analyst forecasting errors additional evidence analyst forecasting errors are approximately as large as dreman and berry 1995 documented and an optimistic bias is evident for all years from 1985 through 1996 in contrast to their findings i show that analyst forecasting errors and bias have decreased over time moreover the optimistic bias in quarterly forecasts was absent for sp 2 firms with comparatively large amounts of market capitalization absolute value of earnings forecast and analyst following and 3 firms in certain industries

hedging and coordinated risk management evidence from thrift conversions we provide an explanation for hedging as a means of allocating rather than reducing risk we argue that when increases in total risk are costly firms optimally allocate risk by reducing increasing exposure to risks that provide zero positive economic rents our evidence shows that mutual thrifts that convert to stock institutions increase total risk following conversion consistent with their increased abilities and incentives for risk taking they achieve this increase by hedging interest rate risk and increasing credit risk we provide some evidence that risk management activities are related to growth capacity and management compensation structure attained at conversion

on the option to invest in pollution control under a regime of tradable emissions allowances optimal decisions of a firm facing the option of retrofitting its plant to reduce pollution and thereby eliminate the need to purchase emissions allowances are analysed the decision is treated as a real option with the price of pollution permits following a known stochastic process the model is formulated as a set of one dimensional partial differential equations at discrete points in time the firm owner makes optimal decisions about the retrofit including whether to mothball temporarily the model is used to analyse a firm s decision to instal a scrubber as a result of the 1990 u s clean air act jel classification q25 d81 g31 sur la possibilite d investir dans le controle de la pollution dans un regime de permis d emission de pollution echangeables commercialement ce memoire examine les decisions optimales d une entreprise face a la possibilite d adapter ses installations pour reduire la pollution et ce faisant d eliminer le besoin de se procurer des permis d emission de pollution sur le marche le decision est traitee comme une option reelle ou le prix des permis resulte d un processus stochastique connu le modele est formule sous forme d un ensemble d equations differentielles partielles a une dimension a des points discontinus dans le temps le proprietaire de l entreprise prend des decisions optimales de mise a niveau des installations y compris la possibilite de les fermer temporairement le modele est utilise pour analyser une decision d installer un epurateur suite a la mise en place de la loi americaine de 1990 clean air act

comparisons and combinations of long and long short strategies market neutral long short strategies get their returns from alphas and short rebates long strategies get their returns from alpha and the market differing return and risk sources complicate their comparison partly because of the strong market referenced focus of conventional performance analysis compelling theoretical advantages of active return per unit of active risk suggest that long short strategies are better able to deliver excess return than are conventional institutional long strategies long short strategies even with tiny positive alphas are seen to improve investors efficient frontiers when added to a traditional t bill long portfolio mix mostly because their risk sources are uncorrelated surprisingly the improvement occurs even if long short strategies are sharpe ratio inferior to long strategies these results provide theoretical support for including long short strategies in most investors mix of assets

mutual holding companies evidence of conflicts of interest through disparate dividends abstract the mutual holding company mhc structure establishes a dual class stock that creates a unique opportunity to transfer wealth from thrift depositor owners to new minority shareholders through the disparate payment of dividends we show that mhcs are priced higher than comparable non mhcs and dividend policy is a significant component of this valuation we also show that mhc thrifts pay significantly higher dividends than non mhc thrifts and that an office of thrift supervision ots ruling reducing the potential for disparate dividends between the two classes of shareholders resulted in lower dividends these results have policy implications of special significance given that the ots reversed its position in 2000 and because of the current controversy over the use of the mhc structure in the financial service industry

energy investment risk assessment for nations along china s belt road initiative abstract overseas energy investment as an effective way of securing energy supply is being favored by the world s leading energy consuming countries however energy investment has the potential high risk on multiple forms including political and regulatory risk currency liquidity and refinancing risk as well as resource risk and so on to effectively evaluate overseas energy investment risk this study proposed a new indicator system from six dimensions furthermore a fuzzy integrated evaluation model based on the entropy weight was constructed to rate the energy investment risk for 50 nations along china s belt road initiative the findings indicate that resource potential and chinese factors have become the main determinant of energy investment risk while environmental constraints and political risk should also be considered for investing decisions in conclusion saudi arabia united arab emirates pakistan kazakhstan and russia are the most ideal choices for china s energy investment balancing resource potential and investment environment

