Average Annual Return Research Articles

Risk and Return Characteristics of American Depository Receipts

I nvestors able to buy and hold the New York Stock Exchange (NYSE) composite index would have earned a before-tax average annual return of 7.7% (without dividends) over the period 1972-1990. Investors able to buy and hold Morgan Stanley Capital International's Europe, Australia, and Far East (EAFE) index, by contrast, would have earned a before-tax average annual return of 13.5%. Replicating the EAFE index, however, would have exposed the holder to greater risk. The standard deviations of annual returns for this period were 16.9% and 24.4% for the NYSE and EAFE index, respectively. Because correlations between international equity markets are less than one, favorable and unfavorable events have offsetting impacts, and international investment leads to less rather than more portfolio risk (see Brinson and Carr [1989], Grubel [1968], Lessard [1973], Solnik [1974], and Solnik and Noetzlin [1982], for example). Reduction in systematic risk is partially offset by new risk exposures on both the macroand microeconomic level, with attendant ramifications for investor wealth. For example, recent events in Mexico such as the Chiapas Rebellion in January 1994 and the foreign currency devaluation in December contributed to a 50.6% decline in the value of the Mexican stock exchange index. Increased risk is not confined to emerging markets, however. Developed countries such as Sweden, Italy, Spain, and Canada face large fiscal imbalances, and Germany continues its struggle with reunification while being haunted by the specter of neo-Nazism. Hence, an assessment of general risks confronting international investors is both important and topical. One major problem to examining this issue empirically is the cost of acquiring data. Fortunately, we do have data for American depository receipts. American depository receipts (ADRs) are dollar-denominated, negotiable instruments issued by a depository bank to represent ownership of a foreign security in the bank's possession. ADRs supposedly offer investors an opportunity to invest globally without many of the risks and administrative problems associated with direct foreign investment. While Officer and Hoffineister [1987] have shown that portfolios comprising both domestic common stocks and ADRs provide risk-reducing benefits, no study has examined the other risks that arise from diversifying internationally. Presumably, risks associated with investing in emerging markets such as Mexico should be greater than risks of investing in developed markets, but the limited data on emerging market securities preclude a more complete examination at this time. Hence, this study focuses on examining risks associated with ADRs from developed countries. The evidence is that ADRs outperformed their respective home-country index for thirteen of the sixteen markets studied between January 1988 and January 1993. This superior performance appears to be time period-dependent and, at least to some extent, a consequence of foreign currency appreciation relative to the dollar. The study also shows that NYSE-listed ADRs are less liquid, as measured by the bid-ask spread, than a control

What We Know About Technological Innovation to Achieve Environmental Compliance: Policy Issues for an Industrializing Animal Agriculture Sector

Technological innovation drives the increasingly industrialized character of animal agriculture. Productivity-enhancing technologies such as growth hormones (bST in dairy, pST in hogs), precision mixing of feed rations, climate-controlled housing, and genetic improvement have simultaneously lowered costs and increased output. Since 1960, annual increases in dairy production have averaged 2% to 3% (OTA). Payoffs to public and private investment in technology development have been significant. In Iowa, since 1980 estimated average annual returns from capital investments in the pork industry have been above 25% (Hurt). In Missouri, producers reported annual returns averaging 13.5% for 1983 to 1992 (Breimyer). Economies of size in productivity-enhancing technologies are well established for dairy (Matulich), swine (Rhodes; VanArdsall and Nelson), and poultry (Reimund, Martin, and Moore). Manure management is an integral part of that technology: Matulich and coauthors demonstrated that analyzing dairy manure handling separate from the choice of production technologies can lead to a suboptimal system design. Similar jointness exists between production technology and manure/litter handling technology in livestock and poultry. Technology selection and day-to-day management of manure have historically been firmlevel decisions, but increasingly they are influenced by contract relationships between producers and processors and/or between producers and input suppliers, and, concurrently, by environmental compliance obligations. Differences in the nature of technological innovation and in technology adoption behavior across regions and across farm sizes have social and demographic implications in addition to their economic roles in agricultural industrialization. Our purpose is to describe manure management technology adoption as a fundamental determinant of cost-effective farm sizes and loca-

Water and energy conservation using irrigation scheduling with center-pivot irrigation systems

