investor preference for large firms new evidence on economies of size in the last several decades industrial organization literature has been replete with studies demonstrating a systematic relationship between accounting rates of return and firm size in the direction of greater and more stable accounting profits for larger firms these studies have been subject to criticism for an alarming number of statistical and conceptual problems the most important of which alleges a serious bias in accounting profit measures as proxies for economic profit 2 the criticisms have resulted in a stalemate in the interpretation of empirical evidence on firm size and performance nevertheless there is continued interest in the area ostensibly resulting from policy concerns with large firm advantages in both product and capital markets this paper provides new evidence concerning the industrial organization literature controversy of the connection between firm size and performance stock market data are used to examine the relationship between capital market returns risk and firm size the findings suggest that even if there were no advantages of large size in the product market equal rates of operating profit large firms would still have a substantial capital raising advantage over small firms this advantage is unrelated to the widely recognized floatation cost economies even after controlling for nondiversifiable risk using the capital asset pricing model capm investors still demonstrate a statistically significant and economically important preference for the securities of larger firms investors apparently place a premium on large firms which is not attributable to large firms observed lower risk as captured by the widely used measure of nondiversifiable risk beta risk this finding a fresh contribution to the

the impact of minimum trading units on stock value and price volatility we study how minimum trading unit changes on the tel aviv stock exchange impact a stock s trading activity price volatility and value the value effects are consistent with merton s 1987 model i e an increase in the investor base trading volume and a decrease in price noisiness affect stock value positively our results extend amihud mendelson and uno s 1999 tests of merton by demonstrating a clear relation between price noisiness changes and stock value changes and by showing that the response to a minimum trading unit decrease becomes less favorable and arguably even negative in the thinnest trading stocks

the asset pricing effects of fixed holding costs an upper bound the capital asset pricing model predicts that investors will hold diversified portfolios but many households actually hold very few assets the paper examines the asset pricing implications of one possible explanation for this phenomenon fixed costs of holding assets while earlier authors found the exact asset pricing effects of such costs in single period models under restrictive assumptions i derive a general upper bound on these effects that is also valid in continuous time illustrative calculations reveal that large holding costs must be postulated to generate significant asset pricing effects

transaction costs and the pricing of assets the existence of transaction costs explains why investors do not fully diversify their portfolios this paper examines the implications of such limited diversification oi equilibrium asset prices in the framework of the capital asset pricing model in the pricing equation obtained here an asset s risk premium depends on a weighted average of its covariance with the market and its own variance the absence of transaction costs in the sharpe lintner capital asset pricing model capm is often claimed to be only a minor idealization which hardly affects the substantive implications of the model this paper aims to demonstrate that this is not the case incorporating transaction costs into the capm leads to a major reformulation of its basic asset pricing equation in contrast with the capm formula

comparing risks by acceptance and rejection stochastic dominance is a partial order on risky assets gambles that is based on the uniform preference of all decision makers in an appropriate class for one gamble over another we modify this requirement first by taking into account the status quo given by the current wealth and the possibility of rejecting gambles and second by comparing rejections that are substantive i e uniform over wealth levels or over utilities this yields two new stochastic orders wealth uniform dominance and utility uniform dominance unlike stochastic dominance these two orders are complete any two gambles can be compared moreover they are equivalent to the orders induced by respectively the aumann serrano index of riskiness and the foster hart measure of riskiness

mean gini portfolio theory and the pricing of risky assets this paper presents the mean gini mg approach to analyze risky prospects and construct optimum portfolios the proposed method has the simplicity of a mean variance model and the main features of stochastic dominance efficiency since mean gini is consistent with investor behavior under uncertainty for a wide class of probability distributions gini s mean difference is shown to be more adequate than the variance for evaluating the variability of a prospect the mg approach is then applied to capital markets and the security valuation theorem is derived as a general relationship between average return and risk this is further extended to include a degree of risk aversion that can be estimated from capital market data the analysis is concluded with the concentration ratio to allow for the classification of different securities with respect to their relative riskiness

inventories rational expectations and the business cycle abstract the simplest macroeconomic models in which markets clear instantaneously and expectations are rational preclude the existence of business cycles that is of serially correlated deviations of output from trend this paper studies one of several mechanisms that can be used to make these so called new classical models produce business cycles the mechanism is the gradual adjustment of inventory stocks two macroeconomic models of inventory holdings are formulated both imply first that current output should be a decreasing function of the stock of inventories and second that inventories once perturbed from equilibrium levels should adjust only gradually these two features are then embedded into an otherwise standard macroeconomic model in which markets clear instantaneously and expectations are rational two principal conclusions are reached first disturbances such as unanticipated changes in money will set in motion serially correlated deviations of output from trend second if desired inventories are sensitive to the real interest rate then even fully anticipated changes in money can affect real variables

naive versus optimal diversification tail risk and performance it is well documented in portfolio optimization that naive diversification outperforms optimal mean variance diversification because the latter is subject to severe estimation error our study provides an alternative explanation for the outperformance of naive diversification by examining the tail risk of naive diversification relative to optimal mean variance diversification we utilize a rolling sample approach and compare the out of sample performance and tail risk of various optimal strategies to that of the naive diversification strategy using portfolios consisting of individual stocks we show that for portfolios containing relatively small number of stocks naive diversification outperforms optimal mean variance diversification and is less exposed to tail risk however for relatively large number of stocks in the portfolio naive diversification maintains its superior performance but increases tail risk and results in more concave portfolio returns these results imply that the outperformance of naive diversification acts as compensation for the increase in tail risk and concavity

wealth and portfolio composition theory and evidence we examine a survey of 6010 u s households and estimate a model for household portfolio allocation we extend the conventional portfolio choice model in order to capture the observed incompleteness of household portfolios we show that the empirical specification of the joint discrete and continuous choice that characterizes household portfolio behavior is a switching regressions model with endogenous switching we go on to examine the impact of taxes on portfolio composition using detailed survey data to calculate precisely the marginal tax rate facing each household finally we estimate wealth elasticities of demand for a range of assets and liabilities

an analysis of bank risk and deposit rate ceilings abstract the effect of deposit rate regulation on bank solvency is an important and unresolved issue that has received only limited attention in this paper capital market data is used to assess changes in both systematic and non systematic risk of a portfolio of bank stocks at the time of deposit rate deregulation the evidence indicates that neither measure of capital market risk is significantly affected leading to the conclusion that bank solvency risk will not be increased by the deregulation of interest rates on deposits

taxes and transaction costs in asset market equilibrium abstract this paper examines the effects of capital taxation in an imperfect capital market in which acquiring risky assets incurs costs individual portfolio choice has two distinct aspects the extensive choice of which assets to hold in the portfolio and the intensive choice of what fraction of wealth to invest in each asset held the traditional assumption of zero transaction costs obscures the extensive choice this paper shows that if trading in assets is costly capital taxes have extensive effects as well as the intensive effects previously studied

