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Book part
Publication date: 18 July 2016

Matthew Lindsey and Robert Pavur

Research in the area of forecasting and stock inventory control for intermittent demand is designed to provide robust models for the underlying demand which appears at…

Abstract

Research in the area of forecasting and stock inventory control for intermittent demand is designed to provide robust models for the underlying demand which appears at random, with some time periods having no demand at all. Croston’s method is a popular technique for these models and it uses two single exponential smoothing (SES) models which involve smoothing constants. A key issue is the choice of the values due to the sensitivity of the forecasts to changes in demand. Suggested selections of the smoothing constants include values between 0.1 and 0.3. Since an ARIMA model has been illustrated to be equivalent to SES, an optimal smoothing constant can be selected from the ARIMA model for SES. This chapter will conduct simulations to investigate whether using an optimal smoothing constant versus the suggested smoothing constant is important. Since SES is designed to be an adapted method, data are simulated which vary between slow and fast demand.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-1-78635-534-8

Keywords

Article
Publication date: 30 September 2022

Hend Monjed, Salma Ibrahim and Bjørn N. Jørgensen

The purpose of this study is to examine the association between two reporting mechanisms used by managers to communicate risk information to the capital market: risk…

Abstract

Purpose

The purpose of this study is to examine the association between two reporting mechanisms used by managers to communicate risk information to the capital market: risk disclosure and earnings smoothing.

Design/methodology/approach

This study juxtaposes two competing hypotheses, the “opportunistic” and the “signaling”, and empirically investigates whether one dominates the other for a sample of large UK firms for the period 2005–2015. This study also uses the global financial crisis as an arguably exogenous shock on overall risk in the economy to investigate its effect on managers' joint use of textual risk disclosures and earnings smoothing.

Findings

This study finds that risk disclosure and earnings smoothing are negatively associated. This finding supports that managers with incentives to mask the firm’s true underlying risk through smoothing earnings provide lower levels of risk-related disclosures. This study documents that the trade-off between risk disclosure and earnings smoothing is more pronounced during the global financial crisis period than before and after the crisis period. Further, this study demonstrates a more negative association for firms with higher volatility of cash flows. This negative association is robust to various model specifications, additional corporate governance related controls and an alternative measure of earnings smoothing.

Originality/value

The findings provide new empirical evidence about the association between risk disclosure and earnings smoothing and support the opportunistic hypothesis, especially when firms are faced with increased risk.

Details

Review of Accounting and Finance, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1475-7702

Keywords

Article
Publication date: 30 March 2020

Noorhelyna Razali, Alias Jedi and Nuryazmin Ahmat Zainuri

Extrapolation is a process used to accelerate the convergence of a sequence of approximations to the true value. Different stepsizes are used to obtain approximate…

Abstract

Purpose

Extrapolation is a process used to accelerate the convergence of a sequence of approximations to the true value. Different stepsizes are used to obtain approximate solutions, which are combined to increase the order of the approximation by eliminating leading error terms. The smoothing technique is also applied to suppress order reduction and to dampen the oscillatory component in the numerical solution when solving stiff problems. The extrapolation and smoothing technique can be applied in either active, passive or the combination of both active and passive modes. In this paper, the authors investigate the best strategy of implementing extrapolation and smoothing technique and use this strategy to solve stiff ordinary differential equations. Based on the experiment, the authors suggest using passive smoothing in order to reduce the computation time.

Design/methodology/approach

The two-step smoothing is a composition of four steps of the symmetric method with different weights. It is used as the final two steps when combined with many steps of the symmetric method. The aim is to preserve symmetry and provide damping for stiff problem and to be more robust than the one-step smoothing. The two-step smoothing is L-stable. The new method is then applied with extrapolation process in passive and active modes to investigate the most efficient and accurate method of implementation.

Findings

In this paper, the authors constructed the two-step smoothing to be more robust than the one-step smoothing. The two-step smoothing is constructed to achieve as high order as possible and able to restore the classical order of particular method compared to the one-step active smoothing that is only able to achieve order-1 condition. The two-step smoothing for ITR is also superior in solving stiff case since it has the super-convergent order-4 behavior. In our experiments with extrapolation, it is proven that the two-step smoothing is more accurate and more efficient than the one-step smoothing, namely 1ASAX. It is also observed that the method with smoothing is comparable if not superior to the existing base method in certain cases. Based on the experiment, the authors would suggest using passive smoothing if the aim is to reduce computation time. It is of interest to conduct more experiment to validate the accuracy and efficiency of the smoothing formula with and without extrapolation.