An extension project covering portions of two counties in north central Nebraska, USA, demonstrated that irrigation scheduling and pumping plant adjustment practices reduced energy costs for center-pivot irrigated corn ( Zea mays L.). Data were collected for 51 center-pivot systems; 19 employed irrigation scheduling techniques (Schedule Group), and 32 center-pivot systems managed water applications using other methods (Control Group). On average, the Schedule Group used 17% less energy, applied 29mm (11%) less water and harvested 322 kg/ha (3.5%) more grain than the Control Group. Harvested yields and annual water application depths were less variable for the Schedule Group. Results suggest that irrigation scheduling improved the irrigators ability to determine irrigation timing and application depths. Adjustment of pumping plants improved the operating performance by an average of 8.1% of the Nebraska Pumping Plant Performance Criteria. Energy use was reduced by 0 to 34%. Annual return averaged $4.70 per hectare compared to an estimated cost of $1.65 per hectare per year for pumping plant adjustment. Analysis of the operating costs indicated that compared to the Control Group, the Schedule Group realized a total increase in return which ranged from $1.54 per hectare in 1986 to $13.03 per hectare in 1984. Average annual return was increased by $5.40 per hectare.

Dispersal and site fidelity in Lesser WhitethroatsSylvia curruca

Over a 20 year period the average annual return rate of adult Lesser Whitethroats was 23%. Recaptures of these birds at the site of ringing totalled 88%, which suggests a strong fidelity to breeding area. The number of birds breeding each year at the study site was mainly dependent on the return of previously ringed adult birds. When these did not return either breeding did not take place, or the population was very low. Juvenile birds commenced dispersal at the start of post‐juvenile moult and were more sedentary during mid‐moult. Migration appeared to commence as moult neared completion. Returns of juvenile birds in subsequent years was very low (0.8%), but the two birds that did return had been ringed in moult stage 2/3 and were probably not reared at the study site. It is suggested that a pre‐breeding population of Lesser Whitethroats arrives each spring, comprising principally first‐year birds, probably returning to the general area of their birth and then selecting breeding sites for the coming season.

The prediction of stock returns using financial statement information

We examine the profitability of a trading strategy which is based on a logit model designed to predict the sign of subsequent twelve-month excess returns from accounting ratios. Over the 1978–1988 period, the average annual excess return produced by the trading strategy ranges between 4.3% and 9.5%, depending on the specific measure of excess return and weighting scheme involved. However, our implementation of the Ou and Penman (1989) trading strategy in the 1978–1988 period, which is based on a logit model that predicts subsequent unexpected earnings- per-share from accounting ratios, does not earn excess returns.

Furrow Irrigated Cotton on Clayey Soil in the Lower Mississippi River Valley

A majority of cotton currently grown in the lower Mississippi River Valley is under dryland production. A three-year field study was conducted to evaluate furrow irrigation as a production practice for cotton (Gossypium hirsutus L.) grown on clayey soils. Soil-water potential (SWP) was used as the primary method for scheduling irrigation. Three other methods, soil-water deficit (SWD), leaf-water potential (LWP), and crop water stress index (CWSI), were compared to SWP as means for determining irrigation timing. Irrigation resulted in a significant yield increase over non-irrigated cotton in each year of the study. The mean yield was 3470 kg/ha (3090 lb/acre) for the irrigated cotton and 2312 kg/ha (2059 lb/acre) for the non-irrigated, which resulted in an average annual increase of 1158 kg/ha (1031 lb/acre) of seed cotton. An economic analysis comparing cost to benefit of irrigation on cotton showed an average annual return of $240 ha-1 ($97 acre-1).

Economic Consequences of Alternative Stocking Rate Adjustment Tactics: A Simulation Approach

An economic analysis of alternative stocking rate adjustment tactics is performed using a simulation model which emulates the annual decision-making situation of a rancher. The model includes variation in livestock prices and annual forage production. The manager's decisions are based on the availability of forage at 4 decision points in the year, the expected growth between the current decision point and the next, and the expected portion of the forage that is to be harvested through grazing. Livestock are bought and sold to adjust the stocking rate to equal the expected available forage for grazing. Results are obtained for 3 different stocking tactics based on 4 levels of expected forage production and livestock utilization set at the May decision point. The results reflect the differences in net returns over variable costs and the differences in annual cow investment capital associated with each tactic. The results indicate that the tactics using a maximum stocking rate of 3.6 ha/au offer the most reasonable compromise between mean and variance of net returns. The tactic with no limit on stocking rate provides the possibility of obtaining higher average annual net returns than tactics with limited stocking rates, but the variation in annual returns is considerably greater and the annual cow investments costs are higher.