farm real estate pricing under risk an empirical investigation the rapid increase in farm real estate prices during the last three decades has heightened interest among agricultural economists in explaining this phenomenon even prior to the 1950s several researchers expressed concern that farm real estate prices were increasing at a faster rate than could be justified by farm income 29 technological change and government programs were evaluated for structural changes in price determination 6 13 other important explanatory variables were farm enlargement and urbanization influences 34 more recently harris and nehring 11 lee and rask 18 harris 10 and boehlje and griffin 3 explored the effects of such factors as farm size inflation and government price supports on farm real estate prices while previous research contributed to understanding farm real estate price determination several important questions remain unanswered how is the farm real estate market linked to other capital markets heady and tweeten 12 and later reynolds and timmons 30 used rate of return on common stock as an explanatory variable in their farm real estate price models however their approaches are based more on intuitive reasoning than on rigorous theoretical development how does risk affect farm real estate prices the fact that real estate is a risky investment generally was ignored in previous research 2 441 4 recently harris 10 and boehlje and griffin 3 included risk information in their analyses of factors affecting bid prices for land these studies use strong microfoundations that are not intended to directly reflect risk related linkages with other markets or sectors these issues can be addressed conceptually through capital market theory the purpose of this paper is to explore farm real estate price determination in the context of capital market theory to determine the relationship between the farm real estate

what is the economic cost of the investment home bias overinvesting domestically is well known as an investment home bias ihb we define an economic home bias ehb whereby the ihb measures the investment weights and the ehb measures the economic cost induced by the ihb we may have a large ihb and a negligible ehb with the increase in the average correlation between foreign markets from 0 4 for the decade ending in 1988 to about 0 9 for more recent decades the u s ehb is becoming negligible despite the domestic investment of 77 5 since 2009 the correlations have decreased indicating that the hb puzzle is emerging once again

doing good but not that well a dilemma for energy conserving homeowners abstract in this paper the issue of market capitalization of energy efficient buildings is addressed by considering single family housing in sweden and through analyzing as to what extent the market price for a house is influenced by its energy performance are swedish homeowners doing well by doing good we make use of information provided by the swedish energy performance certificates for single family homes matched with data on the corresponding transaction prices household characteristics and attributes of the neighborhood the resulting database covering about 77 000 individual observations is used to analyze the relationship between the price of a house and its energy performance by means of a hedonic model unlike most other studies the energy performance is decomposed into energy consumption and several other variables characterizing the energy system the main question addressed is if there is a price premium for energy efficient housing in sweden our results differ from earlier studies and indicate no price premium related to the energy consumption but substantial premiums for housing attributes that improve the energy efficiency a likely explanation is that prospective buyers of new homes base their expectations about future energy consumption on those attributes rather than on the energy consumption of the previous owner

on optimal production and the market to book ratio given limited shareholder diversification our purpose is to examine a firm s optimal output decision and valuation when its shareholders hold a limited number of risky assets the primary theoretical result indicates that the market to book ratio is a function of the degree of shareholder diversification our theory suggests a negative relationship between a firm s market to book ratio and shareholder diversification

estimating the implicit price of energy efficiency improvements in the residential housing market a hedonic approach abstract in this study a hedonic price model has been used to examine the impact which efficiency improvements have on housing values our study represents an improvement over a previous attempt to examine this issue in that the independent variable used in our analysis is designed to reflect variation in structural efficiency levels among sample homes rather than variation in occupant lifestyles and preferences in addition a flexible functional form is used to prevent bias due to misspecification of the hedonic price equation the study results reveal that efficiency improvements are capitalized into housing prices in des moines iowa at the average efficiency level of homes in the sample an efficiency improvement which results in a 1 decrease in the level of expenditures necessary to maintain the house at 65 f in the average heating season will increase the expected selling price of the house by 11 63 the premium obtained for an equivalent efficiency improvement will be greater than 11 63 in a relatively efficient home and less than 11 63 in a relatively inefficient home without further information concerning the price expectations and discount rates utilized by des moines home buyers and the average remaining life of fuels saving investments in the sample it cannot be determined whether the housing market is pricing fuel savings efficiently regardless of whether or not the implicit price of fuel savings is the outcome of an efficient market information on this implicit price facilitates the estimation of an average resale value of fuel saving investments in addition the results of this study refute the hypothesis that efficiency improving investments are not capitalized into housing prices

keeping up with the joneses and optimal diversification abstract peer effects have been shown to affect behavior and can generally lead to investments choices that are mean variance inefficient this paper analyzes optimal diversification with peer effects we show that if individuals have keeping up with the joneses preferences and they take their peer group reference as the market portfolio markowitz s mean variance efficiency analysis and the capm equilibrium are intact this holds for any keeping up preferences as well as heterogeneous combinations of such preferences these results also extend to the merton levy segmented market model

the association between the magnitude of quarterly earnings forecast errors and risk adjusted stock returns since the seminal work of ball and brown 1968 numerous studies have examined the association of both quarterly and annual earnings forecast errors and risk adjusted stock prices 1 the research findings from these studies are consistent with the notion that there is a positive association between the signs of earnings forecast errors and risk adjusted stock prices moreover beaver clarke and wright 1979 hereafter bcw also found an association between unsystematic security returns and the magnitude of annual earnings forecast errors over a 52week preannouncement period they suggested that an important extension of their work would be to examine the association between the magnitude of quarterly earnings forecast errors and unsystematic returns this is the primary focus of the present study

on diversification given asymmetry in returns complete diversification is the rational investment strategy for a risk averse individual in a homogeneous securities market who considers only the first two moments of return observed behavior of market participants however demonstrates that the majority of individual investors hold imperfectly diversified portfolios the purpose of the present study is to examine one potential cause for this behavior which does not rely on imperfection in the capital market specifically we show that given the existence of and investor preference for positive skewness a rational investor may hold an optimal limited number of homogeneous risk assets the relationship between the number of risk assets in a portfolio and the total risk of the portfolio has been examined extensively both theoretically and empirically 7 8 16 the general conclusion from these analyses which are set in a mean variance framework is that adding randomly selected and equally weighted risk assets to a portfolio will reduce total risk without affecting return the implication for risk averse investors in a perfect market is that complete diversification is optimal observed behavior of market participants however demonstrates that the majority of individual investors hold imperfectly diversified portfolios in the wharton survey of 1975 in 4 the median number of stocks held was found to be fewer than 4 with 34 percent of the investors holding no more than 2 stocks the two primary studies providing evidence of the undiversified portfolios of individual investors are blume and friend 3 and blume friend and crockett 5 the former analysis was based on a sample of individual income tax returns from 1971 and indicated that considering only dividend paying stocks 34 15 percent of investors sampled held only one stock 50 51 percent held no more than 2 stocks and only 10 72 percent held 10 or more stocks the latter study which included nondividend paying stocks was based on the federal reserve board s 1962 survey of the financial characteristics of consumers the median number of holdings per household was 2 while the average was 3 41 in both 3 and 5 numerous other measures of diversification were employed with the results confirming the conclusion that individual investors are on average highly undiversified the principal theoretical reasons advanced by the authors of these studies relate to the relaxation of assumptions of the standard capital asset

