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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…

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

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Article
Publication date: 12 October 2012

Doina C. Chichernea, Anthony D. Holder and Jie (Diana) Wei

The purpose of this paper is to investigate the connection between the accrual quality and the growth/value characteristics (and their return premia) at firm level.

Abstract

Purpose

The purpose of this paper is to investigate the connection between the accrual quality and the growth/value characteristics (and their return premia) at firm level.

Design/methodology/approach

The paper employs a battery of univariate and multivariate cross‐sectional tests. Fama‐MacBeth regressions with main effects and interaction effects are used to identify the relation between accrual quality, book‐to‐market and returns. The analysis is conducted on the overall sample, as well as after conditioning on up and down markets.

Findings

Value (growth) stocks are more likely to be associated with high (low) accrual quality. Value stocks earn higher returns mainly in down markets, while poor accrual quality firms have significantly higher returns during up markets, but significantly lower returns during down markets. There is a significant interaction effect between accrual quality and the value premium, which only exhibits in the down markets (i.e. stocks with poor accrual quality earn a higher value premium in down markets than stocks with good accrual quality).

Originality/value

Results in this paper help disentangle between various explanations proposed for the accrual quality premium and the value premium. These findings are consistent with the idea that the same underlying risk factor generating the value premium also generates the cross‐sectional variation in accrual quality responsible for the accrual quality premium. From the corporate managers' perspective, the results imply that value firms can mitigate their higher costs of capital by providing high quality of accounting information. From an analyst's perspective, the study suggests that considering both accrual quality and growth characteristics can help make better portfolio allocation decisions than when these are considered separately.

Details

Managerial Finance, vol. 38 no. 12
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 11 December 2019

Weichen Teng

Although trading stamps were popular in the USA and are still popular in some countries, few studies have investigated why customers are willing to participate in the…

Abstract

Purpose

Although trading stamps were popular in the USA and are still popular in some countries, few studies have investigated why customers are willing to participate in the promotional campaign despite the inconvenience of accumulating and storing stamps. The purpose of this paper is to examine the factors influencing customer participation in trading stamp campaigns.

Design/methodology/approach

Through an extensive literature review, a research model was proposed and its validity evaluated through structural equation modeling. An empirical investigation using a questionnaire survey was conducted among Taiwanese consumers.

Findings

The functional value of premiums and the enjoyment value of a campaign will directly entice a customer to participate, whereas a customer’s purchase intention will be enhanced due to the functional and emotional values of the premiums, social influence of the campaign and motivation to help others obtain premiums through gift-giving. However, the perceived effort to accumulate stamps will inhibit a customer from participating.

Research limitations/implications

The possibility of sampling bias may limit the applicability of the findings.

Practical implications

Effective trading stamp campaigns can be implemented by the careful design of premiums to emphasize their functional and emotional values and by emphasizing enjoyment and social values of the campaign.

Originality/value

This study aims to pioneer the application of the consumption value model in discussing trading stamp campaigns to fill the gap in marketing research. Another goal is to help retailers design successful campaigns.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 33 no. 1
Type: Research Article
ISSN: 1355-5855

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Article
Publication date: 2 September 2014

Mauricio Palmeira

The main aim of this paper is to examine the role of brand reputation on the impact of value product on perceptions of a premium product from the same brand. As a…

Abstract

Purpose

The main aim of this paper is to examine the role of brand reputation on the impact of value product on perceptions of a premium product from the same brand. As a secondary goal, it tests and extends existing findings from judgment tasks to a choice task.

Design/methodology/approach

Two online experiments are presented. In Study 1 (1a and 1b), participants provided quality and price judgments to products. Brand reputation was manipulated by comparing common store brands to non-store brands (Study 1a) and to upscale store brands (Study 1b). In Study 2, we examined whether findings indicating a positive effect of a value store brand on a premium store brand extends to a choice context. Participants made choices between a premium store brand and a national brand in the presence of either a value store brand or a value national brand.

