Predictability of Earnings and Reversion of Profitability

Predictability of Earnings and Reversion of Profitability 1. INTRODUCTION, RESEARCH QUESTION AND CONTRIBUTION In a competitive environment, economists say there is a mean reversion of profitability. Mean reversion of profitability infers that variation in profitability and earnings can be predicted. Although there are some literatures making an effort to find prediction in profitability and earnings, the findings somewhat cannot fully explain those variations. Early researches (Beaver 1970; Brooks and Buckmaster 1976; and Lookabill 1976) did not test the prediction formally. When there were formal tests, models were mostly time-series and identified only companies with long-earning histories (20 years). This approach causes the issue that long-term survivors might not represent all the firms. Furthermore, 20 years of data on earnings is an inaccurate estimation of the time-series model. Thus, the results found are statistically weak (Lev 1969; Freeman, Ohlson, and Penman 1982). There are some later researches attempting to identify those variations as well. Freeman et al (1982), Collins and Kothari (1989), Easton and Zmijewski (1989), Ou and Penman (1989), Elgers and Lo (1994) and Basu (1997) found that cross-sectional tests constructed more consistent evidence of predictability. However, Elgers and Lo (1994) found the unrealistic assumption that there is no correlation among companies due to changes in earnings and profitability. Moreover, most existing literatures do not investigate connection of the predictability of profitability and that of earnings. Contrastingly, like Freeman et al. (1982) and Lev (1983), this research paper is to answer the question: Is much of what is predictable about earnings due to the mean reversion of profitability? The result confirms the answer to question is yes. Those results are applicable to the real world. Therefore, the main contribution is the confirmation of economists presumption that there is a mean reversion of profitability in a competitive environment. 2. Data and methodology 2.1 A First-Pass Partial Adjustment Model for Profitability This test uses a simple cross-section partial adjustment regression in profitability changing for each year t from 1964 to 1995. This regression from t to t+1 is as followed   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   (1a)   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚     Ã‚   (1b) where is total book assets of firm at the end of year t,is earnings before interest,is profitability measure, is expected value of profitability measure, is profitability change from year t to t+1 and is the profitability deviation from the expected value.   Ã‚  Ã‚   The paper uses a two-step method to identify equation (1). After doing regression to investigate differences in expected profitability among companies, the fitted values from the first-step regression are used as the proxy for in the cross-section regression.   Ã‚  Ã‚   In the first-stage regression, (dividends to book value of equity at the end of year t) is used as proxy for expected profitability, (dummy variable to capture nonlinear relationship of dividends and expected profitability) and (market-to-book ratio to find variation of expected profitability which cannot find by dividend determinants. In the cross-section regression, in (1) is the fitted value from the first-stage regression.   Ã‚  Ã‚   (2)   Ã‚  Ã‚   Due to the high regulation during the sample period (1964-1995), financial companies and utilities are omitted. This paper considers only the firms with more than $10 million assets and more than $5 million book equity. With these exclusions, 2,343 companies per year are taken into account. The interpretation is based on the average slopes and the time-series standard errors of the average slopes. However, with only 33 slope observation from 1964 to 1995, the estimation of autocorrelation is inaccurate. Therefore, this paper uses a less strict approach with t-statistics requirement of about 2.8 rather than the common 2.0. 2.2 A Nonlinear Partial Adjustment Model for Profitability This test is developed to investigate whether there is comparable nonlinearity in profitability characteristics with the hypothesis that the mean reversion of profitability results in the predictability of earnings. The nonlinear partial adjustment model equation is expanded from equation (1). (3)   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   where is the negative deviations of profitability from expected values, is the squared negative deviations, is the squared positive deviations, is negative changes in profitability, is squared negative changes and is squared positive changes. , and are to capture the nonlinearity in the mean reversion of profitability and , and are to capture the nonlinearity in the profitability changes autocorrelation. 2.3 Predicting Earnings Freeman et al. (1982) and Lev (1983) argue that the competition causes mean reversion of profitability. This paper inspects the predictable changes in earnings and how much of the predictability brings the nonlinearity of mean reversion in profitability. The dependent variable is change in earnings, . The regression of change in earnings is (4)   Ã‚  Ã‚  Ã‚  Ã‚  Ã‚   where is negative changes in earnings, is squared negative changes in earnings and is squared positive changes in earnings. , and are to capture the nonlinearity in the earning changes autocorrelation. 3. results 3.1 A First-Pass Partial Adjustment Model for Profitability The negative slope of implies that there is a nonlinear relationship of dividends and profitability. The significant positive slope of confirms the hypothesis that market-to-book ratio investigates variation of expected profitability which cannot find by dividend determinants.

