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Article
Publication date: 1 June 2006

Angela J. Black

This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where macroeconomic…

3812

Abstract

Purpose

This paper aims to examine the relationship between the conditional variance of the factors from the Fama–French three‐factor model and macroeconomic risk, where macroeconomic risk is proxied by the conditional variance for a default risk premium and real gross domestic product (GDP) growth.

Design/methodology/approach

A generalised autoregressive conditional heteroscedastic model is used to generate the conditional volatilities and bivariate Granger causality tests are used to examine the empirical relationship between the risk measures.

Findings

Past values of the conditional variance for a default risk premium have information that is precedent to the conditional volatility for value premium and the small stock risk premium, and the conditional variance for the market risk premium has information about the future volatility of macroeconomic risk, as proxied by the conditional variance for GDP growth.

Research limitations/implications

The implications are that conditional volatility associated with default is related to current and future volatility in value premium; however, volatility associated with the market risk premium appears to be a predictor of future macroeconomic risk. A caveat is that the results are dependent on the proxies used for macroeconomic risk and more refined measures of macroeconomic risk may yield different results.

Practical implications

This paper suggests that examination of the relationship between the volatility of macroeconomic factors and the explanatory factors in asset‐pricing models will help to further understanding of the relationship between risk and expected return.

Originality/value

This paper focuses directly on the links between risk associated with the Fama–French factors and macroeconomic risk. This added knowledge is beneficial to practitioners and academics whose interest lies in asset price modelling.

Details

Managerial Finance, vol. 32 no. 6
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 25 May 2010

Sulaiman Mouselli

The aim of this paper is twofold. First, it aims to provide better understanding for the main sources behind the value premium in the UK. Second, given that the value factor (HML…

Abstract

Purpose

The aim of this paper is twofold. First, it aims to provide better understanding for the main sources behind the value premium in the UK. Second, given that the value factor (HML) in the Fama‐French three‐factor model is itself a proxy for value premium, this paper seeks to illustrate the component of HML responsible for explaining UK portfolio returns.

Design/methodology/approach

For the period July 1991 to June 2006, value premium is broken into two components: one is related to small stocks and the other to big stocks. Then monthly time‐series regressions are used to test which component of value premium provides better explanatory power for UK portfolio returns.

Findings

The empirical results indicate that the value premium in average returns is due to small market capitalization stocks. Moreover, value stocks do not seem riskier than growth stocks according to their market beta. Furthermore, the significance of the value factor (HML) in explaining UK portfolio returns is mainly due to its small stock component (HMLS). The paper suggests a revision for the Fama‐French three‐factor model that replaces HML by HMLS.

Originality/value

Academics are interested in understanding the main sources of value premium and the reasons behind the significance of the value factor in explaining UK portfolio returns. Investors and fund managers who wish to exploit the value premium will tilt their portfolios towards value stocks that have low‐market capitalization. Both academics and practitioners may consider altering the Fama‐French model, as suggested by the paper, when estimating the cost of capital.

Details

The Journal of Risk Finance, vol. 11 no. 3
Type: Research Article
ISSN: 1526-5943

Keywords

Article
Publication date: 19 April 2023

Hyejin Cho and Yoon-Suk Baik

The purpose of this paper is to provide an understanding of how backward intelligence and forward-looking intelligence interact and impact decision making in the context of…

Abstract

Purpose

The purpose of this paper is to provide an understanding of how backward intelligence and forward-looking intelligence interact and impact decision making in the context of acquisitions. Past experiences provide essential information used for decision making, however, the ex ante nature of premiums, which require forward-looking intelligence, can change how experience is utilized.

Design/methodology/approach

The authors utilize a fixed effects model to examine acquisitions conducted by US public firms during the period of 1993–2015.

Findings

The authors find that as past acquisition returns increase, acquirers are likely to adopt a backward-looking perspective of past performance that leads to higher premiums, as opposed to a forward-looking perspective of consequences. The relationship between past performance and premium is moderated by differences in the target's industry and the target's slack levels relative to the acquirer. The study findings suggest that forward-looking intelligence can alter attention and ultimately behavior based on backward-looking intelligence. By focusing on how these two contrasting perspectives interact, our findings extend research on the tension between backward-looking and forward-looking logics of decision making.

Originality/value

Unlike extant literature of acquisition premiums that have mainly focused on the valence and magnitude of experience, the authors focus on how backward-looking decision behavior changes when the firm's expectations of the future are incorporated. The authors empirically demonstrate how a lower acquisition premium is achieved when the decision of how much to pay is an interaction of the past and the future.

Details

Journal of Strategy and Management, vol. 16 no. 3
Type: Research Article
ISSN: 1755-425X

Keywords

Article
Publication date: 11 August 2023

Hoang Tran Phuoc Mai Le, Tianbao Ren and Jungkun Park

This paper aims to investigate the key characteristics of parent brands and the relationships among customer perceived value (a second-order construct containing financial…

Abstract

Purpose

This paper aims to investigate the key characteristics of parent brands and the relationships among customer perceived value (a second-order construct containing financial, functional, individual and social attributes), parent brand loyalty and the willingness to pay for a premium extended brand. Moreover, the moderating effect of self–brand integration on the influences in the model is examined.