earnings skewness and analyst forecast bias abstract we argue that if analysts objective is to provide the most accurate forecast by minimizing the mean absolute forecast error then the optimal forecast is the median instead of the mean earnings forecast bias is observed when the median is different from the mean in a skewed earnings distribution thus part of the observed analyst forecast bias could be a result of analysts efforts to improve forecast accuracy when the earnings distribution is skewed we find that earnings skewness is significantly related to analyst forecast bias we also provide evidence that the market adjusts for part of the skewness induced bias

modeling structural and temporal variation in the market s valuation of banking firms hidden capital exists whenever the accounting measure of a firm s net worth diverges from its economic value such unbooked capital has on balance sheet and off balancesheet sources this paper develops a model to estimate both forms of hidden capital and to test hypotheses about their determinants in effect the analysis expands the twoindex model by endogenizing the market and interest rate sensitivities of any stock and decomposing each sensitivity into on balance sheet and off balance sheet elements for a sample of banks during 1975 1985 the model finds considerable variation in both forms of hidden capital to the extent that an accounting representation of a firm s net worth diverges from its economic value the firm is said to have hidden capital two sources of hidden capital exist accountants misvaluations of portfolio positions that accounting principles designate as on balance sheet items and the systematic neglect of off balance sheet sources of value that these principles do not permit to be formally booked this paper develops a model for estimating both types of hidden capital the model makes direct use of accounting information on the bookable positions of a firm and separates bookable from unbookable sources of value we use regression analysis to partition the market value of a firm s stock i e its market capitalization mv into two components recorded capital reserves and unrecorded or hidden net worth hidden capital is in turn allocated between values that are unbooked but bookable through asset turnover or writedowns on a historical cost balance sheet under generally accepted accounting principles gaap and values which gaap currently designates as an unbookable offbalance sheet item we estimate the net unbooked value of on balance sheet positions by estimating an intermediate variation ratio k this variable expresses the ratio of the market value to the book value of the collected components of a firm s bookable

the clean development mechanism stochastic permit prices and energy investments abstract we analyze the impact on energy investments stemming from different emission permit classes by considering permits that are allocated inside the european emission trading scheme and secondary certified emission reduction scer permits originating from the clean development mechanism one price taking firm which is subject to emission regulation has the choice to invest in gas or wind power plant the firm faces uncertainty regarding stochastically evolving permit prices while it receives a premium on the electricity price for wind energy as a first step we determine the value of the option to invest into a gas power plant over time then we calculate the investment probability of a gas power investment in a range of policy scenarios we find that allowing the usage of scer permits in the present policy framework has a positive impact on gas power investment decoupling the price processes has a similar effect if the quota of scer permits is doubled the decrease in the investment probability for wind power is large we carry out sensitivity tests for different parameter values and find that investment behavior changes significantly with differing interest rates the wind energy premium and volatility

the information content of losses abstract this study hypothesizes that because shareholders have a liquidation option losses are not expected to perpetuate they are thus less informative than profits about the firm s future prospects the results are consistent with the hypothesis they also show that the documented increase in the earnings response coefficent as the cumulation period increases appears to be due exclusively to the effect of losses the liquidation option effect extends to profitable cases where earnings are low enough to make the option attractive alternating explanations for the low informativeness of losses such as mean reversal of earnings are not supported by the tests

thrift stock returns and portfolio interest rate sensitivity abstract in practice the interest rate sensitivity of depository institution di net worth is measured in terms of maturity mismatches arising from nominal contracts in their financial portfolios academic studies also frequently invoke nominal contracting to explain a positive covariation observed between di stock returns and bond returns for a sample of thrifts reporting detailed financial data 1984 1992 this study estimates monthly changes in their financial portfolio values due to changes in interest rates these portfolio value changes are found to be unimportant in explaining the thrifts stock returns and are unable to account for a positive covariation between the stock returns and bond market returns potential weaknesses in the tests seem inadequate to explain the results explanations other than nominal contracting may warrant more consideration in relating dis net worth to interest rate changes