Argentina Pestle Analysis

Argentina government has a strong democratic setup. In 2011, President Fernandez de Kirchner won the presidency for the second time. Her government has been successful at introducing reforms to encourage regional trade and support private sector investment, particularly for the development of the country’s infrastructure, primarily through private-public partnership. The government has also announced the creation of the oil planning commission, emphasizing its interest in the oil industry1.The Fernandez government is increasingly reliant on interventionist policies that fail to solve underlying structural problems and has been involved in several inflation figures manipulation and corruption charges, including a commotion with the International Monetary Fund (IMF) concerning inaccurate governance indicators impairing the economic outlook and deterring investment2. This has generated public discontent raising increasing protest against the government and a rapid decline in Fern andez popularity3.Argentina foreign policies are mainly concentrated on developing regional trading relations (Mercosur and UnaSur), the country has a good partnership with the UN and has been working on improving relations with the US, with particular interest to develop the technology and science sectors. Nevertheless, relations with the UK have deteriorated following an official complaint to the UN regarding the Falkland Islands4.ECONOMICFollowing the global financial crisis the Argentine economy has achieved a healthy recovery, predominantly through an increasing trade relationship with China, boosting substantially the country’s trade volume and generating a trading surplus5. However, the major concern for the economy is inflation and the great discrepancy of approximately 15% between official and non-governmental estimates. In addition, the government has increased regulatory intervention and thus reduced economic freedom and development.The government’s recent n ationalisation of oil giant YPF owned by the Spanish Company Repsol and of the private pension funds have furthermore hindered private and foreign investment. These factors combined with high public debt levels and low foreign-exchange reserves have constrained the potential for economic growth and left the country at increased risk of recession. Argentina has a strong automotive industry. The government is aiming to attract further investments into the country’s automotive sector by lessening the regulatory framework obstacles and offering subsidies and incentives6.SOCIALArgentina is a traditionally urban country and continues to experience high migration from rural areas. The urban centres enjoy a relatively high standard of living comparable to other Latin American countries, with notable healthcare and educational facilities. Argentina is facing the problems posed by an aging population. This is projected to affect government's social security budgets and generate fiscal burdens. Despite a comprehensive education system restructuring and an improving primary school education system, dropout rates continue to rise sharply7.This will eventually lead to a significant increase in the proportion of unskilled workers. TECHNOLOGICAL With a strong telecommunications industry and a growing IT market, Argentina has shown significant growth in both sectors. The government has implemented plans to augment IT service penetration in rural areas. In addition, it has supported biofuel R&D in an effort to preserve energy security and accelerate technological development8.Argentina’s energy industry is in a deplorable state as they are now a net energy importer, eroding the country’s foreign-currency reserves9. As a result, the government has shown an increasing interest in science and technology and in the biotechnology industry. However, as a result of inadequate investment in R&D, there is a low degree of innovation resulting in a reduced number of p atents granted. Moreover, the lack of respect for intellectual property rights and copyrights has exacerbated the problem. LEGALArgentina has a comprehensive legal and regulatory structure and a federal republican representative government, where each province has its own constitution. In addition, complex and bureaucratic business regulations and strong union and government ties have resulted in wages increasing at 25-35% annual rates. Furthermore, high taxes have been detrimental to investment. For instance, income and corporate tax rates are both set at 35% added to corporate social security tax of between 23% and 27%. These additional costs place an undue burden in industry10.Notwithstanding the introduction of criminal liability for money laundering offences, the judicial system requires an important overhaul to improve its effectiveness and to generate a conducive environment for new business ventures and investments.ENVIRONMENTALDespite having a remarkable biodiversity and va st natural resources, the Argentinian government has been overexploiting its natural resources as a side effect of the rapid economic development. Increasing deforestation and the destruction of natural habitats have been