negative moments risk aversion and stochastic dominance a simple moment ordering condition is shown to be necessary for stochastic dominance closely related results on generalizations of the geometric and harmonic means are also provided an ordering of the moment generating functions is shown to be necessary and sufficient for stochastic dominance the results have a straightforward and useful interpretation in terms of constant relative and absolute risk aversion utility functions these results are used to provide necessary and sufficient conditions for optimality of distributions on an important class of utility functions

determinants of residential space heating expenditures in germany abstract we first examine the determinants of household expenditures on space heating and hot water supply in germany a number of socio economic characteristics of households are included along with building characteristics our analysis covers information on more than 12 000 households in germany for the years 1998 and 2003 the analysis continues by investigating whether different kinds of households are affected differently by increases in energy prices households in owner occupied properties are less affected compared to those in rented accommodation this could be because owners are more likely to have installed energy efficient heating and hot water supply systems and landlords have less of an incentive to improve the conditions of their rented accommodations an energy policy targeting especially the latter group might benefit not only households in rented accommodation but might also increase energy efficiency and reduce greenhouse gas emissions as well

a learning curve of the market chasing alpha of socially responsible firms abstract this paper explores stock market reactions to corporate social performance we construct a value weighted portfolio based on the list of 100 best csr companies in the world published on the forbes website by reputation institute this portfolio yields statistically significant annual abnormal returns of 1 81 and 1 26 by controlling for carhart four factors and fama french five factors respectively 2 41 and 1 84 respectively for an equal weighted portfolio moreover such abnormal returns decrease as time passes especially after the inaugural publication of the csr lists in 2013 furthermore we find that companies with better social performance are more likely to have positive earnings surprises and that their returns are more sensitive to earnings surprises the results have three implications firstly csr reputation contributes positively to a firm s short term superior equity performance secondly the csr lists facilitate market correction of mispricing intangibles such as csr reputation abnormal returns decrease as the market gradually learns about the value of firms social performance lastly the paper contributes to the socially responsible investing sri screens and provides guidance for investors who would like to do well financially by doing good socially

market reaction to quarterly earnings announcements a stochastic dominance based test of market efficiency the use of the capm in empirical research is subject to some criticism in light of this criticism the stochastic dominance criteria are offered as an alternative research method for the examination of market efficiency the underlying assumptions of the two frameworks are discussed and the stochastic dominance technique is demonstrated via the examination of market reaction to quarterly earnings announcements during the 24 quarters commencing with october 1962 the findings are compared to those of watts watts r the time series behavior of quarterly earnings unpublished paper university of newcastle newcastle n s w 1975 quoted in watts 1978 who utilized the same data base in contrast to watts conclusion our analysis suggests that the market was efficient during the entire period examined and that no significant differences in market behavior between the first and the second 12 month periods was evident the discord may be attributed to the relative effectiveness of the two analytical tool

some empirical evidence on the production level and production cost smoothing models of inventory investment the production smoothing model of inventories has long been the basic paradigm within which empirical research on inventories has been conducted the basic hypothesis embedded in this model is that inventories of finished goods serve primarily to smooth production levels in the face of fluctuating demand and convex cost functions however once we allow for shocks to technology and the costs of producing output firms will also use inventories to shift production from periods in which production costs are relatively high to periods in which production costs are relatively low in this sense inventories can serve to smooth production costs rather production levels in this paper we examine the empirical plausibility of the production level and production cost smoothing models of inventories our basic strategy is to derive and contrast a set of unconditional moment restrictions implied by these models in a way that minimizes the role of auxiliary assumptions regarding market structure and industry demand we find overwhelming evidence against the production level smoothing model and very little evidence against the production cost smoothing mode1 we conclude that the variance of production exceeds the variance of sales in most manufacturing industries because the production cost smoothing role of inventories is quantitatively more important than the production level smoothing role of inventories this abstract was borrowed from another version of this item

risk and capital asset prices abstract this paper is an empirical examination of the statistical significance of the residual variance of individual assets as compared with the covariance of returns with various market portfolio proxies in predicting expected return the data and analysis we present suggest that measures of covariance are no more significant than residual variance in predicting expected return in this sense our paper is not supportive of the sharpe lintner or black versions of the capital asset pricing model

which is a better investment choice in the hong kong residential property market a big or small property the relationship between property size and property investment yield is an interesting issue in the real estate market previous studies usually use the mean variance criterion to compare the return risk profiles of the yields of different property sizes in the united states however this criterion has a few shortcomings this article provides the first attempt to use a stochastic dominance approach to analyse this issue we adopt two powerful stochastic dominance tests to compare the yields of five property size classes in the hong kong residential property market in our study we analyse two possible investment outcomes 1 investors could not rent out their properties and thus they would gain lose from the appreciation depreciation of residential property prices 2 investors could also gain from rental incomes our empirical results provide strong evidence to show that the yields of smaller property classes stochastically dominate the yields of bigger property classes suggesting that buying smal

capital asset prices with and without negative holdings prize lecture to the memory of alfred nobel december 7 1990 this abstract was borrowed from another version of this item

the value of domestic building energy efficiency evidence from ireland abstract following the transposition of the eu energy performance of buildings directive into irish law all properties offered for sale or to let in ireland are obliged to have an energy efficiency rating this paper analyses the effect of energy efficiency ratings on the sale and rental prices of properties in the republic of ireland using the heckman selection technique we model the decision to advertise the energy efficiency rating of a property and the effect of energy efficiency ratings on property values our results show that energy efficiency has a positive effect on both the sales and rental prices of properties and that the effect is significantly stronger in the sales segment of the property market we also analyse the effect of energy efficiency across different market conditions and we find that the effect of the energy rating is generally stronger where market conditions are worse

the pricing of risky assets on the belgian stock market abstract this paper presents the first empirical examination of the relationship between the average return and the risk of a comprehensive sample of 200 securities which traded continuously from 1966 to 1980 on the brussels stock exchange a relatively thin equity market based on our empirical findings we cannot reject the hypothesis that the pricing of common stocks on the brussels stock exchange conforms to the capital asset pricing model

