Corporate sustainability in asset pricing models and mutual funds performance measurement

This study explores whether corporate sustainability is a relevant factor in multifactor asset pricing models. It contributes to the literature on asset pricing, as well as to the literature that examines how sustainability impacts capital markets, by constructing a new factor that captures differences in the returns of sustainable and non-sustainable firms. Specifically, it examines whether an additional sustainability factor has explanatory power in asset pricing models that include size, book-to-market equity, and momentum factors. This research has practical implications for the performance measurement of portfolios and mutual funds that are managed in accordance with sustainability criteria in that it disentangles general stock-picking skills from the differences in returns between sustainable and non-sustainable stocks.     

Classical Swine Fever Changes the Way Farmers Value Pigs in South Africa

Although there is growing demand for animal products in Africa, production is stagnating. Appropriate management of livestock diversity could help reinvigorate production, contribute to food security and improve farmers’ livelihoods, particularly in subsistence‐oriented systems. We assess differences in farmers’ preferences and economic values for pig traits across different production systems and across areas that have been affected and unaffected by classical swine fever (CSF). Not surprisingly, market‐oriented farmers derived higher values from the productive traits such as heavy slaughter weight and large litter size found in exotic pig genotypes. Subsistence‐oriented farmers, particularly in swine fever affected areas, placed high value on tolerance to disease. We found that CSF changed farmers’ preferences for adaptive traits, and less so for productive traits. Therefore, indigenous breeds become more valuable for subsistence farmers and crossbreeds for market‐oriented farmers if CSF is a risk. Our results can have implications for breeding and conservation strategies and for compensation strategies after culling, and will become increasingly relevant if, as predicted, heat waves and disease outbreaks become more frequent in pig production systems in South Africa with climate change.     

Foresight with Delphi Surveys in Japan

Foresight activities are conducted in many countries, but the Japanese were the most active in this field for many years. Most of their activities are based on the Delphi methodology. They published their first Delphi study in 1971 and repeated studies every five years. There is more knowledge available on more than 30 years of foresight with the Delphi approach in Japan. This provides an excellent opportunity to examine the established foresight system with the use of some examples. The forecast of the fax machine as an example of success, and the earthquake warning as a failure are illustrated in more detail, and the question is raised why—in spite of this mixed picture—foresight with the Delphi method is regarded as useful in Japan.     

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Kompression als Basis des Therapieerfolgs – Kompression kann nicht alles, aber ohne Kompression kann bei der Wundheilung eines Ulcus cruris venosum nichts erreicht werden. Die konsequent angewandte Kompressionstherapie und die Anleitung des Patienten zu mehr Bewegung ist daher entscheidend für eine erfolgreiche Rezidivprophylaxe.     

The resurgence of national‐level bargaining: union strategies in Spain

Spain has witnessed an oscillating pattern of bargaining in which national‐level agreements were first present, then declined, and have since resurfaced. While economic pressures may have motivated changing union responses, the specifics of the bargaining patterns can be better understood if domestic institutions are included in an explanation of union strategies.     

Evaluating growth options as sources of value for pharmaceutical research projects

The financial value of research projects is difficult to assess because they are highly uncertain. Often, the result is either an overly conservative approach to strategic innovation, based on net present value analyses, or an overly aggressive approach based on optimistic qualitative portfolios. R&D project evaluation requires recognizing threats as well as opportunities from uncertain events, and incorporating flexibility in managerial action in response to them. Real options pricing analysis is a widely discussed tool for evaluating such managerial flexibility. The limitation of options pricing lies in its requirement for complete financial markets, in which a replicating asset can be found that reproduces (or, at least, is correlated with) the project’s payoffs in all possible states of the world. However, the major risks of research projects are typically project specific and cannot be replicated in external markets. In this situation, a decision tree is a better tool to represent managerial options during execution of the project, and to evaluate its value. A decision tree is equivalent to options pricing for risks that can be priced in the financial markets (if trading of securities is explicitly included), and moreover, it can incorporate risks and flexibility that are not traded in financial markets. Using decision trees, we demonstrate a quantitative evaluation of compound growth options from research at BestPharma, a large international pharmaceutical company. A growth option is a future opportunity that may arise from a current R&D investment. The growth option may not be related to the primary purpose of the R&D project, or not even be directly foreseeable. Kester (1984) has argued that growth options may account for a large part of project value. BestPharma faced the problem of choosing among several strategic research initiatives. They developed a decision tree representation of the projects, which helped to provide transparency about project value and strategic options. Most importantly, carefully thinking through the tree helped to identify growth options, represented by additional branches in the tree, and to quantify that they represented major sources of value.