federal deposit insurance regulatory policy and optimal bank capital this paper seeks to explain the combination of explicit and implicit pricing for deposit insurance employed by the fdic essentially the fdic sells two products insurance and regulation to span the product space it must and does set two prices we argue that the need to establish regulatory disincentives to bank risk taking is the heart of the controversy over the adequacy of bank capital and that the ability to close risky banks before exhausting their charter value i e the value of their right to continue in business stands at the center of these disincentives and in front of the fdic s insurance reserves just as a book shouldn t be judged by its cover a government agency shouldn t be judged by the words behind its initials with the fdic federal deposit insurance corporation the agency s name describes only part of its formal operations the fdic is quasi governmental has a regional structure and sells deposit insurance however the initials fail to convey the fdic s critical place in the governmental regulatory structure as the sole federal overseer of the approximately 8900 state chartered commercial banks that have chosen not to belong the federal reserve system reflecting the federal reserve s membership problem the number of these banks is growing year by year besides selling deposit insurance at bargain explicit rates the fdic performs four regulatory functions 1 entry regulation it passes on new banks applications for deposit insurance and on branch and merger proposals as well thereby protecting the value of existing bank charters 2 examination two thirds of fdic employees are concerned with inspecting bank records and supervising managerial activity 3 regulation of deposit rates and conditions for withdrawal by tradition fdic policies on these matters conform entirely with regulations applicable to federal reserve member banks and 4 disposition of failed banks when an insured bank fails the fdic usually chooses not to liquidate it 2

the rewards to meeting or beating earnings expectations abstract this paper finds that firms that meet or beat current analysts earnings expectations mbe enjoy a higher return over the quarter than firms with similar quarterly earnings forecast errors that fail to meet these expectations further such a premium to mbe although somewhat smaller exists in the cases where mbe is likely to have been achieved through earnings or expectations management the findings also indicate that the premium to mbe is a leading indicator of future performance this premium and its predictive ability are only marginally affected by whether the mbe is genuine or the result of earnings or expectations management

wind farm investment risks under uncertain cdm benefit in china abstract china has set an ambitious target to increase its wind power capacity by 35 gw from 2007 to 2020 the country s hunger for clean power provides great opportunities for wind energy investors however risks from china s uncertain electricity market regulation and an uncertain energy policy framework mainly due to uncertain clean development mechanism cdm benefits prevent foreign investors from investing in china s wind energy the objectives of this paper are to 1 quantify wind energy investment risk premiums in an uncertain international energy policy context and 2 evaluate the impact of uncertain cdm benefits on the net present values of wind power projects with four scenarios this study simulates possible prices of certified emissions reductions cers from wind power projects project net present values npvs have been calculated the project risk premiums are drawn from different and uncertain cer prices our key findings show that uncertain cdm benefits will significantly affect the project npvs this paper concludes that the chinese government needs revising its tariff incentives most likely by introducing fixed feed in tariffs fits and re examining its cdm granting policy and its wind project tax rates to facilitate wind power development and enable china to achieve its wind energy target

linking with uncertainty the relationship between eu ets pollution permits and kyoto offsets carbon offsets from the kyoto flexible mechanisms can be used by firms in the eu emissions trading scheme for compliance in lieu of eu allowances making these carbon assets interchangeable we offer an explanation of the price spread using a structural model of the price for certified emissions reductions that combines three features a limit for the use of kyoto offsets within the eu ets a disconnect between the current price of offsets and their marginal cost of production for institutional reasons and uncertainty about future supply and demand of offsets our model expresses the offset price as an average of the eu allowance price and an offset s outside value weighted by the probability of a binding import limit using a monthly series of the united nation s clean development mechanism and joint implementation about offset supply and demand we provide empirical support for our theory of offset price formation counterfactual simulations suggest that the price process is dominated by uncertainty

