Changes In Valuation Research Articles

Practical Applications of Option-Enhanced Tax-Smart Portfolio Value

Since the origination of the investment discipline, tax implications have always been secondary to investment decisions. Investment education resources and those for training investment professionals do not emphasize after-tax performance. Another idea favored by the investment community is that when investing, a more accurate measure of performance is not how much one makes but how much one keeps. These two ideas conflict since potential tax obligations from selling securities can significantly impact the actual value of investments. In <b><i>Option-Enhanced Tax-Smart Portfolio Value</i></b>, from the April 2022 issue of <b><i>The Journal of Portfolio Management</i></b> and other articles about the impact of taxes on investments, author <b>Andrew Kalotay</b> of <b>Kalotay Advisors</b> contends that there must be a change in how taxable securities are valued and how the performance of taxable investment portfolios is derived. “To discuss how you can improve after-tax performance intelligently, you must develop a way to measure it,” says Kalotay. This philosophical change in investment valuation would facilitate tax-loss harvesting decisions, enhance investment performance measurement, and provide a better way to compare the performance of fund managers and advisers. Kalotay believes that “there should be much more attention by academics and practitioners on the critical topic of after-tax performance.”

Sequential delay and probability discounting tasks in mice reveal anchoring effects partially attributable to decision noise

Delay discounting and probability discounting decision making tasks in rodent models have high translational potential. However, it is unclear whether the discounted value of the large reward option is the main contributor to variability in animals’ choices in either task, which may limit translation to humans. Male and female mice underwent sessions of delay and probability discounting in sequence to assess how choice behavior adapts over experience with each task. To control for “anchoring” (persistent choices based on the initial delay or probability), mice experienced “Worsening” schedules where the large reward was offered under initially favorable conditions that became less favorable during testing, followed by “Improving” schedules where the large reward was offered under initially unfavorable conditions that improved over a session. During delay discounting, both male and female mice showed elimination of anchoring effects over training. In probability discounting, both sexes of mice continued to show some anchoring even after months of training. One possibility is that “noisy”, exploratory choices could contribute to these persistent anchoring effects, rather than constant fluctuations in value discounting. We fit choice behavior in individual animals using models that included both a value-based discounting parameter and a decision noise parameter that captured variability in choices deviating from value maximization. Changes in anchoring behavior over time were tracked by changes in both the value and decision noise parameters in delay discounting, but by the decision noise parameter in probability discounting. Exploratory decision making was also reflected in choice response times that tracked the degree of conflict caused by both uncertainty and temporal cost, but was not linked with differences in locomotor activity reflecting chamber exploration. Thus, variable discounting behavior in mice can result from changes in exploration of the decision options rather than changes in reward valuation.

Evaluating Benefits, Costs, and Social Value as Predictors of Gratitude

Although much is known about cooperation, the internal decision rules that regulate motivations to initiate and maintain cooperative relationships have not been thoroughly explored. Here, we focus on how acts of benefit delivery and perceptions of social value inform gratitude, an emotion that promotes cooperation. We evaluated alternate information-processing models to determine which inputs and internal representations best account for the intensity with which people report experiencing gratitude. Across two experiments (Ns = 257 and 208), we tested 10 models that consider multiple variables: the magnitude of benefits conferred on beneficiaries, the magnitude of costs incurred by benefactors, beneficiaries’ perception of how much benefactors value their welfare, and beneficiaries’ value for the welfare of their benefactors. Across both studies, only beneficiaries’ change in social valuation for their benefactors consistently predicted gratitude. Results point to the need for further research and contribute to the growing literature linking cooperation, social emotions, and social valuation.

The COVID-19 Pandemics’ Impact on Customs Valuation and Import Duties: An Israel Perspective, and a Wider Comparison

In the past year, due to the Coronavirus disease 2019 (COVID-19), sea freight prices and domestic transportation costs have risen sharply, an increase that has not been seen for many years. This leads to a change in customs valuation. In most countries worldwide, collection of duties is based on the cost, insurance and freight (CIF) value of goods, there, any increase in transportation costs, lead to additional collection of import duties. The United States, Canada, Australia, New Zealand and South Africa, however, impose duties on the free on board (FOB) value of goods, meaning, therefore, transport costs changes do not lead to additional import duties in those countries. COVID-19 effects on transportation costs are a global issue and may last for a long time. Therefore, governments that impose customs on the CIF value, should consider waiving the COVID-19 extra shipping costs, for customs valuation purposes, until we are back to a ‘normal’ period. customs, valuation, transport, Incoterms, CIF, FOB, covid19, Israel