Originality/value

The implementation of extrapolation on two-step symmetric Runge–Kutta method has not been tested on variety of other test problems yet. The two-step symmetrization is an extension of the one-step symmetrization and has not been constructed by other researchers yet. The method is constructed such that it preserves the asymptotic error expansion in even powers of stepsize, and when used with extrapolation the order might increase by 2 at a time. The method is also L-stable and eliminates the order reduction phenomenon when solving stiff ODEs. It is also of interest to observe other ways of implementing extrapolation using other sequences or with interpolation.

Details

International Journal of Structural Integrity, vol. 11 no. 4
Type: Research Article
ISSN: 1757-9864

Keywords

Article
Publication date: 21 June 2011

Mahdi Salehi and Nazanin Bashiri Manesh

The purpose of this paper is to investigate whether income smoothing does indeed improve the informativeness of stock prices about firms' future earnings and cash flows…

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Abstract

Purpose

The purpose of this paper is to investigate whether income smoothing does indeed improve the informativeness of stock prices about firms' future earnings and cash flows. Also an approach to studying the effects of income smoothing is presented.

Design/methodology/approach

This study uses data from 1992‐2006 and runs regressions on each of the 560 industry‐year cross‐sections. The data compiled from the financial statements of firms were collected for each year available from the Tehran Stock Exchange database. Income smoothing is defined as the management of accruals to reduce time‐series variation in income, and uses a cross‐sectional version of the Jones model, modified by Kothari, Leone and Wasley. Smoothing is measured as the variation of net income relative to the variation in CFO, or the correlation between changes in accruals and changes in CFO. Informativeness is measured as the coefficient on future earnings (cash flows) in a regression of current stock return against current and future earnings (cash flows and accruals).

Findings

The findings suggest that income smoothing enhances the information content of the effect of stock price on future earnings, thus improving the ability of market participants to make informed decisions about the allocation of capital resources.

Originality/value

Although previous research on the subject of income smoothing in an emerging market has been documented, its effect on stock prices efficiency is largely unknown. Thus, this paper presents an approach to studying the effects of income smoothing and the knowledge that the ability to manage earnings could improve stock prices efficiency could be useful for academics and policymakers in this market.

Details

Asian Journal on Quality, vol. 12 no. 1
Type: Research Article
ISSN: 1598-2688

Keywords

Book part
Publication date: 17 January 2009

Mark T. Leung, Rolando Quintana and An-Sing Chen

Demand forecasting has long been an imperative tenet in production planning especially in a make-to-order environment where a typical manufacturer has to balance the…

Abstract

Demand forecasting has long been an imperative tenet in production planning especially in a make-to-order environment where a typical manufacturer has to balance the issues of holding excessive safety stocks and experiencing possible stockout. Many studies provide pragmatic paradigms to generate demand forecasts (mainly based on smoothing forecasting models.) At the same time, artificial neural networks (ANNs) have been emerging as alternatives. In this chapter, we propose a two-stage forecasting approach, which combines the strengths of a neural network with a more conventional exponential smoothing model. In the first stage of this approach, a smoothing model estimates the series of demand forecasts. In the second stage, general regression neural network (GRNN) is applied to learn and then correct the errors of estimates. Our empirical study evaluates the use of different static and dynamic smoothing models and calibrates their synergies with GRNN. Various statistical tests are performed to compare the performances of the two-stage models (with error correction by neural network) and those of the original single-stage models (without error-correction by neural network). Comparisons with the single-stage GRNN are also included. Statistical results show that neural network correction leads to improvements to the forecasts made by all examined smoothing models and can outperform the single-stage GRNN in most cases. Relative performances at different levels of demand lumpiness are also examined.

Details

Advances in Business and Management Forecasting
Type: Book
ISBN: 978-1-84855-548-8

Book part
Publication date: 18 January 2022

Andrew B. Martinez, Jennifer L. Castle and David F. Hendry

We investigate whether smooth robust methods for forecasting can help mitigate pronounced and persistent failure across multiple forecast horizons. We demonstrate that…

Abstract

We investigate whether smooth robust methods for forecasting can help mitigate pronounced and persistent failure across multiple forecast horizons. We demonstrate that naive predictors are interpretable as local estimators of the long-run relationship with the advantage of adapting quickly after a break, but at a cost of additional forecast error variance. Smoothing over naive estimates helps retain these advantages while reducing the costs, especially for longer forecast horizons. We derive the performance of these predictors after a location shift, and confirm the results using simulations. We apply smooth methods to forecasts of UK productivity and US 10-year Treasury yields and show that they can dramatically reduce persistent forecast failure exhibited by forecasts from macroeconomic models and professional forecasters.