measuring the true profile of taxpayer losses in the s l insurance mess abstract this research shows that conservative methods of projecting and discounting cash flows if applied to information already collected in the fhlbb s reporting system would have reflected the size of the s l deposit insurance losses long before taxpayers were aware of the extent of the mess official data show fslic reserves of 4 6 billion in 1986 in sharp contrast our conservative estimate puts imbedded losses for that year at 45 3 billion these methods prove insensitive to arbitrariness in the assumptions needed to operationalize the discounting process and measure the extent of guilty knowledge it is fair to presume officials possessed supporting an incentive breakdown theory of the problem over presumptions of innocent ignorance the policy implication is that taxpayers need to impose on government regulatory agents a better information system and better enforcement of those agents obligations to the public

on competition risk and hidden assets in the market for bank credit cards abstract the market for credit cards has been the subject of recent attention and controversy because of high profits earned on credit cards and substantial premiums on the resale of credit card receivables this paper estimates risk return profiles for credit card banks and explores the role of intangible assets in determining resale premiums on credit card receivables in addition the effects on the resale market of securitization and the opportunity cost of acquiring new accounts are analyzed using alternative measures of risk and alternative control groups we find for the years 1989 to 1995 that credit card banks earned significantly higher returns on assets but that these returns were associated with greater risk taking analysis of premia for the years 1993 to 1995 suggest that acquiring banks pay higher premia for mid sized regional accounts than for larger national portfolios perhaps because of richer cross selling opportunities

the pricing of interest rate risk evidence from the stock market this paper addresses the issue of whether firms are required to pay an ex ante premium to investors for bearing the risk of interest rate changes a two factor apt model with the market and changes in the yield on long term government bonds as factors is employed the paper shows that empirically most of the interest sensitive stocks are in the utility industries and that there is reasonable evidence that the interest factor is priced in the sense of the apt several sources for the interest sensitivity are considered and regulatory lags are focused on as a likely candidate some firms exhibit ex post sensitivity in their stock returns to unanticipated changes in interest rates are these firms required to pay investors ex ante for bearing this risk of interest rate changes the framework for examining pricing of unanticipated interest rate changes is a two factor apt model with the market and changes in the yield on long term government bonds as factors the issue is whether the interest rate change premium is significant to study this the paper uses full information maximum likelihood fiml estimation on groups of twenty five individual firms with both cross equation constraints and withinequation nonlinear constraints on the parameters as mandated by the apt model whether the risk of unanticipated changes in interest rates is priced in the market is of particular interest with regard to regulated firms regulated firms especially electric utilities turn out to comprise the big majority of firms that are sensitive to unanticipated interest rate changes after some preliminary investigation the analysis focuses on electric utilities much empirical work on the apt relies on factor analysis e g roll and ross 30 bower bower and logue 5 use factor analysis in comparing the apt and the capm to explain utilities returns the present paper however uses observable variables at the macro level chan chen and hsieh cch 7 and chen roll and ross crr 8 also examine apt models with specific macroeconomic factors cch and crr use a traditional fama macbeth type of cross sectional estimation approach in the premia calculations rather than a fiml approach gibbons and stambaugh have applied fiml techniques to models using only the market as an explanatory variable gibbons 20 used a noniterative algorithm on portfolios of firms equivalent to a two step cross sectional approach stam

can the future eu ets support wind energy investments abstract this article discusses how the future emissions trading scheme legislation should be designed to allow the european union to comply with the 20 co 2 emissions reduction target while at the same time promoting wind energy investments we examine whether co 2 prices could eventually replace the existing support schemes for wind and if they adequately capture its benefits the analysis also looks at the effectiveness of the clean development and joint implementation mechanisms to trigger wind projects and technology transfer in developing countries we find out that climate policy is unlikely to provide sufficient incentives to promote wind power and that other policies should be used to internalise the societal benefits that accrue from deploying this technology co 2 prices can only reflect the beneficial impact of wind on climate change but not its contribution to the security of supply or employment creation a minimum price of around 40 tco 2 should be attained to maintain present support levels for wind and this excludes income risks and intermediation costs finally cdm improves the return rate of wind energy projects in third countries but it is the local institutional framework and the long term stability of the co 2 markets that matters the most