Optogenetic stimulation of dynorphinergic neurons within the dorsal raphe activate kappa opioid receptors in the ventral tegmental area and ablation of dorsal raphe prodynorphin or kappa receptors in dopamine neurons blocks stress potentiation of cocaine reward

Behavioral stress exposure increases the risk of drug-taking in individuals with substance use disorders by mechanisms involving the dynorphins, which are the endogenous neuropeptides for the kappa opioid receptor (KOR). KOR agonists have been shown to encode dysphoria, aversion, and changes in reward valuation, and kappa opioid antagonists are in clinical development for treating substance use disorders. In this study, we confirmed that KORs were expressed in dopaminergic neurons in the ventral tegmental area (VTA) of male C57BL6/J mice. Genetic ablation of KORs from dopamine neurons blocked the potentiating effects of repeated forced swim stress on cocaine conditioned place preference (CPP). KOR activation inhibited dopamine neuron GCaMP6m calcium activity in VTA during swim stress and caused a rebound enhancement during the period after stress exposure. Transient optogenetic inhibition of VTA dopamine neurons with AAV5-DIO-SwiChR was acutely aversive in a real time place preference assay and blunted cocaine CPP when inhibition was administered concurrently with cocaine conditioning. However, when inhibition preceded cocaine conditioning by 30 min, cocaine CPP was enhanced. Retrograde tracing with CAV2-DIO-ZsGreen identified a population of prodynorphinCre neurons in the dorsal raphe nucleus (DRN) projecting to the VTA. Optogenetic stimulation of dynorphinergic neurons within the DRN by Channelrhodopsin2 activated KOR in VTA and ablation of prodynorphin blocked stress potentiation of cocaine CPP. Together, these studies demonstrate the presence of a dynorphin/KOR midbrain circuit that projects from the DRN to VTA and is involved in altering the dynamic response of dopamine neuron activity to enhance drug reward learning.

Pandemics, intermediate goods, and corporate valuation

We evaluate whether the changes in valuation of U.S. corporates during the first wave of the COVID-19 pandemic depend on their downstream or upstream industries’ exposure to social distancing. Using a new dataset on sectoral dependence on the use and sale of intermediate goods, we find that firms whose downstream sectors are more affected by social distancing suffer from a greater decline in stock prices during the first quarter of 2020. Such an effect is mitigated for large firms.

New Wine in a New Bottle: A New Organizational Form and Change in Valuation of Category Spanning

This study investigates how the theory of value in a market can evolve towards recognizing and rewarding category spanning. We suggest that a new organizational form in existing markets enables this process by creating a distinct identity that valorizes spanning, which problematizes the existing theory of value and encourages audiences to have positive experiences with spanning. We argue that the prevalence of the new organizational form, then, shifts audiences' theory of value to appreciate hybridity and ultimately drives a change in evaluations of category spanners of the established form. Using the rise of gourmet food trucks in the U.S. restaurant industry as our context, we find an increase in returns to spanning by conventional restaurants over time and with the increase of gourmet food trucks in a focal city. This study contributes to research on spanning and entrepreneurship by investigating how audience evaluations towards spanners are socially contingent and change over time, explicating a “categorical opportunity” for new organizational forms.

A Time-Series Analysis and Forecast of CAPE

Expanding stock market valuation multiples add to expected returns, and contracting multiples subtract from them. But how to forecast valuation measures such as the cyclically adjusted price-to-earnings (CAPE) ratio? Using Robert Shiller’s CAPE, the author first shows that forecasts based on mean reversion are almost certainly wrong—CAPE appears to be nonstationary, indicating no tendency toward mean reversion. The author then provides forecasts of CAPE using time-series analysis—an approach that requires no theory and accommodates a range of views about factors that influence valuation. The author suggests that practitioners use these time-series forecasts to help inform capital market assumptions. <b>TOPICS:</b>Security analysis and valuation, fundamental equity analysis, quantitative methods, statistical methods, financial crises and financial market history <b>Key Findings</b> ▪ CAPE may be nonstationary and as such have no tendency to revert to its long-term or any other mean—forecasts of CAPE based on mean regression may be wrong. ▪ Considering the range of outcomes for CAPE values suggested by time-series models reduces the chances of a big surprise in either direction. ▪ Practitioners factoring valuation changes into their capital market assumptions may wish to assume no or small changes as a base case, rather than reversion to a long-term mean value.