accelerated by soybean cultivation and beef production11.Water and air pollution are major problems, particularly around industrial metropolitan areas. Rising concerns over environmental degradation have resulted in ambitious schemes from the government to develop renewable energy sources. The government has initiated measures to collaborate with prominent multinational organisations to develop biofuel production with particular interest in ethanol from sugarcane pulp12. Moreover, the Argentine government, in partnership with Chinese investments is constructing the largest wind power project in Latin America and is projected to provide 4% of Argentina’s power requirements. ï » ¿Argentina PESTLE analysis POLITICALArgentina government has a strong democratic setup. In 2011, President Fernandez de Kirchner won the presidency for the second time. Her government has been successful at introducing reforms to encourage regional trade and support private sector investment, particularly for the development of the country’s infrastructure, primarily through private-public partnership. The government has also announced the creation of the oil planning commission, emphasizing its interest in the oil industry1.The Fernandez government is increasingly reliant on interventionist policies that fail to solve underlying structural problems and has been involved in several inflation figures manipulation and corruption charges, including a commotion with the International Monetary Fund (IMF) concerning inaccurate governance indicators impairing the economic outlook and deterring investment2. This has generated public discontent raising increasing protest against the government and a rapid declin e in Fernandez popularity3.Argentina foreign policies are mainly concentrated on developing regional trading relations (Mercosur and UnaSur), the country has a good partnership with the UN and has been working on improving relations with the US, with particular interest to develop the technology and science sectors. Nevertheless, relations with the UK have deteriorated following an official complaint to the UN regarding the Falkland IslandsECONOMICFollowing the global financial crisis the Argentine economy has achieved a healthy recovery, predominantly through an increasing trade relationship with China, boosting substantially the country’s trade volume and generating a trading surplus5. However, the major concern for the economy is inflation and the great discrepancy of approximately 15% between official and non-governmental estimates. In addition, the government has increased regulatory intervention and thus reduced economic freedom and development.The government’s r ecent nationalisation of oil giant YPF owned by the Spanish Company Repsol and of the private pension funds have furthermore hindered private and foreign investment. These factors combined with high public debt levels and low foreign-exchange reserves have constrained the potential for economic growth and left the country at increased risk of recession.Argentina has a strong automotive industry. The government is aiming to attract further investments into the country’s automotive sector by lessening the regulatory framework obstacles and offering subsidies and incentives6.SOCIALArgentina is a traditionally urban country and continues to experience high migration from rural areas. The urban centres enjoy a relatively high standard of living comparable to other Latin American countries, with notable healthcare and educational facilities. Argentina is facing the problems posed by an aging population. This is projected to affect government's social security budgets and generate f iscal burdens.Despite a comprehensive education system restructuring and an improving primary school education system, dropout rates continue to rise sharply7. This will eventually lead to a significant increase in the proportion of unskilled workers.TECHNOLOGICALWith a strong telecommunications industry and a growing IT market, Argentina has shown significant growth in both sectors. The government has implemented plans to augment IT service penetration in rural areas. In addition, it has supported biofuel R&D in an effort to preserve energy security and accelerate technological development.Argentina’s energy industry is in a deplorable state as they are now a net energy importer, eroding the country’s foreign-currency reserves9. As a result, the government has shown an increasing interest in science and technology and in the biotechnology industry. However, as a result of  inadequate investment in R&D, there is a low degree of innovation resulting in a reduced numbe r of patents granted. Moreover, the lack of respect for intellectual property rights and copyrights has exacerbated the problem.LEGALArgentina has a comprehensive legal and regulatory structure and a federal republican representative government, where each province has its own constitution. In addition, complex and bureaucratic business regulations and strong union and government ties have resulted in wages increasing at 25-35% annual rates. Furthermore, high taxes have been detrimental to investment. For instance, income and