making with imperfect information

Although the prevention of false markets is one of the major concerns of stock market authorities in the UK and elsewhere, until recently, the theoretical literature on the workings of markets with imperfect information has been sparse. This paper analyses the problem of providing liquidity to investors when price-sensitive information is unequally distributed. Specifically we shall model the activities of a market-maker when certain traders have price-sensitive information unavailable to other market participants. Our model will show how the bid-asked spread would be determined in such a market. It is useful in explaining certain tactics employed by stock market traders and in suggesting alternative ways of evaluating market efficiency. The theory is developed in three sections: (1) the determination of the bid-asked spread for a single, isolated transaction; (2) the determination of the bid-asked spread in a continuous market; (3) the relationship between the spread and the size of transaction.     

Commercial Real Estate Return Performance: A Cross-Country Analysis

This paper investigates the return performance of publicly traded real estate companies. The analysis spans the 1984–1999 time period and includes return data on over 600 companies in 28 countries. The return data reveal a substantial amount of variation in mean real estate returns and standard deviations across countries. Moreover, standard Treynor ratios, which scale country excess returns by the estimated beta on the world wealth portfolio, also reveal substantial variation across countries in excess real estate returns per unit of systematic risk. However, when we estimate Jensens alphas using both single and multifactor specifications, we detect little evidence of abnormal, risk-adjusted returns at the country level. We do, however, find evidence of a strong world-wide factor in international real estate returns. Furthermore, even after controlling for the effects of world-wide systematic risk, an orthogonalized country-specific factor is highly significant. This suggests that real estate securities may provide international diversification opportunities.     

The Predictability of Equity REIT Returns: Time Variation and Economic Significance

This article presents evidence on predictability of excess returns for equity REITs relative to the aggregate stock market, small-capitalization stocks, and T-bills using best-fit models from prior time periods. We find that excess equity REIT returns are far less predictable out-of-sample than in-sample. This inability to forecast out-of-sample is particularly true in the 1990s. Nevertheless, in the absence of transaction costs, active-trading strategies based on out-of-sample predictions modestly outperform REIT buy-and-hold strategies. However, when transaction costs are introduced, profits from these active-trading strategies largely disappear.