biased forecasts or biased earnings the role of reported earnings in explaining apparent bias and over underreaction in analysts earnings forecasts the extensive literature that investigates whether analysts earnings forecasts are biased and or inefficient has produced conflicting evidence and no definitive answers to either question this paper shows how two relatively small but statistically influential asymmetries in the tail and the middle of distributions of analysts forecast errors can exaggerate or obscure evidence consistent with analyst bias and inefficiency leading to inconsistent inferences we identify an empirical link between firms recognition of unexpected accruals and the presence of the two asymmetries in distributions of forecast errors that suggests that firm reporting choices play an important role in determining analysts forecast errors r 2003 elsevier b v all rights reserved

emissions trading and investment decisions in the power sector a case study in finland abstract organizations which consider investment in or divestment of power production licences capacity within the european community are exposed to the impacts of the european union emission allowance trading scheme eu ets in this paper the consequences of the eu ets on investment decisions are explored in a country specific setting in finland first we review the general mechanisms through which the eu ets influences size timing and cashflows of an investment next we discuss the projected changes in finnish power producers investment environment and examine the financial impacts due to the eu ets on a case investment decision a hypothetical condensing power plant 250 mwe the standard discounted cash flow dcf analysis is extended to take into account the value of two real options the option to wait and the option to alter operating scale in a quantitative investment appraisal the impact of emissions trading not only depends on the expected level of allowance prices but also on their volatility and correlation with electricity and fuel prices the case study shows that the uncertainty regarding the allocation of emission allowances is critical in a quantitative investment appraisal of fossil fuel fired power plants

eua and scer phase ii price drivers unveiling the reasons for the existence of the eua scer spread abstract this article studies the price relationships between eu emissions allowances euas valid under the eu emissions trading scheme eu ets and secondary certified emissions reductions scers established from primary cers generated through the kyoto protocol s clean development mechanism cdm given the price differences between euas and scers financial and industrial operators may benefit from arbitrage strategies by buying scers and selling euas i e selling the eua scer spread to cover their compliance position as industrial operators are allowed to use scers towards compliance with their emissions cap within the european system up to 13 4 our central results show that the spread is mainly driven by eua prices and market microstructure variables and less importantly as we would expect by emissions related fundamental drivers this might be justified by the fact that the eu ets remains the greatest source of cer demand to date

risk management of energy system for identifying optimal power mix with financial cost minimization and environmental impact mitigation under uncertainty abstract an interval stochastic risk management isrm method is launched to control the variability of the recourse cost as well as to capture the notion of risk in stochastic programming the isrm method can examine various policy scenarios that are associated with economic penalties under uncertainties presented as probability distributions and interval values an isrm model is then formulated to identify the optimal power mix for the beijing s energy system tradeoffs between risk and cost are evaluated indicating any change in targeted cost and risk level would yield different expected costs results reveal that the inherent uncertainty of system components and risk attitude of decision makers have significant effects on the city s energy supply and electricity generation schemes as well as system cost and probabilistic penalty results also disclose that import electricity as a recourse action to compensate the local shortage would be enforced the import electricity would increase with a reduced risk level under every risk level more electricity would be imported with an increased demand the findings can facilitate the local authority in identifying desired strategies for the city s energy planning and management in association with financial cost minimization and environmental impact mitigation

modelling the price spread between eua and cer carbon prices abstract this paper identifies factors impacting on the dynamics of the price spread between european allowances euas and certified emission reductions cers by detecting changes in the structural relationship between them while prior studies have assumed a fixed structural relationship this paper analyses the dynamic evolution of the price spread by employing a time varying parameter analysis using daily data from march 2008 to september 2011 the analysis reveals that a lack of competitive conditions in markets access constraints on the use and the availability of cers regulatory changes regarding both euas and cers and uncertainty surrounding cers can explain a significant portion of the price spread

does the stock market overreact to corporate earnings information this paper tests whether the stock market overreacts to extreme earnings by examining firms stock returns over the 36 months subsequent to extreme earnings years while the poorest earners do outperform the best earners the poorest earners are also significantly smaller than the best earners when poor earners are matched with good earners of equal size there is little evidence of differential performance this suggests that size and not investor overreaction to earnings is responsible for the overreaction phenomenon the tendency for prior period losers to outperform prior period winners in the subsequent period recently an intriguing efficient markets anomaly has emerged debondt and thaler 1985 1987 report that equities that experience the lowest highest returns over a prior period 2 5 years in their studies overperform underperform the market in the subsequent period they call this violation of the efficient markets hypothesis the overreaction phenomenon since it suggests that investors overreact in the initial period and subsequently correct themselves 1 debondt and thaler 1987 hypothesize that the reason for the overreaction lies in the market s inefficie nt response to earnings information research has found that the random walk model in which all changes are permanent provides a good description of the time series behavior of firms annual earnings on average 2 the primary exception to the random walk model comes from firms that have experienced extreme good or bad years relative to their normal performance the earnings changes of such outlier firms are temporary i e earnings regress to the mean 3 if market participants incorrectly perceive the

