The implied equity risk premium - an evaluation of empirical methods

A new approach of estimating a forward-looking equity risk premium (ERP) is to calculate an implied risk premium using present value (PV) formulas. This paper compares implied risk premia obtained from different PV models and evaluates them by analyzing their underlying firm-specific cost-of-capital estimates. It is shown that specific versions of dividend discount models (DDM) and residual income models (RIM) lead to similar ERP estimates. However, cross-sectional regression tests of individual firm risk suggest that there are qualitative differences between both approaches. Expected firm risk obtained from the DDM is more in line with standard asset pricing models and performs better in predicting future stock returns than estimates from the RIM

Estimating Uncertainty of Bus Arrival Times and Passenger Occupancies

Travel time reliability and the availability of seating and boarding space are important indicators of bus service quality and strongly influence users’ satisfaction and attitudes towards bus transit systems. With Automated Vehicle Location (AVL) and Automated Passenger Counter (APC) units becoming common on buses, some agencies have begun to provide real-time bus location and passenger occupancy information as a means to improve perceived transit reliability. Travel time prediction models have also been established based on AVL and APC data. However, existing travel time prediction models fail to provide an indication of the uncertainty associated with these estimates. This can cause a false sense of precision, which can lead to experiences associated with unreliable service. Furthermore, no existing models are available to predict individual bus occupancies at downstream stops to help travelers understand if there will be space available to board. The purpose of this project was to develop modeling frameworks to predict travel times (and associated uncertainties) as well as individual bus passenger occupancies. For travel times, accelerated failure-time survival models were used to predict the entire distribution of travel times expected. The survival models were found to be just as accurate as models developed using traditional linear regression techniques. However, the survival models were found to have smaller variances associated with predictions. For passenger occupancies, linear and count regression models were compared. The linear regression models were found to outperform count regression models, perhaps due to the additive nature of the passenger boarding process. Various modeling frameworks were tested and the best frameworks were identified for predictions at near stops (within five stops downstream) and far stops (further than eight stops). Overall, these results can be integrated into existing real-time transit information systems to improve the quality of information provided to passengers

Doubly Optimized Calibrated Support Vector Machine (DOC-SVM): an algorithm for joint optimization of discrimination and calibration.

Historically, probabilistic models for decision support have focused on discrimination, e.g., minimizing the ranking error of predicted outcomes. Unfortunately, these models ignore another important aspect, calibration, which indicates the magnitude of correctness of model predictions. Using discrimination and calibration simultaneously can be helpful for many clinical decisions. We investigated tradeoffs between these goals, and developed a unified maximum-margin method to handle them jointly. Our approach called, Doubly Optimized Calibrated Support Vector Machine (DOC-SVM), concurrently optimizes two loss functions: the ridge regression loss and the hinge loss. Experiments using three breast cancer gene-expression datasets (i.e., GSE2034, GSE2990, and Chanrion's datasets) showed that our model generated more calibrated outputs when compared to other state-of-the-art models like Support Vector Machine (p=0.03, p=0.13, and p<0.001) and Logistic Regression (p=0.006, p=0.008, and p<0.001). DOC-SVM also demonstrated better discrimination (i.e., higher AUCs) when compared to Support Vector Machine (p=0.38, p=0.29, and p=0.047) and Logistic Regression (p=0.38, p=0.04, and p<0.0001). DOC-SVM produced a model that was better calibrated without sacrificing discrimination, and hence may be helpful in clinical decision making

Software project economics: A roadmap

The objective of this paper is to consider research progress in the field of software project economics with a view to identifying important challenges and promising research directions. I argue that this is an important sub-discipline since this will underpin any cost-benefit analysis used to justify the resourcing, or otherwise, of a software project. To accomplish this I conducted a bibliometric analysis of peer reviewed research articles to identify major areas of activity. My results indicate that the primary goal of more accurate cost prediction systems remains largely unachieved. However, there are a number of new and promising avenues of research including: how we can combine results from primary studies, integration of multiple predictions and applying greater emphasis upon the human aspects of prediction tasks. I conclude that the field is likely to remain very challenging due to the people-centric nature of software engineering, since it is in essence a design task. Nevertheless the need for good economic models will grow rather than diminish as software becomes increasingly ubiquitous