The association between arbitrage pricing theory risk measures and traditional accounting variables

According to the Arbitrage Pricing Theory (APT), actual security returns depend on a variety of pervasive economic and financial risk factors; as well as firm or industry specific influences. The sensitivity of an asset\u27s returns to unanticipated changes in the pervasive risk factors reflects the security\u27s measure of systematic risk. In equilibrium, the expected security return is a linear function of the sensitivities of actual security returns to unanticipated changes in the pervasive risk factors. The APT does not specify the number or the nature of the pervasive risk factors. Factor analysis of stock returns can be used to determine sensitivities of individual securities to pervasive risk factors without having to identify these risk factors. In this dissertation we empirically tested the following question: \u27Can we use traditional accounting risk measures from the current period to explain cross-sectional variations of the APT risk measures (sensitivities) in the next period?\u27. The empirical analysis was carried out using a sample of manufacturing companies from the Compustat data tapes. The study covered two time periods: 1983-1986 and 1988-1991. The dependent variables were the APT risk measures, derived from a principal factor analysis of daily stock returns. The set of independent variables was an extensive list of traditional accounting risk measures associated with a firm\u27s operating and financial activities. The accounting risk measures used in this study represented the firm\u27s liquidity, debt management, profitability and efficiency, business risk, and market value ratios, as well as the size of the company. Relying on predictive correlation analysis and multiple regression analysis, an association was established between a firm\u27s basic operating and financial characteristics, and the variations of the APT risk measures across a sample of individual companies as well as portfolios of manufacturing companies. Several variables measuring various characteristics of firms were found to be significant in explaining each one of the APT risk measures. Traditional accounting variables, can be used to explain the APT risk measures across different sample specifications, as well as across different time periods. In this respect variables showing the greatest promise are measures of size, business risk, financial risk, and market power

Electronic Alliances: Outsourcing for Competitive Advantage

While several studies have examined the role of strategic alliances in outsourcing, as a way to manage the client-vendor relationship, no systematic attempt has been made to integrate the knowledge from the strategic management literature. The study contributes to this line of research, by developing a framework that weaves the Relational-Theory View with the outsourcing literature. This synthesis leads to the proposition that the more an outsourcing alliance meets the conditions of Relational-Theory, the higher the rent generating potential for the partners. Specific scenarios are generated based on the strategic value of the considered process, as well as the existence and the visibility of the appropriate capability

DURATION OF COMPETITIVE ADVANTAGE DUE TO EMERGING TECHNOLOGY ADOPTION (22)

The objective of this study is to provide a framework for predicting the expected duration of a competitive advantage due to adoption of an emerging technology, and suggest a process for generating technology specific benchmark of expected duration for the average adopting firm. Our framework integrates elements from the technology adoption (diffusion) cycle, hype cycles of emerging technologies, and the resource based view conceptualization of number of firms associated with a perfectly competitive market equilibrium. The objective of this synthesis is to generate a framework for estimating average technology diffusion time and standard deviation. Given the prevailing assumption that technology diffusion follows an approximate bell shaped distribution, we can use these two values to estimate the duration of a technology adoption related competitive advantage. We demonstrate the empirical estimation of expected duration of competitive advantage for an emerging technology (cloud computing) and a mature one (ERP)

Ultrasonic And Numerical Modeling Of Reflections From Simulated Fractured Reservoirs

Vve examine seismic waves scattered from anisotropic heterogeneity with laboratory data and numerical modeling in order to develop modeling techniques for the characterization of fracture properties in tight gas sands from surface seismic reflection data. Laboratory models representing features of a fractured reservoir were constructed using Phenolite (the "reservoir") embedded in a Lucite background, and seismic surveys were gathered over these models. In parallel with laboratory measurements, finite-difference modeling of reflections from a fractured medium were carried out. Fracture zone properties were calculated using an effective medium theory; the variation of fracture density produced a heterogeneous medium. The heterogeneity was modeled with a stochastic process, characterized by a probability density function and an auto-correlation function. Results from both modeling efforts show that prestacked AVO data can contain important information describing reservoir heterogeneity.United States. Dept. of Energy (Grant DEFG02-95ER82066)Massachusetts Institute of Technology. Earth Resources Laboratory. Reservoir Delineation Consortiu

Network uncertainty in selfish routing

We study the problem of selfish routing in the presence of incomplete network information. Our model consists of a number of users who wish to route their traffic on a network of m parallel links with the objective of minimizing their latency. However, in doing so, they face the challenge of lack of precise information on the capacity of the network links. This uncertainty is modelled via a set of probability distributions over all the possibilities, one for each user. The resulting model is an amalgamation of the KP-model of [13] and the congestion games with user-specific functions of [17]. We embark on a study of Nash equilibria and the price of anarchy in this new model. In particular, we propose polynomial-time algorithms for computing some special cases of pure Nash equilibria and we show that negative results of [17], for the non-existence of pure Nash equilibria in the case of three users, do not apply to our model. Consequently, we propose an interesting open problem in this area, that of the existence of pure Nash equilibria in the general case of our model. Furthermore, we consider appropriate notions for the social cost and the price of anarchy and obtain upper bounds for the latter. With respect to fully mixed Nash equilibria, we propose a method to compute them and show that when they exist they are unique. Finally we prove that the fully mixed Nash equilibrium maximizes the social welfare. 1

Modeling of Climate Change Effects on Coastal Erosion

Sediment Transport and Morphodynamic