evaluating the power investment options with uncertainty in climate policy abstract this paper uses a real options approach roa for analysing the effects of government climate policy uncertainty on private investors decision making in the power sector it presents an analysis undertaken by the international energy agency iea that implements roa within a dynamic programming approach for technology investment choice case studies for gas coal and nuclear power investment are undertaken with the model illustrative results from the model indicate four broad conclusions i climate change policy risks can become large if there is only a short time between a future climate policy event such as post 2012 and the time when the investment decision is being made ii the way in which co 2 and fuel price variations feed through to electricity price variations is an important determinant of the overall investment risk that companies will face iii investment risks vary according to the technology being considered with nuclear power appearing to be particularly exposed to fuel and co 2 price risks under various assumptions and iv the government will be able to reduce investors risks by implementing long term say 10 years rather than short term say 5 years climate change policy frameworks contributions of this study include 1 having created a step function with stochastic volume of jump at a particular time to simulate carbon price shock under a particular climate policy event 2 quantifying the implicit risk premium of carbon price uncertainty to investors in new capacity 3 evaluating carbon price risk alongside energy price risk in investment decision making and 4 demonstrating roa to be a useful tool to quantify the impacts of climate change policy uncertainty on power investment

valuation of diversified banks new evidence abstract this paper reconsiders the effect of diversification on bank valuation our objective is to provide new evidence based on a unified estimation framework that places particular emphasis on separating the effects of diversification specialised banks vs diversified banks from those of bank type investment banks vs commercial banks consistent with prior studies we find a significant diversification discount at the end of the 1990s our main finding is that it decreases over time and practically vanishes after the financial crisis we do not find support for the hypothesis that the diversification effect is influenced by geographical or regulatory factors the valuation impact of bank characteristics varies over time particularly in the financial crisis but this structural break does not explain the observed decrease of the diversification discount we show that the pre crisis discount is considerably smaller in a robust regression which in part is driven by banks with a large share of non interest income

integration of the global carbon markets abstract this paper analyzes the market architecture and common factors of emission reduction instruments in europe and north america spot and futures prices across exchanges in europe are cointegrated but the futures curve beyond the calendar year evolves independently despite narrower spreads political uncertainties about the clean development mechanism have kept eua and cer prices from converging rggi allowances share a common trend with eua and the european markets adjust to the u s price trend a 0 10 shock to rggi prices leads to a one month 0 64 cumulative increase in eua prices the introduction of cap and trade legislation in the u s has broken a cointegrating relationship in voluntary prices voluntary instruments that are convertible into mandatory allowances imply less than a 20 probability of price convergence between the u s and europe by 2013

the sensitivity of bank stock returns to market interest and exchange rate risks abstract this paper presents and estimates a multifactor model of bank stock returns that incorporates market return interest rate and exchange rate risk factors a model of the optimizing behavior of an international banking firm is used to derive the sensitivity coefficients of the alternative factors regression equations are estimated that are based on either actual or unexpected values of the underlying factors with a post october 1979 time dummy variable and with a money center bank dummy variable standard results are obtained for the market and interest rate variables while new results are derived for the exchange rate variable the specific effects of the latter variable are found to be dependent on the time period of observation and the money center status of banks

financial analysts forecasts of earnings a better surrogate for market expectations abstract the specification of the market expectation of accounting numbers is a common feature of many empirical studies in accounting and finance givoly and lakonishok 1979 found that financial analysts forecasts have information content this study evaluates the quality of analysts forecasts as surrogates for the market expectation of earnings and compares it with that of prediction models commonly used in research results indicate that prediction errors of analysts are more closely associated with security price movements suggesting that analysts forecasts provide a better surrogate for market expectations than forecasts generated by time series models the study also identifies factors that might contribute to the performance of the financial analysts forecasts the broadness of the information set employed by analysts and to a lesser extent their reliance on information released after the end of the fiscal year appear to be important contributors to their performance