risk in banking and capital regulation this paper investigates the role of bank capital regulation in risk control it is known that banks choose portfolios of higher risk because of inefficiently priced deposit insurance bank capital regulation is a way to redress this bias toward risk utilizing the mean variance model the following results are shown a the use of simple capital ratios in regulation is an ineffective means to bound the insolvency risk of banks b as a solution to problems of the capital ratio regulation the theoretically correct risk weights under the risk based capital plan are explicitly derived and c the theoretically correct risk weights are restrictions on asset composition which alters the optimal portfolio choice of banking firms the recent increase in bank failures especially after the 1980 and 1982 deregulatory acts has again ignited a controversy over the risk portfolio of the banking industry given the importance of this sector there has been increased scrutiny of the industry s motives for risk taking and possible regulatory changes to improve its stability these investigations have centered around two rather complementary areas the first of these is the role of deposit insurance and how its current pricing procedure encourages risk taking and justifies current bank regulations the works of buser chen and kane 4 kane 9 and benston et al 2 have made substantive contributions the authors demonstrates the way in which our current fixed rate insurance system rewards risk taking by the firm and insulates it through deposit insurance from the market discipline that needs to exist to ensure proper risk evaluation this realization has led these authors to propose a series of regulatory changes to encourage proper portfolio choice within the industry these include a shift to market value accounting risk based deposit insurance premiums and additional capital regulation the last of these serves as a method of coinsurance whereby higher capital levels require the bank to absorb greater losses in the event of failure and encourage additional prudence in management in essense it is one method of risk reduction that may offset the risk preference imposed on the industry due to the inappropriate insurance pricing because the amount of capital influences the probability of bank insolvency and thus the soundness of the entire banking system the regulators ceteris paribus prefer more capital to

arbitrage with fixed costs and interest rate models in this paper we study securities market models with fixed costs we characterize the absence of arbitrage opportunities and we provide fair pricing rules we then apply these results to extend some popular interest rate and option pricing models which present arbitrage opportunities in the absence of fixed costs in particular we prove that the quite striking result obtained by dybvig ingersoll and ross 1996 which asserts that under the assumption of absence of arbitrage long zero coupon rates can never fall is no longer true in models with fixed costs even arbitrarily small ones for instance models where the long term rate follows a diffusion process are arbitrage free in the presence of fixed costs including arbitrarily small ones we also rationalize models with partially absorbing or reflecting barriers on the price processes in particular we propose a version of the cox ingersoll and ross 1985 model which as in longstaff 1992 produces yield curves with realistic humps but does not assume an absorbing barrier for the short term rate this is made possible by the presence of even arbitrarily small fixed costs

the bullwhip effect progress trends and directions the bullwhip effect refers to the phenomenon where order variability increases as the orders move upstream in the supply chain this paper provides a review of the bullwhip literature which adopts empirical experimental and analytical methodologies early econometric evidence of bullwhip is highlighted findings from empirical and experimental research are compared with analytical and simulation results assumptions and approximations for modelling the bullwhip effect in terms of demand forecast delay replenishment policy and coordination strategy are considered we identify recent research trends and future research directions concerned with supply chain structure product type price competition and sustainability

the heterogeneous investment horizon and the capital asset pricing model theory and implications this paper generalizes the risk return relationship implied by the traditional capital asset pricing model with finite investment horizons it examines the effect of heterogeneous investment horizons on the functional form of capital asset pricing and proposes a translog model for estimating the risk return relationship in addition this paper contends that some empirical findings that are inconsistent with the traditional capm have resulted from misspecification of the capm by ignoring the discrepancy between the observed data periods and the true investment horizons finally the paper shows that under various conditions the translog model is a suitable function for estimating the relationship between risk and expected returns

specialization versus diversification as a venture capital investment strategy abstract much important work has informed us of rates of return earned by venture capitalists the importance of venture capitalists to the going public process and the criteria venture capitalists use to evaluate deals this paper seeks to add to the literature by testing hypotheses based upon both the finance and strategic management literature regarding certain venture capitalist investment practices venture capitalists seek to control or manage risk driscoll 1974 macmillan siegel and subbanarasimha 1985 financing structure and investment strategy provide several means for venture capitalists to do this tools available to the venture capitalist include portfolio diversification to spread risk across different industries firms or hot cold ipo markets to minimize unsystematic or investment specific risk information sharing networking and specialization can also be used to control unsystematic risk several hypotheses are developed from these conflicting perspectives data used to test the hypotheses are derived from responses to a survey of venture capitalists three hundred surveys were mailed to venture capitalists 98 or 32 7 returned usable responses portfolio diversification is a well known means to control risk exposure by reducing unsystematic or specific risks however bygrave 1987 1988 as well as financial intermediation theorists argues that maintaining a high degree of specialization is useful for controlling risk as well as for gaining access to networks information and deal flow from other venture investors the analyses of this paper build upon bygrave s work we construct more rigorous tests to resolve the conflict between the diversification and information sharing hypotheses our hypothesis tests were usually resolved in favor of the information sharing view for example venture capitalists in the sample that were heavily involved in seed round financing were diversified across fewer numbers of firms and industries further evidence in favor of information sharing is seen in investment patterns across different financing stages diversification would imply maintaining a portfolio of investments across the different investment stages the information sharing specialization view would argue that it is best to stay focused on a single stage or several connected stages the empirical evidence from the sample once again favors the specialization perspective this research provides information of use to venture capitalists as they seek information on how best to control risk to entrepreneurs as they learn of the factors venture capitalists consider in determining their investment strategy and to academicians as such studies provide insight to general industry practice and thus help to form the basis of classroom discussion and future research endeavors

the production of housing services and the derived demand for residential energy most studies of residential energy usage treat energy as a final consumer good this study explicitly considers the production of housing service flows from stocks of real estate and flows of operating inputs and considers the demand for residential energy as a factor input the empirical results based upon analysis of a sample of newly constructed dwellings and their occupants are used to evaluate the effects of energy price changes on the price of housing services and on the demand for housing and real estate thus indicating the extent of residential energy conservation in response to higher prices finally the results are used to analyze federal and state tax subsidies for residential energy conservation

