THE STATISTICS OF LONG-HORIZON REGRESSIONS REVISITED1

This paper compares commonly used approaches for estimating the relation between long-horizon returns and a predetermined variable X₁, such as dividend yields. Specifically, we look at regression of (i) nonoverlapping multiperiod returns on X_t (ii) overlapping multiperiod returns on X_t, (iii) single-period returns on multiperiod X_t, and (iv) single-period returns on X_t and its implied long-horizon regression coefficient. We provide analytical formulae which quantify the efficiency of the estimators used in the various approaches. Using the formulae, as well as Monte Carlo simulations, we demonstrate that the relative efficiency of the estimators used in the various approaches differs remarkably, depending on the dynamic structure of the regressor. of special interest for financial economists, when the regressors are highly autocorrelated, we find that the regressions (ii) (iii), and (iv) provide only marginal efficiency gains above and beyond the nonoverlapping long-horizon regression.     

Pierce and Haugh on characterizations of causality: A re-examination

This paper amends the set of equivalent necessary and sufficient conditions under which y does not cause x, provided by Pierce and Haugh (1977).     

Fluctuations in innovations overtime

This paper first explains the concept of innovation life cycles and their relationship to leading sectors of the economy. It then briefly describes the relationship between innovation life cycles and long waves in macro-economic development, and presents a chronology and characterisation of the four phases of the long wave derived from Schumpeter. Various phases of the long wave could be expected to have different effects on the propensity to innovate, and this propensity probably varies also between new industries and existing established industries, as well as between product and process innovations. A list ef 80 major innovations is classified by sector and date, to provide a preliminary empirical validation of the hypotheses advanced on the varying influence of the successive phases of the long wave on different types of innovation. Finally, the author's findings are compared with those of Mensch and Schmookler.     

‘Managerialism’, ‘ownerism’ and risk

This paper proposes that managers, having the value of their human capital dependent on the performance of the firm they manage, and being unable to diversify away this risk, are expected to attempt to reduce their employment risk internally by project selection or by income smoothing, intended to stabilize the firm's income stream. An empirical investigation shows that manager-controlled firms exercise ‘income smoothing’ to a greater extent than owner-controlled firms, have relatively lower unsystematic risk and perhaps lower systematic risk.     

Earnings management surrounding CEO changes

This paper investigates the extent of earnings management in the periods surrounding CEO changes by Australian firms. Evidence is presented of incoming CEOs undertaking earnings management to reduce income in the year of CEO change, with abnormal and extraordinary items being the primary vehicle through which this is achieved. This result is consistent with the notion of new CEOs engaging in an 'earnings bath', and is strongest for non–routine CEO changes, where the opportunities to manage earnings are greatest. Extending prior work, classification of CEO changes as routine or non–routine is based on an expanded information search, and this provides insights into the CEO change process and identifies problems with simpler mechanistic classification methods. Additionally, detailed information of the operation of the modified Jones model for estimating expected accruals is presented, and this is consistent with such models having low explanatory power in identifying abnormal accruals.