Reinforcer pathology in cocaine use disorder: Temporal window determines cocaine valuation

AimsThe Experimental Medicine Approach offers a unique perspective to determine clinical behavior change by engaging a target underlying the cause of a disorder. The present work engaged a novel target of addiction, Reinforcer Pathology, in two studies to test changes in behavior among individuals with cocaine use disorder. MethodsIn Study 1, n = 44 participants engaged the temporal window with episodic future thinking (EFT), a positive prospection exercise. Changes in temporal view and cocaine valuation were tested using delay discounting and behavioral economic demand, respectively. Additionally, a computational model assessed the relative reliance on the near- and far-sighted systems during EFT. In Study 2, n = 71 engaged the temporal window with a negatively-valenced hurricane scenario to test the opposite effects on window length and cocaine valuation. ResultsResults demonstrated systematic and symmetrical engagement of the behavioral target. Study 1 robustly replicated previous work, wherein EFT lengthened the temporal window and decreased cocaine valuation. Moreover, EFT increased the weighting of the modeled far-sighted system, increasing the relative impact of long-term discounting decisions. Study 2 produced opposite outcomes, shortened temporal window and increased cocaine valuation. ConclusionsThis approximately equal and opposite reaction to the manipulations supports reinforcer pathology theory and implicates the temporal window over which rewards are valued as a target to be pushed and pulled to produce clinically meaningful behavior change. Using the Experimental Medicine Approach as a guide, future work should identify new potential interventions to engage reinforcer pathology and use the clinically relevant outcomes as a litmus test for mechanism.

Money Don't matter? How incubation experience affects start-up entrepreneurs' resource valuation

According to the resource-based view, for start-ups to gain a sustainable competitive advantage their resources should be valuable, rare, inimitable, and non-substitutable (VRIN). However, early-stage entrepreneurs often do not have the capability to properly value resources. Incubators are popular tools for supporting early-stage entrepreneurs. Many entrepreneurs initially prefer that incubators provide tangible non-VRIN resources such as funding and office space. While in incubators, entrepreneurs increasingly learn to value intangible resources as VRIN. It is unknown whether this change in resource valuation is caused by the incubator or a learning process common to all entrepreneurs. The aim of this study is to discern whether the change in valuation of resources is a result of the incubation experience or a consequence of a normal learning process. This contributes to a better understanding of the impact of incubation on start-up development. We pose the following research question: What are the effects of incubation experience on start-up entrepreneurs' valuation of different tangible and intangible resources offered by incubators? We develop hypotheses about how incubators change the valuation of specific resources. We test these hypotheses using data from 935 entrepreneurs in North America and Western Europe who completed a survey containing a discrete choice experiment in which entrepreneurs with and without incubation experience were asked to choose between two hypothetical incubators that offer different resources. Our results reveal that incubators indeed contribute to entrepreneurs’ capacity to value resources. First, we find that entrepreneurs of incubated start-ups value non-VRIN resources less than entrepreneurs of non-incubated start-ups. Second, start-up entrepreneurs generally value most VRIN resources more than non-incubated start-up entrepreneurs.

Decreasing physician Medicare reimbursement for dermatology services

Decreasing physician Medicare reimbursement for dermatology services

Measuring and benchmarking the benefits of Athens metro extension using an ex-post cost benefit analysis

The development of metro projects is an essential step for the establishment of a high level of mobility, especially in urban areas, where traffic congestion is a major issue to tackle. Nevertheless, underground projects of this scale require major investments and often become the objects of skepticism regarding the associated expenditures. Cost-benefit analysis (CBA) is the tool to assess such projects and provide support in the decision process. Such tools are examined in the present paper, where a relatively small extension of the Athens metro is evaluated. The analysis is being made as an ex-post CBA, utilizing the retrospective experience and the available data from the project’s construction period and its operation until now. The findings of the current analysis are then compared to a respective ex-ante CBA that was made during the initial phase of the construction phase revealing a considerable positive change in valuation having twice as much more ENPV (€153 million vs. €340 million). By comparing the results of both the ex-ante and the ex-post approach the main differentiating factors, similarities and shortcomings are identified, especially in the cost aspects of the development and the accurate assessment and valuation of benefits that render the whole extension even more socially desirable than it was initially perceived.