Rates of Value Change on Uncut Forest Stands in New Hampshire

Abstract Nominal rates of value change for 141 uncut forest plots in New Hampshire averaged 15.9% annually for the 10 years ending in 1983. In contrast, average annual nominal returns were 8.3% for the Standard and Poors 500 stock average and 7.6% for the Forbes bond and preferred stock composite fund from 1973 to 1983. Regression analysis failed to establish useful predictive relationships between stand variables and rates of value change, but some results were clear. Forest type was an important factor in determining rate of value change. Much of the difference between rates of value change among forest-type groups was due to differences in price trends for various species. Rates of value change declined at higher elevations, overall, and within forest-type groups. North. J. Appl. For. 4:64-66, June 1987.

The relationship of strategic planning to financial performance

AbstractThe relationship between financial performance and characteristics of corporate planning systems was investigated/Planning systems that combined an external focus with a long‐term perspective were found to be associated with superior 10‐year total return to stockholders. A lagged relationship between such systems and 4‐year average annual returns to investors also was identified.

Investment Policies of Property-Liability Insurers and Pension Plans: A Lesson from Ben Graham

The investment returns of property-liability insurers and pension plans are of increasing importance to the American public. This article examines a publicly available investment strategy, formulated by Benjamin Graham, which, seemingly, is ideally suited to the goals and constraints faced by property-liability insurers and pension plans. Simulations of this strategy over the 1955-1976 period revealed both after-cost risk-adjusted performance and average annual return greater than an appropriate market benchmark. This strategy, therefore, provides a reasonable alternative to both the active strategies utilized by many institutional portfolio managers and to passive index funds.

The Von Thünen Model and Environmental Uncertainty

Abstract In the Von Thunen model of agricultural location, land use is strictly determined by the set of initial conditions. However, under such conditions of environmental uncertainty, the pattern of land use is not predetermined, but varies according to the behavior mode of individual farmers. Elements of decision theory are used to show that a crop pattern that maximizes the long-run economic return frequently differs from the pattern that maximizes a guaranteed return each year. Secondly, although the short-run pattern produces a more stable return, the long-run pattern generates a higher average annual return. Thus, in a competitive system, conflicts emerge where farmers who can afford the higher risks dominate those unable to survive short-run fluctuations.

Land Banking in Stockholm: An Evaluation of Municipal Residential Leasehold as a Public Finance and Housing Subsidy Instrument

Abstract In this study the performance of Stockholm's municipal residential leasehold program as a public finance and housing subsidy tool is assessed for the period 1910-1970. The program has yielded an average annual return of 5.5 percent—mainly in the form of unrealized capital gains—which compares favorably with the city's capital costs (4.8 percent). Ground charges have been below market, implying subsidies to leaseholders. The subsidies have mainly benefitted first owners of single-family homes erected on city owned land. By charging market lease fees an annual average return of 7.3 percent could have been earned. The additional revenue, distributed through the Swedish housing allowance scheme, would represent a far more efficient housing subsidy.

Biology of Acacia pulchella R.br. With Special Reference to Symbiotic Nitrogen Fixation

Growth, reproduction and longevity of the fire weed Acacia pulchella var. glaberrima were examined in natural populations of known age in coastal sands in and around Perth, W.A. Dense populations (10000 plantsiha) were established after a summer burn; plant density was 30% of its initial value at 4 years. less than 8% at 13 years. Plants accumulated dry matter, nitrogen and phosphorus throughout a 13-year growth period. Seed production commenced at 2 years, reached a maximum (12000 seeds per plant per year) at 3 or 4 years declining to 2000 seedsiplant in the 13th year. Only a small fraction of the shed seed accumulated in soil under the stands. Changes in total plant N, nodule weightlplant, and C2H2 reduction capacity of detached nodules were followed in populations in their first, second and fourth growing seasons. A new set of nodules formed with the autumn rains, peak nodule mass and C2H2 reduction activity were recorded in July-October, and virtually no nodules survived the summer into a second growing season. A glasshouse study of N accumulation and C2H2 reduction by nodules in minus N sand culture gave acalibration value of 2.26 mol C2H2 : mol N2 fixed. Applying this value to data from nativepopulations, 8% of the N accumulated by first season plants, 45% of the N of second season plants and 68% of the N of fourth season plants were estimated to be derived from symbiosis. Average annual returns of N to the ecosystem were estimated at 3.9 kg/ha, probably more than half of this from N2 fixation. Progressive death of plants in the populations gave the greatest return ( 1.9 kg N per ha per yr), the remainder from litter (1 kg N per ha per yr) and shed seed ( 1 kg N per ha per yr).