Details

Essays in Honor of M. Hashem Pesaran: Prediction and Macro Modeling
Type: Book
ISBN: 978-1-80262-062-7

Keywords

Book part
Publication date: 21 November 2014

Yixiao Sun

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual…

Abstract

New asymptotic approximations are established for the Wald and t statistics in the presence of unknown but strong autocorrelation. The asymptotic theory extends the usual fixed-smoothing asymptotics under weak dependence to allow for near-unit-root and weak-unit-root processes. As the locality parameter that characterizes the neighborhood of the autoregressive root increases from zero to infinity, the new fixed-smoothing asymptotic distribution changes smoothly from the unit-root fixed-smoothing asymptotics to the usual fixed-smoothing asymptotics under weak dependence. Simulations show that the new approximation is more accurate than the usual fixed-smoothing approximation.

Book part
Publication date: 16 September 2022

Peterson K. Ozili

Purpose: In this chapter, the author evaluates the association between bank loan loss provisions (LLP) and the pre-provisions earnings of UK banks during the first-wave of…

Abstract

Purpose: In this chapter, the author evaluates the association between bank loan loss provisions (LLP) and the pre-provisions earnings of UK banks during the first-wave of the COVID-19 pandemic. A positive co-movement between the two variables indicates income smoothing.

Methodology: Graphical analysis, correlation analysis and regression analysis are used to assess the relationship between income smoothing and bank provisions among UK systemic banks.

Findings: The findings show that LLP have an inverted V-shaped property during the first-wave of COVID-19 pandemic. LLP reached its highest level at the peak of the pandemic in Q2 2020 and declined in the subsequent quarters. The regression results show that LLP are positively related to pre-provisions earnings during the pandemic quarters and in the pre-pandemic quarters. The relationship is stronger in the pandemic quarters and indicates higher income smoothing in the pandemic quarters. The correlation results also show a strong positive correlation between bank provisions and pre-provisions earnings in the pandemic period. In the individual bank analysis, three of the four systemic banks exhibit higher income smoothing during the pandemic quarters.

Implication: UK systemic banks engaged in earnings management as a coping mechanism to mitigate the effect of the pandemic on their profits.

Need for the study/originality: This chapter is the first to provide a preliminary analysis of income smoothing among banks during the early stages of the COVID-19 pandemic.

Details

The New Digital Era: Other Emerging Risks and Opportunities
Type: Book
ISBN: 978-1-80382-983-8

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Article
Publication date: 1 April 2022

Can Ban, Na Na Pu, Yi Fei Zhang and Ma Wentao

This article aims to develop an accurate and efficient meshfree Galerkin method based on the strain smoothing technique for linear elastic continuous and fracture problems.

Abstract

Purpose

This article aims to develop an accurate and efficient meshfree Galerkin method based on the strain smoothing technique for linear elastic continuous and fracture problems.

Design/methodology/approach

This paper proposed a generalized linear smoothed meshfree method (LSMM), in which the compatible strain is reconstructed by the linear smoothed strains. Based on the idea of the weighted residual method and employing three linearly independent weight functions, the linear smoothed strains can be created easily in a smoothing domain. Using various types of basic functions, LSMM can solve the linear elastic continuous and fracture problems in a unified way.

Findings

On the one hand, the LSMM inherits the properties of high efficiency and stability from the stabilized conforming nodal integration (SCNI). On the other hand, the LSMM is more accurate than the SCNI, because it can produce continuous strains instead of the piece-wise strains obtained by SCNI. Those excellent performances ensure that the LSMM has the capability to precisely track the crack propagation problems. Several numerical examples are investigated to verify the accurate, convergence rate and robustness of the present LSMM.

Originality/value

This study provides an accurate and efficient meshfree method for simulating crack growth.

Details

Engineering Computations, vol. 39 no. 7
Type: Research Article
ISSN: 0264-4401

Keywords

Article
Publication date: 7 February 2022

Peterson K. Ozili

This paper examines the determinants of bank income smoothing using loan loss provisions in the United Kingdom or Great Britain from 1999 to 2017.

Abstract

Purpose

This paper examines the determinants of bank income smoothing using loan loss provisions in the United Kingdom or Great Britain from 1999 to 2017.

Design/methodology/approach

The study used ordinary least square (OLS) regression and applying the HAC robust standard error correction test.

Findings

The findings showed that UK banks use loan loss provision for income smoothing purposes. Income smoothing is greater in times of high economic policy uncertainty. The extent of bank income smoothing is reduced by foreign bank presence, UK GAAP adoption, IFRS9 adoption, and high levels of voice and accountability. Also, there is reduced income smoothing using loan loss provisions during a financial crisis and in periods of economic prosperity.

Research limitations/implications

The implication is that economic conditions, institutional governance and accounting disclosure rules can influence the extent of bank income smoothing in the United Kingdom. The findings of the study contribute to several studies that explore the determinants of bank income smoothing.

Originality/value

No study has extensively examined the determinants of bank income smoothing in Great Britain or the United Kingdom. The present study fills this gap in the literature.

Details

Journal of Economic and Administrative Sciences, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1026-4116

Keywords

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