the capital asset pricing model theory and empiricism in a recent breakthrough article richard roll i977 has shown that the value of the huge amount of empirical research which has attempted to verify the sharpe lintner capital asset pricing model capm is open to question briefly roll claims that if all the empirical investigators were to take a meanvariance efficient portfolio as the market portfolio they would get in the sample a perfect linear relationship between average security returns and betas in what is commonly known as the second pass cross section regression this perfect linear relationship is tautological it neither proves nor disproves the capm theory it is a technical result obtainable by straightforward algebra without making any assumption regarding the investors preference it is interesting to mention that in another paper published in 1977 stephen ross makes the same argument with regards to the capm and the efficiency of the market portfolio in his words the efficiency of the market portfolio and the capm are equivalent see ross i 977 p 178 the purpose of this paper is to show that empirical evidence and the investigation of investor behaviour lends support to a rejection of the capm theory in its presentform a revised formulation of the capm developed by levy i 978 provides a more suitable theoretical model in the reformulated capm the systematic risk beta plays in most cases only a negligible role in measuring the security s risk in section i we sketch a different prooof of what we consider to be roll s basic claim this proof contributes no additional theoretical results beyond what is given by roll i977 appendix corollary 6 but it is simple very short and uses no matrix algebra in section ii we derive a number of sample efficient sets and demonstrate that all efficient portfolios include short positions such results can be interpreted in one of the following alternative ways a sample variations cause this result but the capm holds and no such results would be obtained if we employed ex ante rather than ex post parameters b the empirical results are not entirely attributed to sample variations and they indeed contradict the capm in its present form since the motives for taking a short position can be explained by strong positive correlations between rates of return of various stocks e g general motors and ford we believe that this co movement of prices prevails ex post as well as

international corporate diversification market valuation and size adjusted evidence errunza and senbet es 7 analyze the effects of international operations on the market value of the firm both at theoretical and empirical levels the theoretical model which is largely heuristic exploits the costly supply adjustment of multinational firms mncs in providing international portfolio diversification services to investors who face differential cost barriers to direct holdings of assets across national boundaries mncs compete as financial intermediaries to undo the barriers so that in equilibrium profits are driven out mncs and pure domestic firms sell at an equivalent risk adjusted return however costly financial intermediation and the associated relative efficiency leads to a positive valuation effect for mncs relative to purely domestic firms further the equilibrium analysis implies that demand side investor barriers to international capital flows alone are inconsequential to the valuation of mncs in their pure financial role but that the interaction with the supply side costs are necessary to produce a valuation effect at the corporate level es subject the theory to an empirical analysis in a value based approach by employing a variant of tobin s 17 qratio the analysis controlling for industrial market power suggests that the relationship between the excess valuation and the degree of international involvement doi has magnified over periods characterized by severe u s government controls vis a vis the more recent periods in this paper we formalize the theoretical argument by viewing indirect portfolio diversification by mncs as a means of completing the international capital market we employ a paradigm in the unanimity literature and formally characterize the equilibrium in which there is a rationale for mnc financial intermediation we then perform an expanded empirical study by employing generalized least squares and maximum likelihood procedures since the positive relationship between excess valuation and doi as suggested in es 7 might be attributed to the so called small firm or size and the p e effects the test methodology controls for such effects also the traditional literature has relied upon foreign sales percentage as a proxy for doi in view of the well recognized limitations of this proxy we employ four different measures of international

energy performance ratings and house prices in wales an empirical study this paper investigates the effect of energy performance certificate epc ratings on residential prices in wales drawing on a sample of approximately 192 000 transactions the capitalisation of energy efficiency ratings into house prices is investigated using two approaches the first adopts a cross sectional framework to investigate the effect of epc rating on price the second approach applies a repeat sales methodology to investigate the impact of epc rating on house price appreciation statistically significant positive price premiums are estimated for dwellings in epc bands a b 12 8 and c 3 5 compared to houses in band d for dwellings in band e 3 6 and f 6 5 there are statistically significant discounts such effects may not be the result of energy performance alone in addition to energy cost differences the price effect may be due to additional benefits of energy efficient features an analysis of the private rental segment reveals that in contrast to the general market low epc rated dwellings were not traded at a significant discount this suggests different implicit prices of potential energy savings for landlords and owner occupiers

conditional volatility and the production smoothing hypothesis of inventory investment abstract this paper introduces a conditional second moment approach to the production smoothing hypothesis of inventory investment the multivariate arch technique makes it possible to calculate the time series of the relevant conditional variances and covariances the importance of explaining the production and inventory decision rules in terms of the sales anticipation errors is emphasized the time varying conditional volatility measures suggest that the factors affecting the production and inventory investment are changing over time it is shown that the buffer stock motive can be the source of production smoothing when firms face unanticipated sales changes but the stock adjustment behavior may cause production bunching through the intended change in production if the desired stock of inventories is proportional to anticipated sales and demand shifts are considerably durable

unobservables in consumer choice residential energy and the demand for comfort a model of consumption of residential energy in dwellings is developed distinguishing between attributes of housing that provide direct benefits to consumers and attributes that serve as inputs in the production of final goods for example the thermal comfort of dwellings empirical estimates are made of the mode based upon the annual housing survey and the results are used to calculate the effects of changes in energy prices on the consumption of housing residential energy and other goods the analysis suggests that the adjustment process within the housing market permits a great deal of substitution in response to energy price changes copyright 1989 by mit press

housing market capitalization of thermal integrity abstract the extent to which housing markets capitalize investments in energy efficiency is important to observe the uncertainty now associated with this process can lead households to allocate resources inefficiently in the production of thermal comfort by substituting more fuel inputs for less capital from a policy perspective the end result of this is the continued construction of units in the housing stock with sub optimal levels of energy efficiency this study is a cross sectional analysis of houses constructed through the energy efficient housing demonstration program of the minnesota housing finance agency values of investments in energy efficiency are derived from a hedonic regression which includes a vector of thermal integrity factors as an independent variable

agency theory and stochastic dominance recently agency theory has become popular as a means of explaining the structure of contracts between various classes of economic agents oftentimes the contracts of interest represent sharing rules for the payoffs that result from some production activity in the usual two party model of the contracting problem one party designated the principal delegates authority for decisions affecting production to another party designated the agent typically the assumptions made about the consequences of the agent s actions are that they are associated with effort on the part of the agent for which the agent but not the principal has disutility and that greater effort will result in higher payoffs from production in every state of nature moral hazard is then introduced by assuming that the principal is unable to observe the agent s effort or to infer what effort the agent applied through an ex post observation of the payoff that results

building energy efficiency a research branch made of paradoxes abstract the literature dealing with building energy efficiency has long since debated about the possible occurrence of the so called jevons paradox in a nutshell benefiting from energy savings due to transition to high performance buildings may the same savings cause a kind of rebound effect by acting as an incentive to increase consumptions on closer inspection this is not the only paradox affecting the research branch that focuses on the energy used by the buildings and the building industry a second paradox is that investments in energy efficient solutions may contribute to energy price control which in turn lends itself to make the same investments not profitable a third paradox lies in the need to adopt energy intensive materials in order to achieve substantial energy savings in operation hence sometimes we just substitute a certain amount of operating energy with a more or less commensurate amount of embodied energy here we argue that the joint consideration of the paradoxes mentioned above should not be neglected since it brings with itself several implications needing to be disentangled whether we aim to get further enhancements in this disciplinary field