Measuring environmental (dis)amenity value during a pandemic: Early evidence from Maryland

With the outbreak of COVID-19 and the implementation of stay-at-home (SAH) orders aimed to mitigate its spread, households became less mobile and sheltered in place. This behavior has potential implications for how households’ value environmental (dis)amenities, especially those that are underutilized during the pandemic. In this paper, we explore changes in the valuation of two prominent environmental (dis)amenities – major roadway and open space proximity – by households within the Baltimore metropolitan region. We find evidence that the housing price capitalization of immediate major roadway proximity changes due to the SAH order and associated policies that impact economic activity, suggesting a shift in household perceptions, while there is no evidence of open space valuation changes. These results may have significant implications for homeowner welfare if the altered capitalization of environmental (dis)amenities is temporary due to the SAH order.

Usefulness of earnings announcements and other news: Evidence from the impact of peer information on IPO price revision

We study the relative usefulness of earnings announcements for valuation from the perspective of information externalities–the use of peer information in IPO pricing. The relative usefulness of an information source for peer valuation is a function of both the amount and the per-unit usefulness of the information. While prior research suggests that a firm’s earnings announcements supply a modest amount of incremental information, we find the per-unit usefulness of peer earnings announcements to be higher than other news in IPO pricing. Specifically, using stock returns around (outside) earnings announcements to capture earnings (other) information (e.g., Ball and Shivakumar 2008), we find that a 1-percent change in peer valuation caused by earnings announcements results in approximately 60 percent larger IPO price revisions than a 1-percent change in peer valuation caused by other information. High accounting comparability and reporting quality of peer firms further improve the per-unit usefulness of peer earnings announcements. IPO issuers also avoid setting their offering dates to immediately precede peer earnings announcements, suggesting that these are important information events.

Product quality and quantity with responsive pricing

In this paper, we study a firm's optimal joint product quality and quantity decisions when the consumers' utilities change with the market environment. We develop a model framework to study a monopolist firm's decisions about product quality and related production quantity planning when responsive pricing is implemented. Consumers are heterogeneous in their marginal valuations of the product quality but homogeneous in their reservation utility. Considering a utility function incorporating the reservation utility, quality, and price, consumers make their purchase decisions. We find that as the reservation utility increases or the quality valuation decreases, the optimal quantity increases. However, counterintuitively, the optimal quality decreases when the reservation utility becomes higher. Furthermore, the product quality and quantity are substitutes in the context of responsive pricing. We also investigate the optimal quality and quantity for a product line that is vertically differentiated. Compared to a firm offering a single product, a firm offering a product line is more likely to alter its quality investment decisions due to changes in reservation utility, whereas the optimal investment decisions are less sensitive to changes in quality valuation.

The Market Success of Corporate Spin-offs: Do CEO External Directorships, Age, and Their Interactions Matter?

Corporate spin-offs have been a major “preferred” restructuring technique in the previous couple decades in the U.S. This corporate transaction aims to create value for both divesting firm and its subsidiary. This study examines an understudied interaction of CEO external directorships and age (as well as their direct effects) in the strategy literature on the change in market valuation of spun-off subsidiaries. By drawing our cases from the SDC Platinum database, we identified 138 completed corporate U.S. spin-offs that took place between 2000 and 2014. Our empirical analysis indicates that the number of CEO external directorships as well as having a younger CEO positively and significantly affect the change in market valuation. In addition, our interaction effect shows significant results. Grounded in the upper echelons and resource dependence theories, this study contributes to the corporate governance literature in terms of understanding whether two particular CEO characteristics and their interactions hold a great deal of importance for spun-off subsidiaries’ market performance. From the perspective of managerial implications, this study suggests that having a younger CEO along with holding many external directorships will help these spun-off subsidiaries much better perform in the market.

Self-Regulation Without Force: Can Awareness Leverage Reward to Drive Behavior Change?