Tobacco Technology and Agricultural Labor

At the founding of the American commonwealth two hundred years ago, 95% of the population was engaged in agriculture. Today, less than 4% of the labor force remains in agriculture, the result of a massive shift of labor from the farm to the nonfarm sector. From a historical perspective, the agricultural changes which displace substantial numbers of farmworkers are nearly complete; estimates indicate that the share of the labor force in agriculture is expected to decline to 2% by 1985 (U.S. Dep. of Labor, p. 336). Just as agriculture has slowed the rate at which it disgorges its surplus labor into the nonfarm sector, renewed concern for the consequences of some agricultural changes is being expressed. The public agricultural research establishment is indicted for neglecting the human costs of the labor displacement which often accompany mechanization, for accelerating the pace of environmental and rural decay, and for encouraging the production of profitable but less palatable crops (California Assembly, Hightower). Although the values of critics may be questioned and the cogency of specific indictments disputed, the conflict between the drive for agricultural efficiency and the needs of farmworkers, the environment, and consumers promises to be prominent in the set of issues which 'seem likely to broaden and intensify (Farrell, p. 786) rather than disappear. The absence of informed debate on the relative virtues of agricultural efficiency and workplace equity obscures the real interdependency between the social goals of efficiency and equity, permitting the enactment of incompatible policies designed for what are actually joint problems. This paper examines the benefits and costs which can be expected as a result of mechanizing the harvest of one of the most labor-intensive crops in America, flue-cured tobacco.' In 1972, about 141 million man-hours, 3% of all man-hours used in the production of crops, were used to produce fluecured tobacco on 0.5 million acres of land in the Southeast (Grise et al., p. 22; U.S. Dep. of Agriculture, p. 99). Most flue-cured tobacco labor (60%70%) is used in the six-to-eight-week harvest. Although mechanical innovations introduced since World War II already have reduced harvest employment, the introduction of the mechanical harvester and adoption of bulk barns is further reducing harvest labor demands. The mechanical tobacco harvester, developed with public monies, serves as an illustration of the research-displacement nexus in agriculture and permits the exploration of the various policy options available to alter the linkage. After a brief description of technological changes in the flue-cured tobacco industry, we derive an estimate of the average annual return which can be expected as a result of past and ongoing research outlays. In the third section of this paper, we explore the magnitude of potential adjustment costs likely to be incurred by displaced harvest labor. In the concluding section, we review the prospects for successfully implementing any of the proposed compensation or assistance schema. Throughout the paper, our focus remains on the efficiencyequity conundrum. While no ideal solution appears available, it is hoped that a discussion of the need for solutions can generate more research on a timely issue.

Use of Probabilistic Cash Flows in Analyzing Investments Under Conditions of Risk and Uncertainty

Managers of business firms, large or small, farm or nonfarm, must make investment decisions under conditions of risk and uncertainty. However, in evaluating investments, the assumption of perfect knowledge has often been used to simplify the analysis. For example, an estimate of average annual net returns is frequently discounted into perpetuity to evaluate a real estate investment alternative. Capital budgeting literature suggests a number of approaches to evaluating alternative investments. However, use of concepts such as the payback period, average rate of return, internal rate of return and net present value embodies the assumption of perfect knowledge.

Seismic intensities, “size” of earthquakes and related parameters

Abstract The simple model of an earthquake used in Evernden, et al. (1973) was extended to the conterminous United States and observed patterns of isoseismals for major earthquakes studied in relation to the model. Regional attenuation, a known major factor controlling isoseismal patterns, was quantitatively evaluated. Incorporating this regional variation into the model results in the prediction that in terms of energy released, the San Francisco earthquake of 1906 was 50 times as large as Owens Valley 1872 and more than 100 times larger than the Charleston 1886 and New Madrid 1811 earthquakes. All of these were probably of comparable “magnitude”. Other relevant parameters are investigated. Analysis of probability of occurrence of major earthquakes in the Eastern United States suggests average annual return times of intensity X and IX of thousands of years at least. Presently unknown local conditions may lead to much greater probabilities at some localities, and the importance of developing procedures for determining regions of abnormally high risk is stressed.