Findings

It was found that brand reputation plays an important role in the interplay of products in line extensions. While the positive impact of a value brand on a premium brand is at its strongest level for a regular store brand, it still has a moderate size for a non-store brand without a defined reputation, as well as for an upscale store brand. Second, using a choice task, we reject an important rival explanation for the impact of a value store brand on a premium store brand observed in previous research.

Research limitations/implications

The authors have focused on consumers’ expectations of products. While research has shown that these expectations play an important role in evaluations, future research may directly examine perceptions after consumption. The findings also offer an opportunity for future research to examine the differences in perceptions between store and non-store brands at different positioning levels, as well as other factors that affect brand reputation.

Practical implications

The findings have two practical implications. First, our results indicate that when a manufacturer produces two products in the same category at different levels of quality, there is some benefit in letting consumers know about this relationship. The authors consistently found no negative impact on the brands and often a positive impact on the premium brand. While effects are stronger for common store brands, they are likely to emerge for any type of brand, albeit weaker.

Originality/value

This paper contributes to the nascent literature on multi-tier brands and vertical extensions in several ways. First, the role of brand reputation was examined and how it interacts with positioning in line extension context. Second, we show that the effect of a value brand on a premium brand is stronger for store brands, but still existent for non-store brands. These results offer implications for practice and open opportunities for future research on multi-tier store brands.

Details

European Journal of Marketing, vol. 48 no. 9/10
Type: Research Article
ISSN: 0309-0566

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Article
Publication date: 1 July 2014

Graeme Newell, John MacFarlane and Roger Walker

Green office buildings have recently taken on increased significance in institutional property portfolios in Australia and globally. The key issue from an institutional…

Abstract

Purpose

Green office buildings have recently taken on increased significance in institutional property portfolios in Australia and globally. The key issue from an institutional investor perspective is the assessment of whether green office buildings add value. Using an extensive portfolio of green office buildings, the purpose of this paper is to empirically assess the level of energy rating premiums in the property performance of green office buildings in Australia.

Design/methodology/approach

Using a portfolio of over 200 green office buildings in Australia benchmarked against a comparable portfolio of non-green office buildings, the level of energy rating premiums in the property performance of green office buildings in Australia is empirically evaluated. Hedonic regression analysis is used to account for differences between specific office buildings and to explicitly identify the “pure” green effect in identifying the level of energy rating premiums in several commercial property performance characteristics (e.g. office value, rent).

Findings

The empirical results show the added-value premium of the 5-star National Australian Built Environment Rating Scheme (NABERS) energy rating scheme and the Green Star scheme in the property performance of green office buildings in Australia, including office values and rents. Energy rating premiums for green office buildings are evident at the top energy ratings and energy rating discounts at the lower energy ratings. The added-value “top-end” premium of the 5-star vs 4-star NABERS energy rating category is clearly identified for the various property performance parameters, including office values and rents.

Practical implications

This paper empirically determines the presence of energy rating premiums at the top energy ratings in the performance of green office buildings, as well as energy rating discounts at the lower energy ratings. This clearly highlights the added value dimension of energy efficiency in green office buildings and the need for the major office property investors to prioritise the highest energy rating to facilitate additional property performance premiums. This will also see green office buildings become the norm as the market benchmark rather than non-green office buildings.

Social implications

This paper highlights energy performance premiums for green office buildings. This fits into the context of sustainability in the property industry and the broader aspects of corporate social responsibility in the property industry.

Originality/value

This paper is the first published property research analysis on the detailed determination of energy rating premiums across the energy rating spectrum for green office buildings in Australia. Given the increased focus on energy efficiency and green office buildings, this research enables empirically validated and practical property investment decisions by office property investors regarding the importance of energy efficiency and green office buildings, and the priority to achieve the highest energy rating to maximise property performance premiums in office values and rents.