a stochastic dominance analysis of yen carry trades abstract yen carry trades have made headline news for over a decade we examine the profitability of such trades for the period 2001 2009 yen carry trades generated high mean returns and sharpe ratios prior to the recent financial crisis they continued to outperform major stock markets for the full sample period given the non normality of carry trade returns we apply non parametric tests based on stochastic dominance sd to evaluate whether the high returns of yen carry trades are compatible with risk as reflected in returns on us and global stock market indices we apply a general test for sd developed recently by linton maasoumi and whang 2005 to six currencies as well as portfolios of these currencies for a large class of risk averse investors profits from yen carry trades cannot be attributed to risks

could the global financial crisis improve the performance of the g7 stocks markets abstractfinancial crises are normally associated with negative effects on financial markets in this article we investigate whether the most recent global financial crisis gfc had any positive impact on the g7 canada france germany italy japan the united kingdom and the united states indices to conduct the analysis we employ the mean variance mv analysis capm statistics hurst exponent runs test multiple variation ratio test and stochastic dominance sd tests our mv and capm results conclude that most of the g7 stock indices are significantly less volatile the results from hurst exponent run tests and multiple variation ratio confirm that efficiency improved in the post gfc period finally our sd results conclude that there is no arbitrage opportunity and the markets are efficient due to the gfc and in general investors prefer investing in the indices after the gfc overall we conclude that the gfc led to markets that are more efficient and mature confirming that crises can also

risk aversion and the propensities for self insurance and self protection for a risk averse individual the methods for reducing the expected financial impact of a loss include reducing the severity of any loss that occurs self insurance and reducing the probability of the occurrence of a loss self protection the literature on this topic has pointed to several anomalies whereby the use of self protection and self insurance yield quite unsimilar results for example ehrlich and becker 5 show that self insurance is always a substitute for market insurance an insurance company s indemnifying a loss whereas self protection and market insurance might be complements dionne and eeckhoudt 4 show that a more risk averse consumer would always invest more in self insurance activities but not necessarily more in self protection activities they argue 4 42 that this result is counterintuitive and provides an exception to the widely accepted result that increased risk aversion reduces risky activities ehrlich and becker 5 639 argue that the incentive to self protect is not so dependent on attitude towards risk both of the above papers seem to take for granted that self protection activities reduce the riskiness of the final wealth distribution however as we argue below this is not the case if riskiness is defined as in rothschild and stiglitz 14 even if we use the variance as our risk measure we do not always reduce risk via self protection dionne and eeckhoudt suggest that these results might not be robust enough to extend to models that incorporate random initial wealth risk and state dependent preferences we show that the model seems to be very robust we also explain why self protection is not at all an exception to the long standing result of arrow 1 whereby more risk averse individuals undertake a lower

housing market capitalization of energy saving durable good investments energy conservation in the residential sector depends in large measure upon the willingness of builders and homeowners to invest in the durable goods which result in an energy efficient house since these durable goods generally become attached permanently to the dwelling unit and since ownership of the unit is likely to change within the expected lifetime of the installed equipment the incentive to invest in conservation measures depends upon the efficiency of the housing market in capitalizing the financial benefits of future fuel savings this paper examines housing market efficiency in this regard by first estimating an hedonic price index with the annual fuel bill included as an explicit attribute of the structure then from the estimated hedonic price of a one dollar reduction in annual fuel costs and assumed fuel price escalation rates and remaining lifetimes of the equipment implicit housing market discount rates are calculated the relatively low estimated discount rates indicate that the housing market performs efficiently in capitalizing future fuel savings

risk return and equilibrium an extension this study extends a recent empirical reexamination of the risk ret urn relationship by examining the possibility that an omitted size re lationship may account for the anomalous results h levy s generaliz ed capital asset pricing model provides the theoretical basis for incorporating the impact of firm size on expected return by examining the relative importance of unsystematic risk in pricing closely held securities compared to pricing widely held securities in so doing the empirical analysis also provides a test of an implication of the generalized capital asset pricing model two methodologies are used t o test the hypotheses empirically the results indicate that even thou gh size has a significant impact on the risk return relationship it apparently does not account for the anomalous results this implicati on is consistent under both methodologies copyright 1988 by the university of chicago

inventories and the volatility of production a stylized fact associated with inventory behavior is that the variance of production exceeds the variance of sales this paper presents a model of production decisions with demand uncertainty that incorporates no nnegativity constraints on inventories even with no productivity shocks optimal behavior by the firm is consistent with this stylized fact either if demand exhibits positive serial correlation or if the firm can backlog excess demand the reason is that a demand shock affects both the actual inventory level given unchanged production and the desired level production must replenish the stock and adjust to the new desired level copyright 1987 by american economic association

third degree stochastic dominance here f x and g x are less than cumulative probability distributionis where x is a continuous or discrete random variable representing the outcome of a prospect the closed interval a b is the sample space of both prospects the integral shown in rule 2 and those shown throughout the paper are stieltjes integrals recall that the stieltjes integral fb f x dg x exists if one of the functions f and g is continuous and the other has finite variation in a b let d1 d2 and d3 be three sets of utility functions x d1 is the set containing all utility functions with 4 x and 1 x continuous and 41 x 0 for all xe a b d2 is the set with x 1 x 2 x continuous and q j x 0 02 x o for all xc a b d3 is the set with x 1 x 2 x 3 x continuous and 1 x 04 2 x o o for all xc a b here 1 x denotes the ith derivative of x hadar and russell proved that rule 1 is valid for all cd1 and rutle 2 is valid for all ed2 the authors point out that the set of probability distributions that can be ordered by means of second degree stochastic dominance is in general larger than that which can be ordered by means of first degree stochastic dominance note that in rule 2 they assume that x is not only an increasing function of x but also exhibits weak global risk aversion a condition guaranteed by requiring the second derivative of x to be nonpositive in this paper a condition which will be called third degree stochastic dominance is considered it is based on the following assumption about the form of the utility function x from a normative point of view one expects the risk premium associated with an uncertain prospect to become smaller the greater is the individual s wealth the plausibility and implications of this assumption h ave been explored by john pratt as well as others the risk premium of an uncertain prospect is that amount by which the certainty equivalent of the prospect differs from its expected value in mathematical terms given the prospect f x with expected value a the corresponding risk premium t is obtained by solving the following equation rb

stochastic dominance and expected utility survey and analysis while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics finance agriculture statistics marketing and operations research in this survey the first second and third order stochastic dominance rules are discussed with an emphasis on the development in the area since the 1980s

