Is the ex‐ante equity risk premium always positive? Evidence from a new conditional expectations model

We model the conditional risk premium by combining principal component analysis and a statistical learning technique, known as boosted regression trees. The method is validated through various out‐of‐sample tests. We apply the estimates to test the positivity restriction on the risk premium and find evidence that the risk premium is negative in periods of low corporate and government bond returns, high inflation and downward‐sloping term structure. These periods are linked with changes in business cycles; the states when theories predict the existence of negative risk premium. Based on the evidence, we reject the conditional capital asset pricing model and raise a question over the practice of imposing the positive risk premium constraint in predictive models.     

Analyst versus model-based earnings forecasts: implied cost of capital applications

We find that a composite implied cost of capital (ICC) estimate – based on the earnings forecasts generated by cross-sectional models – is highly correlated with future realised returns in both portfolio- and regression-based tests. By contrast, we find very little evidence for an association with future realised returns for an ICC estimate based on analyst earnings forecasts. We also document the time-varying nature of expected returns and risk premia, and provide up-to-date estimates of an implied Australian market risk premium.     

Dynamic responses and tail-dependence among commodities,the US real interest rate and the dollar

Theoretical models suggest monetary policy is transmitted to commodity prices. We quantify this channel using several empirical methods under daily data. In early 2009, the US real interest rate became negative, with sample mean varying from 1.75 % (in the mid-1997 to January 28, 2009, subsample) to \(-1.50\,\%\) (in January 29, 2009, to mid-September 2013 subsample). Gold displays higher risk-adjusted returns earlier, while copper and oil have higher risk-adjusted returns more recently. Shocks to the exchange rate and the real interest rate in VARs explain almost 30 % for oil and 32 % for copper more recently when impulse responses are more significant. The time-varying correlation of oil with the real interest rate in the more recent period is \(-0.462\), and its correlation with the exchange rate is \(-0.460\), compared to \(-0.089\) and \(-0.120\), respectively, in the earlier period. Vine copula methods identify a dependence pattern of C-vine copula with t-copula in almost every pair among commodity prices, the real value of the US dollar and the US real interest rate.     

Young consumers’ green purchase behaviour in an emerging market

Young consumers represent a powerful engine in the development of environmentally conscious population as well as a promising market for green products. Marketers and organizations are therefore increasingly developing strategic marketing campaigns and environmental education programmes that target the young consumer segment. This study aims to examine a number of rational, moral, emotional and self-identity factors that may facilitate or impede green purchase behaviour among young consumers in an emerging market, Vietnam. A paper-based survey was employed to collect data from university students, which yielded an effective sample of 289 respondents. Multivariate statistics revealed that most factors (i.e. knowledge, attitudes, personal norms, self-identity and perceived barriers) significantly affected consumer purchase of energy efficient appliances, except for subjective social norms and warm glow. From these findings, implications for marketers, policy-makers and other stakeholders engaged in promoting green products are discussed.     

Ex-ante performance of REIT portfolios

Review of Quantitative Finance and Accounting - The Real Estate Investment Trust (REIT) market has become an increasingly important vehicle for alternative investment for equity investors. While...