Estimating Farm Efficiency in the Presence of Double Heteroscedasticity Using Panel Data

The accuracy of technical efficiency measures is important given the interest in such measures in policy discussions. In recent years the use of stochastic frontiers has become popular for estimating technical inefficiency, but estimated inefficiencies are sensitive to specification errors. One source of such errors is heteroscedasticity. This paper addresses this issue by extending the Hadri (1999) correction for heteroscedasticity to stochastic production frontiers and to panel data. It is argued that heteroscedasticity within an estimation can have a significant effect on results, and that correcting for heteroscedasticity yields more accurate measures of technical inefficiency. Using panel data on cereal farms, it is found that the usual technical efficiency measures used in stochastic production frontiers are significantly sensitive to the extended correction for heteroscedasticity.stochastic frontier production, heteroscedasticity, technical efficiency, panel data

Yes, the CAPM is testable

It is well-known that cross-sectional tests of the CAPM are problematic. The market indexes used in empirical tests are likely to be inefficient ex ante, which could lead to spurious results even in the absence of sampling errors. This problem has led many to express serious doubt on the testability of the CAPM. In this paper I show that the CAPM is indeed testable. This paper builds on the seminal paper by Kandel and Stambaugh (1995) and proposes a two-step procedure for testing the CAPM. The first step uses a simple combination of the coefficients of determination from both Ordinary Least Squares and Generalised Least Squares estimations. This step tests whether the index used in the empirical test is efficient and whether there are no omitted factors. The second step tests the hypothesis that the efficient index is the market portfolio. The two-step approach enables testing the CAPM regardless of whether the true expected return generating process is a CAPM or a non-CAPM. © 2014 Elsevier B.V

Forecasting Value at Risk in Emerging Arab Stock Markets

The economic and political instability of most of the Arab countries may lead to the assumption that Arab stock markets are riskier and less predictable than stock markets in developed countries. Value at Risk (VaR) measures risk exposure at a given probability level and is very important for risk management. In this paper extreme value theory with volatility updating is used to forecast Value at Risk in three emerging Arab stock markets and the US stock market. Several forecast accuracy criteria are used to compare forecast performance in the four stock markets, including a suggested asymmetric forecast criterion. The various criteria used in this paper suggest that Arab stock markets are less risky than the US stock market.Value-at-Risk, Extreme Events, Hill Estimator, Volatility Updating.

The Practice of Zakat: An Empirical Examination of Four Gulf Countries

As one of the cornerstones of Islamic economics, zakat has been given little attention in Islamic economics literature. Both theoretical and empirical studies are scarce, and thus this paper is an attempt to initiate discussion on the realities of the practice of zakat in the Muslim world. It is hoped that this will draw attention to the need to investigate the practice of zakat throughout the world. Some empirical results on a number of practical aspects of zakat are provided. The discussion is based on a collection of perception data from respondents in four Gulf Cooperation Council (GCC) countries regarding the evaluation, collection and payment of zakat.Zakat; Fiqh; Gulf Cooperation Council, Shari‘a.

The impact of economic value added (EVA) adoption on stock performance

© 2020 by the authors; licensee Growing Science, Canada. The adoption of EVA as a compensation and management plan, generally, impacts positively the performance of companies adopting this method. However, this paper examines whether the adoption of the EVA framework enhances the firm’s performance and gauge the long-term effects of such an adoption on the firm’s value. It also assesses whether the market reacts to the announcement of the adoption of EVA as a compensation system. Moreover, the paper fills this gap in research literature by showing whether or not EVA adoption leads to a significant increase in firm value as reflected by its market prices on the long run. Growing evidence in research indicates that the stock market does not incorporate all firm information into the stock price quickly and completely (REF). Therefore, the critique that contemporaneous association between price and EVA does not reflect reality is likely to be correct. However, this paper takes a different action. The basic contention is that although prices adjust slowly to information, long horizons are sufficiently long for markets to incorporate almost all relevant information into prices. The study sample consists of 89 US firms adopted EVA as a compensation system. It compares the performance of adopting firms to that of selected matching firms and to the market indexes, particularly, the S&P500 portfolio. Then it uses two common aggregating methods to test the event of adopting EVA by different US firms namely the CAR and BHAR methods. The results obtained, however, showed a slight improvement in the performance of companies adopting EVA within five years from the date of adoption. © 2020 by the authors; licensee Growing Science, Canada