production smoothing evidence from physical product data we reconsider the paradox that the variance of production often exceeds the variance of shipments a result that casts doubt on the production smoothing model of inventory behavior most studies of production smoothing have analyzed two digit sic dollar value data from commerce department surveys in contrast this paper examines disaggregated physical product data and finds that production is smoother than shipments in about two thirds of the 38 industry or product groupings considered however doubts about the model persist most notably euler equation estimates of the model s cost parameters are usually imprecise and often do not have the signs postulated by production smoothing models

a simple algorithm for optimal portfolio selection with fixed transaction costs the general optimal portfolio selection problem with fixed transaction costs is a complex mathematical programming problem however by placing reasonable restrictions on the variance covariance matrix of returns it is possible to simplify the solution of the problem specifically if the structure of returns between securities is such that the pairwise correlation coefficients are approximately the same a fairly simple algorithm which requires little computational effort can be employed this method can also be extended to the case where changes in the information set necessitate a revision of an existing portfolio

does idiosyncratic risk really matter goyal and santa clara 2003 find a significantly positive relation between the equalweighted average stock volatility and the value weighted portfolio returns on the nyse amex nasdaq stocks for the period of 1963 08 to 1999 12 we show that this result is driven by small stocks traded on the nasdaq and is in part due to a liquidity premium in addition their result does not hold for the extended sample of 1963 08 to 2001 12 and for the nyse amex and nyse stocks more importantly we find no evidence of a significant link between the value weighted portfolio returns and the median and value weighted average stock volatility the intertemporal relation between risk and return has long been an important topic in asset pricing literature most asset pricing models postulate a positive relationship between a stock portfolio s expected returns and risk which is often modeled by the variance or standard deviation of the portfolio s returns however there is no agreement about the existence of such a trade off for stock market indices 1 while return volatility is an intuitively appealing measure of risk different approaches used by previous researchers suggest that no clear consensus has emerged regarding its relevance 2 whether or not investors require a larger risk premium on average for investing in a security during times when the security is more risky remains an open question

a panel data study on spanish firms inventory investment this paper raises several questions about inventory investment of a sample of 172 big nonfinancial spanish companies inventory investment has been usually explained by two alternative theories the production smoothing model and the s s model first we provide a descriptive analysis based on industry level data to show some shortcomings of the first model then we test a flexible accelerator model using firm level data the results seem to show that inventory investment previous period inventories and sales are closely and significantly related this evidence although not conclusive rejects both the pure production smoothing model and the s s model at the same time our results confirm the view of a target inventory level and the plausibility of the so called stock adjustment model so that the optimal inventory holding buffers sales volatility

volatility and time varying risk premiums in the stock market the stock returns generating process is analysed using alternative specifications of the autoregressive conditional heteroscedasticity model empirical anaylysis using monthly data from the finnish stock market shows a clearly significant persistence of volatility of stock prices in addition the presence of a time varying risk premium in the stock returns is also clearly supported by the data this suggests a cautious attitude towards traditional standard empirical analysis of capital markets which is based on the assumption of time invariant risk premiums the results obtained do not support the view that the risk premiums have increased during the 1980s when instability has been the main characteristic of most financial markets

computing equilibrium prices for a capital asset pricing model with heterogeneous beliefs and margin requirement constraints abstract the mean variance capital asset pricing model capm is a useful mathematical tool for studying a variety of financial problems in contrast to existing work in the literature which has primarily focused on deriving analytical solutions under restrictive assumptions we propose a numerical algorithm for efficiently computing the set of equilibrium prices of a capm model with heterogeneous investors and arbitrary margin requirements we present the mathematical formulation of the capm model derive structural properties of the portfolio selection and excess demand functions and establish the asymptotic convergence of the proposed algorithm under mild conditions to illustrate the utility of the algorithm we perform sensitivity analysis on a simple example to study the impact of marginal requirements and interest rates on the resulting equilibrium prices numerical studies are also carried out to compare the performance of the algorithm with that of two other popular methods namely the fixed point method and the brand and bound algorithm

the production smoothing model of inventories revisited an error correction specification which nests the linear quadratic production smoothing and stock adjustment models of inventories is estimated on u s seasonally adjusted two digit sic data the restrictions of the general model to the production smoothing specification is accepted for four out of six of the production to stock industries and for total nondurables the estimation results do not suggest any use of inventories to smooth the level of production but there is evidence of smoothing of the rate of change of production for three production to stock industries and for both total nondurables and total durables coefficient estimates may however be biased copyright 1994 by royal economic society

stochastic dominance via quantile regression with applications to investigate arbitrage opportunity and market efficiency abstract tests for stochastic dominance constructed by translating the inference problem of stochastic dominance into parameter restrictions in quantile regressions are proposed they are variants of the one sided kolmogorov smirnoff statistic with a limiting distribution of the standard brownian bridge the procedure to obtain the critical values of our proposed test statistics are provided simulation results show their superior size and power they are applied to the nasdaq 100 and s p 500 indices to investigate dominance relationship before and after major turning points results show no arbitrage opportunity between the bear and bull markets our results infer that markets are inefficient and risk averters are better off investing in the bull rather than the bear market

the value of energy efficiency and the role of expected heating costs the german energy performance of buildings directive requires sellers on the housing market to provide detailed information on expected yearly energy consumption per square meter energy performance eps this paper uses variation in local fuel prices and climate fuel types and building ages to analyse the relationship between expected energy cost savings from energy efficient building structure and house prices in a data set of listing prices from all regions of germany results suggest that heating cost considerations are less relevant than previously thought

bank funding modes securitization versus deposits abstract we examine a bank s choice of whether to fund the loans it originates by emitting deposits or to sell the loans to investors with common knowledge of loan quality and laissez faire banking we find that the choice is irrelevant with asymmetric information but without government intervention we find that better quality assets will be sold securitized and poorer quality assets will be funded with deposits public regulation can influence the bank s choice subsidies can cause a bank to favor deposit funding but mutual funds and third party insurers may mitigate the effects of governmental subsidies

theories of risk testing investor behaviour on the taiwan stock and stock index futures markets investor behavior towards risk lies at the heart of economic decision making in general and modern investment theory and practice in particular this paper uses both the mean variance mv criterion and stochastic dominance sd procedures to analyze the preferences for four of the most widely studied investor types in the taiwan stock and stock index futures market we find that risk averters concave utility function prefer spot to futures whereas risk seekers convex utility function prefer futures to spot our findings also show that investors with s shaped utility functions prefer spot futures to futures spot when markets move upward downward finally our results imply that investors with reverse s shaped utility functions prefer futures spot to spot futures when markets move upward downward these results are robust with respect to sub periods spot returns including dividends and diversification although we do not check whether risk averters risk seekers and investors with s shaped and reverse sshaped utility functions actually exist in the market we do show that their existence is plausible the implications of our findings on market efficiency and the existence of arbitrage opportunities are also discussed in this study