Details

Journal of Property Investment & Finance, vol. 32 no. 4
Type: Research Article
ISSN: 1463-578X

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Article
Publication date: 9 May 2016

James Foye

This paper aims to provide a comprehensive analysis of whether stock returns in Europe are best characterized by country-specific or Europe-wide versions of widely used…

Abstract

Purpose

This paper aims to provide a comprehensive analysis of whether stock returns in Europe are best characterized by country-specific or Europe-wide versions of widely used factor models.

Design/methodology/approach

To estimate the cost of equity in Europe, both region-wide and nationally, the Fama and French (2012) three-factor and Carhart (1997) four-factor models are used.

Findings

The results show that although the value and momentum premiums are present on a Europe-wide basis, the size premium is country-specific.

Originality/value

The paper offers an explanation to the puzzle of why Fama and French (2012) detect value and momentum premiums but no size premium in Europe. Furthermore, the results shed new light on these premiums and present a challenge to existing applications of widely used factor models.

Details

Review of Accounting and Finance, vol. 15 no. 2
Type: Research Article
ISSN: 1475-7702

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Article
Publication date: 1 November 2003

Angela J. Black and Patricia Fraser

Using data from the stock markets of Japan, the UK and the US, this paper examines thetime series properties of a price index derived from a zero net investment strategy…

Abstract

Using data from the stock markets of Japan, the UK and the US, this paper examines the time series properties of a price index derived from a zero net investment strategy of buying value stocks and short selling growth stocks. We use the results of this analysis to consider implications for the validity of competing hypotheses on the source of the value premium. Overall, the results from this study indicate that the US value premium displays different characteristics to the value premiums for the UK and Japan. This has farreaching implications for financial modelling and for the success, or otherwise, of investment strategies based on the existence of a value premium.

Details

Managerial Finance, vol. 29 no. 10
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 10 May 2011

Julia Chou, Praveen Kumar Das and S.P. Uma Rao

The purpose of this paper is to investigate the seasonal effect in the value premium puzzle. It studies whether the book‐to‐market effect is an outcome of the January…

Abstract

Purpose

The purpose of this paper is to investigate the seasonal effect in the value premium puzzle. It studies whether the book‐to‐market effect is an outcome of the January effect observed among stock returns.

Design/methodology/approach

The paper uses returns of portfolios based on size and BE/ME ratios as Fama and French suggest to define value premium and investigate the seasonality of the BE/ME effect. The paper tests whether the value premiums observed among large and small stocks are different in January and non‐January months. It examines the turn‐of‐the‐year effect on the value premium by analyzing the returns of BE/ME portfolios during the first and last ten trading days of a calendar year.

Findings

Empirical evidence supports the fact that value premium has different patterns in January and non‐January months for large and small capitalization firms. It was found that large stocks have a significant value premium only in January and this high January value premium among large stocks is mainly driven by loser stocks at the turn of the year. In contrast with large stocks, the value premium of small stocks occurs only in non‐January months.

Originality/value

This paper shows that value premium of large and small stocks are different in January and non‐January months. Furthermore, the past performance of stocks plays a key role in the observed January value premium among large stocks. Finally, this study provides evidence to show that the value premium among large stocks may be explained by investor trading behavior.

Details

Managerial Finance, vol. 37 no. 6
Type: Research Article
ISSN: 0307-4358

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Article
Publication date: 4 November 2013

Nadine Gatzert

In financial planning, customers are typically confronted with choosing a premium payment scheme when investing in a mutual fund, which is often equipped with an…

Abstract

Purpose

In financial planning, customers are typically confronted with choosing a premium payment scheme when investing in a mutual fund, which is often equipped with an investment guarantee to provide downside protection. Guarantee costs may thereby also be charged differently depending on the provider. The paper aims to investigate the impact of the premium payment method on different performance measures for a mutual fund with an investment guarantee.

Design/methodology/approach

The paper compares a fund with annual and upfront premiums as well as constant guarantee costs versus the guarantee price as an annual percentage fee of the fund value, always ensuring that the present value of premium payments is the same for all product variants. The paper further studies the relevance of the guarantee level and the contract term.