A conditional regime switching CAPM

© 2017 Elsevier Inc. The standard Capital Asset Pricing Model (CAPM) is simple, intuitive, and grounded in sound economic theory. Yet, almost half a century's worth of empirical testing has so far failed to demonstrate its relevance. One major reason given for the CAPM's empirical failure is that beta is not the sole measure of systematic risk. In other words, the standard CAPM does not hold. Another important explanation is that the CAPM may hold conditionally rather than unconditionally. The standard CAPM fails to explain the cross-section of returns because it ignores the fact that both the risk and the price of risk are time-varying. The search for conditional models has led researchers to either disregard the theory behind the CAPM or to use statistical procedures that are too complex to be replicated by other researchers and practitioners. In this paper we propose a conditional model that is compatible with the standard CAPM while remaining simple and accessible to both researchers and practitioners. Beta and the risk premium are assumed to be time-varying, with the latter being associated with bull and bear states. We find strong support for the conditional CAPM with beta explaining both bull and bear markets. While the bear market ex-post risk premium is negative, the weighted average risk premium is positive and highly significant

Short run reaction to news announcements: UK evidence

In this paper we aim to investigate the behaviour of returns around corporate news announcements. The motivation of the paper is that neither the broad classification of news into “good” and “bad” in many previous studies, nor the focus on only one news announcement type such as earnings announcements, allows us to determine whether returns patterns are in general consistent with efficient markets explanations or behavioural finance models. We study a unique dataset of more than 8,000 news announcements collected for 100 UK companies over a period of 10 years. We compute both daily and cumulative abnormal returns over a 27 day event window to enable the observation not only of event day returns reactions but also pre- and post-event day returns. The results reveal that corporate events convey important economic information to investors. One interesting implication of this is an aggregated holistic approach towards firm events may not be appropriate. Some of the evidence found in this paper is not consistent with the efficient market expectations. Asymmetric reaction, sluggishness, over and underreaction, and leakage are found in many types of news announcements

The long-term effect of economic value added adoption on the firm’s business decision

© 2019, Emerald Publishing Limited. Purpose: This study aims to examine the long-term effects of adopting economic value added (EVA) as a compensation tool on managers’ behaviour. Design/methodology/approach: The authors extend the sample used in prior studies both in the time and the cross-section dimensions. Findings: The study conclusions are distinct from those offered by existing studies. The authors show that EVA adopters, relative to non-EVA adopters, increase the working capital cycle, use their assets less intensively and decrease their payouts to shareholders via a decrease in dividends and share repurchases. In investing decisions, the authors find a decrease in new investments, but no change in asset dispositions after the adoption of EVA compensation plans. Originality/value: The study results highlight that the EVA adoption provides more incentives to reduce the total cost for capital rather than increasing operations and maximising shareholder wealth. The results also have implication for corporate management, particularly in the area of management compensation scheme design

Electrical and structural characterisation of plasma-polymerized TEOS thin films as humidity sensors

In this study, we used plasma polymerization of TEOS to deposit thin water molecule sensitive layers on two intredigitated aluminum electrodes evaporated on glass substrate. Electrical and structural analyses of the deposited sensitive layers have been evaluated through current-impedance responses and FTIR spectroscopy. The elaborated humidity resistive sensor exhibited a detectable response to relative humidity (RH) percentages ranging from 20 to 95%. The films showed good sensitivity to water molecule due to the presence of hydroxyl groups OH. These groups provide the adsorption sites for water and play an important role to the humidity sensor properties. The low impedance, good sensitivity as characterized by a linear change in impedance from 106 to 103 Ω over RH interval of 20–80% and low observed hysteresis of about 4%, make the elaborated layer a promising candidate for humidity sensors development.In this study, we used plasma polymerization of TEOS to deposit thin water molecule sensitive layers on two intredigitated aluminum electrodes evaporated on glass substrate. Electrical and structural analyses of the deposited sensitive layers have been evaluated through current-impedance responses and FTIR spectroscopy. The elaborated humidity resistive sensor exhibited a detectable response to relative humidity (RH) percentages ranging from 20 to 95%. The films showed good sensitivity to water molecule due to the presence of hydroxyl groups OH. These groups provide the adsorption sites for water and play an important role to the humidity sensor properties. The low impedance, good sensitivity as characterized by a linear change in impedance from 106 to 103 Ω over RH interval of 20–80% and low observed hysteresis of about 4%, make the elaborated layer a promising candidate for humidity sensors development

Short-term versus long-term impact of managers: evidence from the football industry

Studies into the impact of top manager change on organization performance have revealed inconsistent findings. Using longitudinal data over a 12-year period on football organizations, we test for the short-term and long-term effects of manager change in comparison to the tenures of incumbent top managers. We find that long incumbent tenures are associated with performance far above the average. But when looking at change events, contrary to theoretical expectations, we find that change in the short term leads to a brief reprieve in poor performance only for performance to deteriorate in the long term as underlying weaknesses once again take hold. Our findings reveal the illusion of a short-term reprieve and the long-term consequences of this illusion. We map several implications for research and practice from our work