Design/methodology/approach

Data were collected in two countries, the USA (n = 535) and China (n = 511), through an online survey. Structural equation modeling and a multi-group analysis were used to analyze the data.

Findings

The results show that perceived quality and premium brand authenticity are two important predictors of perceived value. The relationships among perceived value, parent brand loyalty and willingness to pay for an extended premium brand were significantly supported. In addition, self–brand integration was found to moderate the relationship between perceived value and loyalty to the parent brand.

Practical implications

Wine marketers and managers can use recommendations to establish effective brand extension strategies to help the industry know what essential characteristics of a parent brand to focus on and maintain sustainable development through the customer–extended brand relationship.

Originality/value

Previous researchers have discussed wine consumption behaviors or branding strategies. By limiting combining two theories (flow theory and the theory of planned behavior), this paper proposes a chain of behaviors to optimize customer experience to develop a brand extension strategy based on key characteristics of the parent brand.

Details

International Journal of Wine Business Research, vol. 35 no. 4
Type: Research Article
ISSN: 1751-1062

Keywords

Open Access
Article
Publication date: 16 May 2023

Noora Arantola and Mari Juntunen

This study aims to increase the understanding of the emergence of a values-based (VB) premium private label (PL) brand reputation within a multiple-tier PL brand portfolio in…

23589

Abstract

Purpose

This study aims to increase the understanding of the emergence of a values-based (VB) premium private label (PL) brand reputation within a multiple-tier PL brand portfolio in retailing.

Design/methodology/approach

By building on the research on PLs, brand image, brand reputation and consumer values, this study creates a conceptual foundation for the emergence of VB PL brand reputation within a multiple-tier brand portfolio among consumers and examines the emergence of such reputation empirically using interpretive exploratory qualitative laddering interviews in the context of fast-moving consumer goods.

Findings

The findings of this study illustrate that the VB reputations of the premium PL product brand and the PL brand store intertwine, ultimately relating to two terminal values: pleasure and doing good. These reputations differ remarkably from the VB reputations of the economy PL brand and the umbrella brand of the retail chain (not doing good and financial security).

Research limitations/implications

This study explains the emergence of VB brand reputation within a multiple-tier brand portfolio and introduces the use of the laddering technique in such research.

Practical implications

This study reminds brand managers to carefully design the relevant brand strategy for brands and their relationships under a brand umbrella.

Originality/value

Although much is known about PL brands and brand reputation, to the best of the authors’ knowledge, this study might be the first to increase the understanding of how a VB premium PL brand reputation emerges and accumulates from brand images within a multiple-tier brand portfolio.

Details

Journal of Product & Brand Management, vol. 32 no. 7
Type: Research Article
ISSN: 1061-0421

Keywords

Article
Publication date: 26 January 2023

Ralf Bebenroth and Kashif Ahmed

In this paper, the knowledge-based view of the firm is applied to theoretically elucidate and empirically examine the influence of target industry growth on premium payments in…

Abstract

Purpose

In this paper, the knowledge-based view of the firm is applied to theoretically elucidate and empirically examine the influence of target industry growth on premium payments in cross-border acquisitions. This study aims to extend internally driven Mergers and Acquisitions research efforts of acquirers to industry contingencies of targets by analyzing cross-border acquirers located within the group of seven (G7) countries.

Design/methodology/approach

This study’s investigation covers 209 cross-border acquisitions from 2012 to 2019 undertaken by firms located within the G7 countries. This paper used generalized estimation equations method to test the hypotheses applying Gaussian distribution for the dependent variable, an identity link function, exchangeable correlation structure and robust standard errors.

Findings

This study’s results reveal that target industry growth determines premiums. Furthermore, this study shows that acquirer industry growth, as well as acquirer slack, moderates this relationship. This study is built on the notion that industry contingencies influence premiums even when target firms are based in foreign countries.

Originality/value

To the best of the authors’ knowledge, unlike other studies, this is the first to explicitly focus on premiums for multiple cross-border acquisitions by hand selecting nine years of industry sale figures for 53 industries separately in each of the G7 nation countries (leading to 371 separate downloads of data samples). This study contends that industry growth of cross-border targets matters for premium payments.

Details

Multinational Business Review, vol. 31 no. 2
Type: Research Article
ISSN: 1525-383X

Keywords

Open Access
Article
Publication date: 16 August 2022

Christopher N. Boyer and Andrew P. Griffith

Livestock Risk Protection (LRP) insurance can reduce losses from price declines for cattle producers, but LRP adoptions has been limited. In 2019 and 2020, LRP subsidies were…

1851

Abstract

Purpose

Livestock Risk Protection (LRP) insurance can reduce losses from price declines for cattle producers, but LRP adoptions has been limited. In 2019 and 2020, LRP subsidies were increased to lower the cost, but it is unclear how much these changes lowered the cost. The objective of this research was to estimate the impact of the subsidy increase on the cost of LRP for feeder and fed cattle by month and for various insurance period lengths and levels.