a temporal analysis of earnings surprises profits versus losses i show that median earnings surprise has shifted rightward from small negative miss analyst estimates by a small amount to zero meet analyst estimates exactly to small positive beat analyst estimates by a small amount during the 16 years 1984 to 1999 i show that a rightward temporal shift in median surprise from negative to positive describes earnings but neither profits nor losses median profit surprise shifts within the positive quadrant from zero to one cent per share median loss surprise shifts within the negative quadrant from extreme negative about 33 cents per share to zero i show that the median surprise for profits exceeds that for losses in every year i document significant positive temporal trends in both meet and beat analyst estimates for both profits and losses but i find a greater frequency of profits that either meet or beat analyst estimates in every year i find a significant positive temporal trend in positive profits that are a little bit of good news and a significant negative temporal trend in managers who report losses that are an extreme amount of bad news my results are robust to the four internal validity threats i consider namely temporal changes in 1 analyst forecast accuracy 2 the mix of earnings of one sign preceded by earnings of another sign four quarters ago 3 the timeliness of the most recent analyst forecast and 4 the i b e s definition of actual earnings i find that managers of growth firms are relatively more likely than managers of value firms to report good news profits i show that when they do report positive profit surprises managers of growth firms are more likely to report a little bit of good news in every year

retracted relationship incentives and the optimistic pessimistic pattern in analysts forecasts we examine whether analysts incentives to maintain good relationships with management contribute to the optimistic pessimistic within period time trend in analysts forecasts in our experiments 81 experienced sell side analysts from two brokerage firms predict earnings based on historical information and management guidance analysts forecasts exhibit an optimistic pessimistic pattern across the two timing conditions early and late in the quarter and the effect is significantly stronger when the analysts have a good relationship with management than when their only incentive is to be accurate debriefing results indicate that analysts are aware of this pattern of forecasts and believe that this benefits their future relationships with management and with brokerage clients the analysts most frequently cite favored conference call participation and information access when describing benefits from maintaining good relationships with management our results suggest the following the optimistic pessimistic pattern in forecasts is in part a conscious response to relationship incentives information access is perceived to be a major benefit of management relationships and recent regulatory changes may have lessened but have not eliminated this conflict of interest source

expectations management and stock returns we establish a link between firms managing investors performance expectations earnings announcement premiums and cyclical patterns i e seasonalities in returns firms that are more likely to manage expectations toward beatable levels predictably earn lower returns before and higher returns during their earnings announcements this pattern repeats across firms fiscal quarters suggesting firms manufacture positive surprises by negatively biasing investors expectations ahead of announcing earnings we corroborate these findings using non price based outcomes indicative of expectations management together our findings are consistent with the pressure for firms to meet earnings targets shaping the cross section of firms stock returns

impact of climate policy uncertainty on the adoption of electricity generating technologies this paper presents a real options model where multiple options are evaluated simultaneously so that the effect of the individual options on each other is accounted for we apply this model to the electricity sector where we analyze three typical technologies based on fossil fuel fossil fuel with carbon capture and renewable energy respectively in this way we can analyze the transition from co2 intensive to co2 neutral electricity production in the face of rising and uncertain co2 prices in addition such a modelling approach enables us to estimate precisely the expected value of perfect information i e the willingness of investors and producers to pay for information about the correct co2 price path as can be expected the expected value of information rises with increasing co2 price uncertainty in addition the larger the price uncertainty the larger are the cumulative co2 emissions over the coming century the reason for this is that the transition to less co2 intensive technologies is increasingly postponed with rising co2 price uncertainty by testing different price processes geometric brownian motion versus jump processes with different jump frequencies we can also make useful recommendations concerning the importance of policy predictability we find that it is better to have climate change policies that are stable over a certain length of time and change abruptly than less abrupt but more frequently changing policies less frequent fluctuations reduce the expected value of information and result in smaller cumulative co2 emissions