the economic determinants of the market reaction to proposed mandatory accounting changes in the oil and gas industry a cross sectional analysis abstract this paper examines the economic reasons for the observed negative abnormal common stock performance of firms whose reported earnings and stockholders equity were negatively affected by the proposed elimination of full cost accounting in the oil and gas industry four explanations of the market effects of this mandatory accounting change are examined 1 naive investor theory 2 modified naive investor theory 3 contracting cost theory and 4 estimation risk theory these hypotheses are developed in detail and used to generate variables for a cross sectional model which explains observed return behavior the effect of the accounting change on total stockholder s equity the existence of financial contracts denominated in terms of accounting numbers and to a lesser extent firm size are shown to be important explanatory variables the importance of these variables is consistent with both the contracting cost and estimation risk theories

does energy efficiency matter to home buyers an investigation of epc ratings and transaction prices in england abstract this paper investigates whether energy performance ratings as measured by mandatory energy performance certificates epcs are reflected in the sale prices of residential properties this is the first large scale empirical study of this topic in england involving 333 095 dwellings sold at least twice in the period from 1995 to 2012 applying hedonic regression and an augmented repeat sales regression we find a positive relationship between the energy efficiency rating of a dwelling and the transaction price per square metre the price effects of superior energy performance tend to be higher for terraced dwellings and flats compared to detached and semi detached dwellings the evidence is less clear cut for rates of house price growth but remains supportive of a positive association overall the results of this study suggest that energy efficiency labels have a measurable and significant impact on house prices in england

a note on almost stochastic dominance abstract both the expected utility maximization and the hierarchy property are very important properties in stochastic dominance for almost stochastic dominance leshno and levy 2002 propose a definition and tzeng et al 2013 modified it to give another definition this note provides more information on the two definitions the former has the hierarchy property but not the expected utility maximization whereas the latter has the expected utility maximization but not the hierarchy property

inventories and risk in african manufacturing using a panel data set for zimbabwe which includes firm specific measures of contractual risk we show that contractual risk has a major effect on the holding input stocks and to a lesser extent the constitution of cash reserves this is consistent with inventories being a hedge against stockout risk by contrast firms facing more inter annual market risk hold less inventories this suggests that african manufacturers prefer adapting to long term market fluctuations as they materialise rather than building up inventories this interpretation is consistent with the finding that high market risk firms also have a low capacity utilisation rate

stochastic dominance and expected utility while stochastic dominance has been employed in various forms as early as 1932 it has only been since 1969 1970 that the notion has been developed and extensively employed in the area of economics

market efficiency of oil spot and futures a mean variance and stochastic dominance approach this paper examines the market efficiency of oil spot and futures prices by using both mean variance mv and stochastic dominance sd approaches based on the west texas intermediate crude oil data for the sample period 1989 2008 we find no evidence of any mv and sd relationships between oil spot and futures indices this infers that there is no arbitrage opportunity between these two markets spot and futures do not dominate one another investors are indifferent to investing spot or futures and the spot and futures oil markets are efficient and rational the empirical findings are robust to each sub period before and after the crises for different crises and also to portfolio diversification

stochastic dominance analysis without the independence axiom we characterize the consistency of a large class of nonexpected utility preferences including mean variance preferences and prospect theory preferences with stochastic orders for example stochastic dominances of different degrees our characterization rests on a novel decision theoretic result that provides a behavioral interpretation of the set of all derivatives of the functional representing the decision maker s preferences as an illustration we consider in some detail prospect theory and choice acclimating preferences two popular models of reference dependence under risk and we show the incompatibility of loss aversion with prudence this paper was accepted by james smith decision analysis

returns to farm real estate revisited barry s research on farm real estate returns suggests that when farm assets are viewed as a part of the nation s wealth portfolio returns are not persistently low as is commonly asserted in policy debates this paper extends barry s research by explicitly accounting for the effects of uncertain inflation using a broader market proxy and lengthening the sample period the results suggest farm real estate offers only slight not substantial premiums above those for systematic risk contributes little systematic risk to a well diversified portfolio and exhibits substantial risk due to uncertain inflation

the impacts of energy efficiency policies meta analysis abstract this paper attempts to quantitatively summarize the existing empirical evidence on the effects of energy efficiency policies on energy demand and on the price of associated durable goods as well as to identify the main factors that systematically affect the estimated impacts to this end a meta regression analysis of the effects of energy efficiency policies is carried out on the basis of an extensive review of the existing literature selecting those studies that analyze the impact of energy efficiency policies with respect to a business as usual setting taking into account the econometric problems associated with this type of analysis intra class correlation cross sectional dependence publication bias in pursuit of robust outcomes the results show that the studies analyzing the effects of energy efficiency policies estimate a significant impact of these policies on energy demand 10 5 8 8 and the price of related durable goods 7 9 6 the main factors that influence results are the policy instrument the targeted sector the type of country the analyzed period the consideration of free riders and the type of analysis data and publication energy demand and the sector and analyzed period price of durables

more possessions more worry abstract a common wisdom asserts that the wider the universe of assets to choose from the greater the investor s welfare we show that this is not the case in practice where parameters have to be estimated even when the estimates are unbiased surprisingly risk aversion plays a crucial role corresponding to the desirability of asset expansion by dividing investors in three groups investors with very low risk tolerance and investors with very high risk tolerance are better off with asset expansion and investors with moderate risk tolerance are worse off despite the option to refrain from investing in the additional asset

an empirical comparison of stochastic dominance among lognormal prospects l introduct ion the theory of portfolio selection and diversification developed by markowitz 22 and tobin 33 was based primarily on the criterion of meanvariance mv efficiency the objective was to select an efficient set of portfolios from which every risk averter will choose the optimal portfolio which maximizes his expected utility the mv criterion is the appropriate rule either for the case in which the utility function is quadratic or if the returns are normally distributed and risk aversion is assumed two approaches to the choice among risky alternatives that have been developed independently over the past two decades are the geometric mean criterion gm and the stochastic dominance sd decision model both can be justified by the expected utility hypothesis with the geometric mean cri terion following as a result of the assumption that the decision maker has a logarithmic utility function and the stochastic dominance models requiring the less restrictive assumption of signs of the first few derivatives of the decision maker s utility function this paper compares the concept of ordinary stochastic dominance to stochastic dominance of the lognormally distributed prospects from an empirical point of view further 1ight is also shed on the issue of applying the markowitz tobin mean variance rule