corporate tax rates are both set at 35% added to corporate social security tax of between 23% and 27%. These additional costs place an undue burden in industry.Notwithstanding the introduction of criminal liability for money laundering offences, the judicial system requires an important overhaul to improve its effectiveness and to generate a conducive environment for new business ventures and investments.ENVIRONMENTALDespite having a remarkable biodiversity and vast natural resources, the Argentinian government has been overexploiting its natural resources as a side effect of the rapid economic development. Increasing deforestation and the destruction of natural habitats have been accelerated by soybean cultivation and beef production11. Water and air pollution are major problems, particularly around industrial metropolitan areas.Rising concerns over environmental degradation have resulted in ambitious schemes from the government to develop renewable energy sources. The government has initiated measures to collaborate with prominent multinational organisations to develop biofuel production with particular interest in ethanol from sugarcane pulp12. Moreover, the Argentine government, in partnership with Chinese investments is constructing the largest wind power project in Latin America and is projected to provide 4% of Argentina’s power requirements.

Online Bachelor Degree in Business Administration Think Tanks Offer Long-Term Career Options for Graduates 2019

International business professionals and researchers have formed a research project to understand economic competition and advancement of countries around the world. The Berkeley Roundtable on the International Economy (BRIE) conducts research, works with international business leaders, and produces influential publications about the international economy. BRIE and other think tanks offer exciting long-term career goals for online Bachelor Degree in Business Administration students. Online Bachelor Degree in Business Administration Students can Aspire to Serve on Think Tanks in their Areas of Interest Think tanks are typically funded by private or government sources to create advice and ideas on various subjects. They also encourage interaction between scientists and intellectuals to discover solutions to different problems. Online Bachelor Degree in Business Administration students may one day find interest in holding think thank positions, such as: Brookings Institution online bachelor degree in business administration positions. Heritage Foundation online bachelor degree in business administration positions. American Enterprise Institute online bachelor degree in business administration positions. Cato Institute online bachelor degree in business administration positions. 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Crafting a personalized business career, that may one day qualify a graduate to serve on a think tank, begins with choosing one of the following specialties: Online Bachelor Degree in Business Administration with an Accounting Emphasis Online Bachelor Degree in Business Administration with a Business Security and Assurance Emphasis Online Bachelor Degree in Business Administration with a Finance Emphasis Online Bachelor Degree in Business Administration with a Management of Information Systems Emphasis Serving on a think tank requires expertise and dedication to a business field of choice. 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The Moral Decline Of Teens And Youth - 903 Words

The moral decline in America with teens and youth is rapidly changing every day. Three main reasons would be social media, sexual publicity and doing more drugs. If you look back on the old days you can see how bad this world is coming too and the dangers we have ahead of us. People do not notice what has happen over the past 50 years because they do not believe it. Kids in this century are using website to hook up with random people just to have sex and other things. This needs to stop because it only going to get worse and by the time we try to fix it, it is going to be too late. Moral decline in teens has changed in a dramatic way and needs to fix before it gets worse. Social media is making teenagers have anxiety and lower their self esteem, the bad thing is that parents are doing anything about it because they do not want to hear them whine about it. This is becoming a big problem because teens are using tinder to meet up with strangers to have sex with them. Teens are trying t o do anything they can just to get some action and that is pitiful. The age restriction on tinder is 13 and anyone can get on there, they just have to change their age. Websites make it so easy for teens to use their websites to hook up and make sexual encounters with strangers. One day someone is going to do that and get their self killed by someone older than them or raped by the person they think they are meeting. Would you want that to happen to you? Therefore, Sexual publicity is anotherShow MoreRelatedMoral Decline in the United States Essay1526 Words   |  7 Pagesis not a moral decline going on. 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