Firms’ financial flexibility and the profitability of style investing

This thesis examines how firms’ financial flexibility affects the profitability of three of the most commonly used style investing strategies. They are the value-growth trading strategy (going long on stocks with high Book-to-Market ratio and short on stocks with low Book-to-Market ratio), the momentum trading strategy (going long on stocks that have performed well and short on stocks that have performed poorly recently), and the accruals based trading strategy (going long on stocks with low accruals and short on stocks with high accruals). The findings suggest the value premium exists when controlling for risks using the Fama and French three factor model. However, it is explained when the risk factors are conditioned on firms’ investment irreversibility and the business cycle. Next, the momentum profit can be explained by (a) adjusting returns for risks using the Fama and French model that is conditioned on firms’ financial constraints and the business cycle, and (b) accounting for the interaction between the momentum profit and firms’ investments beyond the risk-return relationship. Finally, the accruals based trading strategy is most successful at the two ends of the financial inflexibility spectrum, supporting both an explanation based on the risk-return relationship and an explanation based on the catering theory. When controlling for the cyclicality in stock returns, the strategy ceases to be profitable. The results suggest that the understanding of corporate investment decisions can help improve the understanding of securities markets and portfolio investment strategies. There are a few lessons that investors can learn from the findings of this thesis. Value-growth investors should focus on value and growth firms with high investment irreversibility gap. Momentum investors should pursue the trading strategy among firms with high financial constraints and during economic upturns. They could also benefit from forming their portfolio from past winners and past losers with high investment gaps. Accruals based investors would benefit from pursuing the strategy among firms with high investment and financing flexibility and during economic upturns

Non-Standard Errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants

Safety and efficacy of fluoxetine on functional outcome after acute stroke (AFFINITY): a randomised, double-blind, placebo-controlled trial

Background Trials of fluoxetine for recovery after stroke report conflicting results. The Assessment oF FluoxetINe In sTroke recoverY (AFFINITY) trial aimed to show if daily oral fluoxetine for 6 months after stroke improves functional outcome in an ethnically diverse population. Methods AFFINITY was a randomised, parallel-group, double-blind, placebo-controlled trial done in 43 hospital stroke units in Australia (n=29), New Zealand (four), and Vietnam (ten). Eligible patients were adults (aged ≥18 years) with a clinical diagnosis of acute stroke in the previous 2–15 days, brain imaging consistent with ischaemic or haemorrhagic stroke, and a persisting neurological deficit that produced a modified Rankin Scale (mRS) score of 1 or more. Patients were randomly assigned 1:1 via a web-based system using a minimisation algorithm to once daily, oral fluoxetine 20 mg capsules or matching placebo for 6 months. Patients, carers, investigators, and outcome assessors were masked to the treatment allocation. The primary outcome was functional status, measured by the mRS, at 6 months. The primary analysis was an ordinal logistic regression of the mRS at 6 months, adjusted for minimisation variables. Primary and safety analyses were done according to the patient's treatment allocation. The trial is registered with the Australian New Zealand Clinical Trials Registry, ACTRN12611000774921. Findings Between Jan 11, 2013, and June 30, 2019, 1280 patients were recruited in Australia (n=532), New Zealand (n=42), and Vietnam (n=706), of whom 642 were randomly assigned to fluoxetine and 638 were randomly assigned to placebo. Mean duration of trial treatment was 167 days (SD 48·1). At 6 months, mRS data were available in 624 (97%) patients in the fluoxetine group and 632 (99%) in the placebo group. The distribution of mRS categories was similar in the fluoxetine and placebo groups (adjusted common odds ratio 0·94, 95% CI 0·76–1·15; p=0·53). Compared with patients in the placebo group, patients in the fluoxetine group had more falls (20 [3%] vs seven [1%]; p=0·018), bone fractures (19 [3%] vs six [1%]; p=0·014), and epileptic seizures (ten [2%] vs two [<1%]; p=0·038) at 6 months. Interpretation Oral fluoxetine 20 mg daily for 6 months after acute stroke did not improve functional outcome and increased the risk of falls, bone fractures, and epileptic seizures. These results do not support the use of fluoxetine to improve functional outcome after stroke

Avian influenza A (H5N1) in 10 patients in Vietnam

BACKGROUND: Recent outbreaks of avian influenza A (H5N1) in poultry throughout Asia have had major economic and health repercussions. Human infections with this virus were identified in Vietnam in January 2004. METHODS: We report the clinical features and preliminary epidemiologic findings among 10 patients with confirmed cases of avian influenza A (H5N1) who presented to hospitals in Ho Chi Minh City and Hanoi, Vietnam, in December 2003 and January 2004. RESULTS: In all 10 cases, the diagnosis of influenza A (H5N1) was confirmed by means of viral culture or reverse transcriptase-polymerase chain reaction with primers specific for H5 and N1. None of the 10 patients (mean age, 13.7 years) had preexisting medical conditions. Nine of them had a clear history of direct contact with poultry (median time before onset of illness, three days). All patients presented with fever (temperature, 38.5 to 40.0 degrees C), respiratory symptoms, and clinically significant lymphopenia (median lymphocyte count, 700 per cubic millimeter). The median platelet count was 75,500 per cubic millimeter. Seven patients had diarrhea. In all patients, there were marked abnormalities on chest radiography. There was no definitive evidence of human-to-human transmission. Eight patients died, one patient has recovered, and one is recovering. CONCLUSIONS: Influenza A (H5N1) infection, characterized by fever, respiratory symptoms, and lymphopenia, carries a high risk of death. Although in all 10 cases the infection appears to have been acquired directly from infected poultry, the potential exists for genetic reassortment with human influenzaviruses and the evolution of human-to-human transmission. Containment of influenza A (H5N1) in poultry throughout Asia is therefore urgently require

Non-Standard Errors

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: Non-standard errors (NSEs). We study NSEs by letting 164 teams test the same hypotheses on the same data. NSEs turn out to be sizable, but smaller for better reproducible or higher rated research. Adding peer-review stages reduces NSEs. We further find that this type of uncertainty is underestimated by participants