Design/methodology/approach

The authors collected United States LRP offering data from 2017 to 2021. The authors estimated separate generalized least squares regression for feeder cattle and fed cattle with producer premium as the dependent variable. Independent variables were dummy variables for coverage level, insurance period, month and year as well as dummy variables in commodity years 2019 and 2020 when the LRP subsidy was increased.

Findings

The authors found the subsidy increases did reduce the cost of LRP policies for feeder and fed cattle LRP policies. Producer premiums for feeder cattle LRP polices have declined between $1.41 to $1.90 per cwt and $0.95 to $1.56 per cwt for fed cattle LRP policies depending on the coverage level. Results indicate these subsidy increases did lower the LRP premium costs to producers.

Originality/value

Results show policy implications from the subsidy increases and will be informative to producers when exploring the cost of LRP. This study extends the literature by estimating the reduction in subsidy costs while considering total premiums changed.

Details

Agricultural Finance Review, vol. 83 no. 2
Type: Research Article
ISSN: 0002-1466

Keywords

Article
Publication date: 5 September 2022

Joseph Oscar Akotey, Godfred Aawaar and Nicholas Addai Boamah

This research explores to answer the question: What accounts for the substantial underwriting losses in the Ghanaian insurance industry?

Abstract

Purpose

This research explores to answer the question: What accounts for the substantial underwriting losses in the Ghanaian insurance industry?

Design/methodology/approach

Thirty-four (34) insurers' audited financial reports covering the period of 2007 to 2017 were analysed through dynamic panel regression to uncover the underlying causes of high underwriting losses in the Ghanaian insurance industry.

Findings

The findings indicate that efforts at increasing market share by overtrading add no value to insurers underwriting profitability. The underwriting risk suggests that the industry charges disproportionately too small premiums for the risks it underwrites. This may indicate under-pricing by some insurers to grow their customer base.

Practical implications

The findings have implications for managerial efficiency and risk management structures that align compensation with underwriting efficiency.

Originality/value

The association between managerial preference and the underwriting performance of insurers in emerging markets has rarely been researched. This study responds to this knowledge challenge.

Details

African Journal of Economic and Management Studies, vol. 14 no. 1
Type: Research Article
ISSN: 2040-0705

Keywords

Article
Publication date: 1 October 2000

Ali Fatemi and Jan Pieter Krahnen

Outlines the special characteristics of preferred shares in Germany, notes that ordinary shares are valued at substantially higher figures and presents a study of the pricing of…

Abstract

Outlines the special characteristics of preferred shares in Germany, notes that ordinary shares are valued at substantially higher figures and presents a study of the pricing of both types for 58 German companies 1990‐1993. Refers to previous research to develop hypotheses on reasons for the common share premium and an explanatory model which is then applied to the data. Finds that larger premiums are associated with higher ownership concentration and lower trading but not to the proportion carrying voting rights or the cumulative preferred dividends in arrears; and that they are significantly reduced if a family or financial institution is a major shareholder. Goes on to show that where a family is the largest blockholder the premium increases with liquidity but for a financial institution, liquidity reduces the premium. Considers the underlying reasons for this and consistency with other research.

Details

Managerial Finance, vol. 26 no. 10
Type: Research Article
ISSN: 0307-4358

Keywords

Article
Publication date: 17 June 2019

John Forth and Alex Bryson

The literature on the union wage premium is among the most extensive in labour economics but unions’ effects on other aspects of the wage-effort bargain have received much less…

Abstract

Purpose

The literature on the union wage premium is among the most extensive in labour economics but unions’ effects on other aspects of the wage-effort bargain have received much less attention. The purpose of this paper is to contribute to the literature through a study of the union premium in paid holiday entitlements.

Design/methodology/approach

The authors examine the size of the union premium on paid holidays over time, with a particular focus on how the premium was affected by the introduction of a statutory right to paid holidays. The data come from nationally representative surveys of employees and workplaces.

Findings

The authors find that the union premium on paid holidays is substantially larger than the union premium on wages. However, the premium fell with the introduction of a statutory minimum entitlement to paid leave.

Originality/value

This is the first study to examine explicitly the interaction between union representation and the law in this setting. The findings indicate the difficulties that unions have faced in protecting the most vulnerable employees in the UK labour market. The authors argue that the supplanting of voluntary joint regulation with statutory regulation is symptomatic of a wider decrease in the regulatory role of unions in the UK.

Details

Journal of Participation and Employee Ownership, vol. 2 no. 1
Type: Research Article
ISSN: 2514-7641

Keywords

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