Findings

The results emphasize that even though the present value of premiums paid into the contract is the same, the type of premium (upfront versus annual) as well as the type of guarantee cost (upfront versus annual fee) has a considerable impact on the performance.

Practical implications

Providers can thus make a product more attractive for consumers by individually adjusting the premium scheme depending on their preferences and by making the resulting risk-return-profile transparent, while keeping the other contract characteristics unchanged (e.g. extent of the guarantee).

Originality/value

To date, there has been no comprehensive analysis with specific focus on the impact of different premium payment schemes (in particular with respect to savings premiums and guarantee costs) on risk and return of a mutual fund with otherwise given contract characteristics such as the underlying fund strategy and the investment guarantee, even though the premium scheme itself can already have a considerable impact on the terminal payoff distribution and thus risk-return profiles. In addition, such an analysis can provide important information for consumers and providers in designing and choosing attractive products by simply adjusting the premium scheme (if possible) instead of or in addition to changing other product features.

Details

The Journal of Risk Finance, vol. 14 no. 5
Type: Research Article
ISSN: 1526-5943

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Article
Publication date: 3 July 2009

Kandapa Thanasuta, Thanyawee Patoomsuwan, Vanvisa Chaimahawong and Yingyot Chiaravutthi

The purpose of this paper is to quantify the value of brands and countries of origin in monetary units. The automobile industry in Thailand is chosen because of the…

Abstract

Purpose

The purpose of this paper is to quantify the value of brands and countries of origin in monetary units. The automobile industry in Thailand is chosen because of the variety of brands and the intense competition within the industry. Both the pick up truck and passenger car market shares have been dominated by Japanese brands for decades, whilst the luxury market has been dominated by German brands.

Design/methodology/approach

The data are collected from an authors' survey carried out during the “Thailand International Motor Expo 2007”. A total of 244 models are chosen from 20 brands, and from 7 countries of origin. The hedonic price model is applied to ascertain the price premiums of these different brands, taking into account their countries of origin, since each automobile brand offers several models with distinguishably different features.

Findings

The results indicate that different brand names affect consumers' “Willingness to Pay,” in which Mercedes, BMW, and Audi brands are ranked the highest. Surprisingly, Subaru, Mitsubishi and Toyota are the only Japanese brands to have significant brand values. The findings also illustrate a direct relationship between market acceptance and the price premium for automobiles in the luxury car segment, however the same relationship does not hold true for the cars in economy car segment. It seems that Thai consumers put the highest value on cars from Germany, whilst cars from Japan and the USA possess approximately the same value. Korean and Malaysian cars, which focus on low‐prices as a means to obtain a competitive advantage, are as to be expected ranked last. An association was found between countries' GDP per capita and the price premium. Countries with a lower GDP per capita show lower price premiums and vise versa. The exception is Germany, which has a low GDP per capita yet has a higher price premium than the better ranked GDP countries such as the USA

Research limitations/implications

Though the German brands are ranked the highest, competition in the car industry is likely to be intense, since their premiums are not noticeably different. Additionally, there are implications regarding entry barriers for new automobile brands from the same or different countries. These entry barriers are considered to be quite high, as the brand premiums could represent more than 25 percent of the car prices, at least for the compact car segment. A strategy of discounted price penetration is therefore recommended for a brand which is new to the market, and which does not originate from a highly regarded country. For existing brands with below average values, a customer‐based approach is recommended in which those brands improve the attributes in order to create higher premiums.

Originality/value

In addition to confirming the relationship between the price premiums of brands and their countries of origin, this paper successfully provides valuations in monetary units and rankings accordingly. This research could be useful to both incumbents and new entrants, when designing their pricing strategies.

Details

Asia Pacific Journal of Marketing and Logistics, vol. 21 no. 3
Type: Research Article
ISSN: 1355-5855

Keywords

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