An agroclimatic probability study of the economics of fallow-seeded and continuous spring wheat in southern saskatchewan

This analysis of the economics of spring wheat grown on fallow in a two-year rotation as compared with continuous wheat grown in the Brown soil zone of southern Saskatchewan includes three phases: 1. (1) the estimation of spring soil moisture by a meteorological soil water budgeting technique (versatile budget) and the verification of the estimates against observations over 20 years; 2. (2) the prediction of average and probable yields from fallow-seeded wheat fields in two-year rotation and from continuous wheat using published water use-yield relationships; and 3. (3) the evaluation of average and probable net returns from fallow-seeded wheat and continuous wheat using the estimated yields and published data on production costs. Spring soil moisture estimates were significantly correlated with the corresponding observations on fallow ( r = 0.78) as well as on stubble ( r = 0.73) lands. The observed and estimate means over 20 years did not differ significantly and the standard errors of estimate were about 1.2 inches. Estimated average wheat yields (bu/acre) from continuous wheat were 71% of yields from fallow-wheat. In three out of ten years net return from continuous wheat were less than those from fallow-seeded wheat. Based on an average farm wheat price of $1.65 per bushel, average (strictly medium = 50% probability) annual net returns per cultivated acre were $13.23 for continuous wheat seeded over the whole area and $9.53 for fallow wheat in a two-year rotation seeded over half of the area under cultivation. But probable net returns fluctuated more widely for continuous wheat than for fallow-seeded wheat. One inch of water beyond an initial six inches of available water yielded $2.53 in terms of additional net returns from fallow-seeded wheat and $5.05 from continuous wheat. The use of the proposed techniques for evaluating economic benefits in various soil and climatic zones by simulated changes in the crop rotation program is demonstrated.

Maatalousmaan arvioimisesta Yhdysvalloissa

The author gives a critical report on the American system of rural appraising. Although the advantages of the system, in which income appraisal and commercial appraisal are effected parallelly, are realized, there seem to be some considerations in need of further study. The author devotes special attention to the possibility of using net rent as a measure of land value. Since the appraisal method is to a great extent based on capitalization of net landlord income or net rent, the question arises whether the average net rent equals the average annual net return from the farms. The author concludes that this cannot be the true situation in the USA. It is inevitable that the tenant invests his labour and capital as entrepreneur and is therefore quite justified in demanding a part of the entrepreunial rent. If, however, net rent equals net return he does not get any of it. This can happen only in cases where land is scarce and landowners maintain monopoly power. A real equilibrium is possible only when the advantages of purchasing and of renting are in balance from the viewpoint of the farmer. Even a rapid survey of recent trends in the composition of farm capital shows how greatly increased is the share of farm investment which to-day must be met by the tenant. Again, it has been statistically shown that the difference between capitalized rent value of land and its market value has been increasing during the last few decades. In all probability a part of this difference may be the result of an increase in the share of the farm capital which the tenant has to invest, and thus perhaps has no relation to the increase or decrease of net return from the farm. Among other minor points raised by the author, the problem of determining the right capitalization rate seems to him to be especially in need of further intensive study.

Employment in the Wildlife Field

apiece) were obtained in the winter of 1939-40. The gross return was $599.00 from 2.2 acres, allowing a strip of land 2 rods wide as occupied by the hedge. This was equivalent to an average annual return of over $9.00 per acre for the 30 years since the hedge was set. In addition, several cords of firewood of good quality were obtained from the post cutting. Through all the years that these wood products were growing, the hedge had served as a fence. Data from several hedgepost harvests in northern Missouri showed a close correlation between the yield and the character of the subsoil. Large yields were obtained from soils such as Marshall with a porous, friable, well oxidized subsoil, whereas mediocre returns came from soils with tight subsoils such as the Mandeville. The data and yield computations are presented in Table 1. Similar returns were recorded in Adams County, Illinois. Succeeding crops of posts develop from vigorous sprout growth and mature more rapidly than does the initial crop so that later returns are even better than those listed.