To reach longer-term goals and live aligned with their values, people typically must regulate their behavior. Effortful self-control is one way to achieve this and is usually framed as a forceful struggle between lower-level impulses and higher-level cognitive control processes. For example, people may restrain themselves from eating cake in order to lose weight. An alternative avenue of self-regulation draws on autonomous motivation: Individuals eat healthfully because it is values-congruent or intrinsically satisfying. Recent advances in the understanding of reward valuation on a neural level (e.g., ventromedial prefrontal cortex/orbitofrontal cortex) and emerging treatments on a clinical level (e.g., mindfulness training) suggest a possible mechanistic convergence between brain and behavior that is consistent with a shift from forced to unforced behavior change. Here we propose how an overlooked aspect of reinforcement learning can be leveraged using a simple yet critical feature of experience that is not reliant on willpower: Bringing awareness to one’s subjective experience and behavior can produce a change in valuation of learned but unhealthy behaviors, leading to self-regulatory shifts that result in sustainable behavior change without force.

Why Ricardo’s Theory of Comparative Advantage Regarding Foreign Trade Doesn’t Work in Today’s Global Economy

This article first analyzes Ricardo’s theorem, not just his argument in favor of comparative advantage, but also the conditions that are necessary for the theory to work, namely, that capital is loyal to the country of origin and that currencies will adjust to level out imbalances in trade. It then traces the flow of foreign direct investment into China and the basis for that flow – cheap labor. It then analyzes China’s manipulation of the yuan and the changes in the relative valuation of currencies. The next section of the article addresses China’s entry into the World Trade Organization and its failure to live up to its agreement to move to a market-based economy. China’s reliance on state owned enterprises, its subsidization of export and high-tech industries, and its direct and indirect coercion of technological transfer and know-how from the U. S. and other countries – all stand in opposition to the principles to which other countries have agreed in connection with their participation in the World Trade Organization. A critical factor that is not been understood in connection with global trade is that the transfer of dual-use technology to China also carries with it national security implications. The next sections look at forced technology transfer and China’s military goals, including its policy to be both industrially and militarily self-sufficient, something United States needs to be likewise. This leads to a discussion of industrial policy. China has clearly articulated its industrial policy and the steps that it will take to implement it. The United States cannot afford, either from the standpoint of providing good paying jobs for its citizens, or from the standpoint of being a leader in research and development, or from the standpoint of national security, to be dependent upon products originating from, or supply chains running through, other countries – particularly when such countries are hostile to the United States. The conclusion asserts that Sen. Rubio’s “Made in China 2025 and the Future of American Industry” may be the opening of a critically necessary dialogue on the need for, and nature of, an industrial policy for the United States. Just relying upon the mantra that free trade benefits all, and supporting such mantra on the basis that it is “proved” by Ricardo’s theorem of comparative advantage, is to put our head in the sand and ignore the evidence set forth in this article.

Equity Valuation, Cost of Capital and Firm Characteristics

Long-term discount rate is different from short-term expected return. Long-term discount rate determines the level of equity valuation, whereas short-term return reflects the change in valuation. Long-term discount rate is relevant to corporate managers as it summarizes a firm's financing cost, while short-term expected return concerns investors who can trade dynamically. By applying the Gordon growth model and its two-stage variant, I empirically measure how long-term discount rates are correlated with various firm characteristics. I show that the relation between long-term discount rates and firm characteristics can be very different from that of the short-term expected returns. Characteristics predicting short-term returns do not always line up with long-term discount rates and vice versa. My findings highlight the mismatch between long-term discount rates and short-term expected returns, and document how firm characteristics are correlated with equity valuation levels.

Taper Tantrums: Quantitative Easing, Its Aftermath, and Emerging Market Capital Flows

Abstract This paper examines the spillover effects of U.S. unconventional monetary policy (UMP) on emerging market capital flows and asset prices. Affine term structure model estimates show that U.S. monetary policy shocks, identified with high-frequency Treasury futures data, represent revisions to expected short-term yields and term premia, especially during the UMP period. The policy shocks exhibit sizable effects on U.S. holdings of emerging market assets. These effects disproportionately manifest through valuation changes versus physical flows, are more pronounced for equity relative to bond markets, and are asymmetric between the quantitative easing and tapering periods, with flows more important during the unwinding.