The Gilt-Equity Yield Ratio and the Predictability of UK and US Equity Returns

A number of financial variables have been shown to be effective in explaining the time-series of aggregate equity returns in both the UK and the US. These include, inter alia , the equity dividend yield, the spread between the yields on long and short government bonds, and the lagged equity return. Recently, however, the ratio between the long government bond yield and the equity dividend yield – the gilt-equity yield ratio – has emerged as a variable that has considerable explanatory power for UK equity returns. This paper compares the predictive ability of the gilt-equity yield ratio with these other variables for UK and US equity returns, providing evidence on both in-sample and out-of-sample performance. For UK monthly returns, it is shown that while the dividend yield has substantial in-sample explanatory power, this is not matched by out-of sample forecast accuracy. The gilt-equity yield ratio, in contrast, performs well both in-sample and out-of-sample. Although the predictability of US monthly equity returns is much lower than for the UK, a similar result emerges, with the gilt-equity yield ratio dominating the other variables in terms of both in-sample explanatory power and out-of-sample forecast performance. The gilt-equity yield ratio is also shown to have substantial predictive ability for long horizon returns.     

Rate Level Indexed Mortgages: An Evaluation

In this paper, a new and superior alternative mortgage design is presented and evaluated. The mortgage design is motivated by a desire to reduce the exposure of both borrowers and lenders to risks that result from high and variable interest rates, while at the same time providing a mechanism by which changes in the real value of payments and rates of amortization can be controlled. In addition to a theoretical discussion of the merits of this design a simulation of the mortgage's performance is provided that uses market data from the period 1965 to 1983.     

COLONIALISM AND LONG‐RUN GROWTH IN AUSTRALIA: AN EXAMINATION OF INSTITUTIONAL CHANGE IN VICTORIA'S WATER SECTOR DURING THE NINETEENTH CENTURY

Institutional change in water rights in the nineteenth century Australian colony of Victoria raised institutional efficiency, which contributed to long‐run economic growth. High‐quality human capital and the extension of voting rights (franchise) were crucial for efficient institutional change in the water sector. Quality human capital (literacy) appeared to increase the rural population's awareness of the economic impact of the existing structure of water rights that may have constrained growth in the agricultural sector and reduced investment incentives. Extension of the franchise allowed the rural population to exert political pressure for enactment of change in water rights, which resulted in efficiency‐enhancing policies and efficient institutions. The findings show these two factors were more important than Victoria's British colonial heritage in determining whether growth‐enhancing institutional change took place.     

Evaluating the Contribution of Exporting to UK Productivity Growth: Some Microeconomic Evidence

This study assesses the contribution of exporting activities to aggregate productivity growth in the UK for all market‐based sectors for the period 1996–2004, using a weighted FAME dataset. Based on decompositions of productivity growth, our findings suggest that, overall, exporting firms experience faster productivity growth than non‐exporting firms and therefore contribute more to national productivity growth. In addition, aggregate productivity for exporters benefits from a large contribution from ‘continuing’ firms improving their productivity, as well as exporters that have been taken‐over/merged or started‐up as new firms. In contrast, most of the TFP improvement for non‐exporters is attributable to lower productivity firms exiting, rather than from internal improvements or the productivity‐enhancing impact of new firms.     

Gender disparities: a medical detoxification program

Significant gaps exist in health care regarding gender in the United States. Health status, social roles, culturally patterned behavior and access to health care can be influenced by gender. Women have been the primary users of health care and minority women usually have received poorer quality care than Non-Hispanic White (NHW) females. The objectives of this study were to identify gender, racial and ethnic disparities in access to substance abuse treatment in a Texas hospital. Secondary data collected on 1,309 subjects who underwent detoxification were studied. Gender, race/ethnicity, drug of abuse, relapse and financial classification were included in the analysis. Results indicate Hispanic females and Non-Hispanic Black (NHB) females were about 5 and 3.5 more likely than NHW females to use Medicaid services respectively (p < .05). NHW and NHB males were more likely to use Medicare than females (p < .05). NHB and Hispanic females were 5.8 and 2.1 times more likely to receive care for abuse of cocaine when compared to NHW females respectively (p < .05). Hispanic females were 2.3 times more likely to relapse than Non-Hispanic females, and uninsured NHB females were 7.1 times at a higher risk to abuse multiple drugs compare to NHW females (p < .05). Socio-economic factors, lower labor force participation rates, and less financial independence can explain females utilizing more often Medicaid regardless of their race/ethnicity. These results can be also explained by aggressive case management utilization, socio cultural barriers and/or discriminatory practices, both intentional and unintentional.     

Neue Banken- und Fiskalarchitektur für Europa: Krisen vermeiden,statt sie nur zu bewältigen

In December 2013 agreement on the second pillar of the banking union was reached. The SRM sets up restructuring guidelines for banks, including a bank-paid resolution fund, fully operational in 2025. In the article we discuss how the current design of the banking union falls short of the goal of breaking the link between governments and their banks. We explain how an insolvency code for sovereigns is central to achieving this goal and evaluate alternative mechanisms to synchronise the business cycles of member states: 1) the coordination of national stabilisation policies; 2) the introduction of a cyclical shock insurance; and 3) the enlargement of the euro area budget, of which we consider the first alternative the most promising.     

The dynamic of financial crises and its non-monotonic effects on earnings quality

Despite the wealth of research examining earnings quality and earnings management, we still have much to learn about the effects of macroeconomic factors on accounting discretion’s decisions; the recent financial crises may be one of such factors. Nevertheless, the extant literature is inconclusive about the direction of the relationship between earnings quality and economic downturn. In this study, we focus on the extent to which organizational survival may be an objective of earnings management. In this manner, we add to research considering earnings target as an objective of earnings manipulation. Furthermore, our results suggest that these objectives likely change as crisis becomes worse. Consequently, we argue that the relationship between financial crises and earnings management is non-monotonic. Earnings management decreases when the intensity of the crisis is low, while it increases when the crisis is acute.     

Pathways After Default: What Happens to Distressed Mortgage Borrowers and Their Homes?

We use a detailed dataset of seriously delinquent mortgages to examine the dynamic process of mortgage default—from initial delinquency and default to final resolution of the loan and disposition of the property. We estimate a two-stage competing risk hazard model to assess the factors associated with post-default outcomes, including whether a borrower receives a legal notice of foreclosure. In particular, we focus on a borrower’s ability to avoid a foreclosure auction by getting a modification, by refinancing the loan, or by selling the property. We find that the outcomes of the foreclosure process are significantly related to: loan characteristics including the borrower’s credit history, current loan-to-value and the presence of a junior lien; the borrower’s post-default payment behavior, including the borrower’s participation in foreclosure counseling; neighborhood characteristics such as foreclosure rates, recent house price depreciation and median income; and the borrower’s race and ethnicity.