Damage Awards Using Intermediate Term Government Bond Funds vs. U.S. Treasuries Ladder: Tradeoffs in Theory and Practice

2012 ◽  
Vol 23 (1) ◽  
pp. 1-31 ◽  
Author(s):  
Joseph I. Rosenberg ◽  
Rick R. Gaskins
Keyword(s):  
Theory And Practice ◽  
Alternative Methods ◽  
Present Value ◽  
Damage Awards ◽  
Practical Result ◽  
Future Earnings ◽  
Lump Sum ◽  
Earnings Losses ◽  
Ex Post ◽  
Finance Theory

Abstract Valuing damage awards for personal injury or wrongful death requires the application of finance theory to achieve a practical result. Methods for discounting future earnings losses fall into two major categories: Current market rates, which offer greater objectivity, and historical rates, which theoretically offer greater stability of results by averaging away the effect of often volatile “current” market conditions. The purpose of this paper is to provide a unique ex post comparison of damage awards using distinctive current and historical rates methods that highlight the inherent differences between the two major discounting alternatives. Current market rates methods are represented by a Treasury bond ladder with no instrument rollover, using initial market rates for both discounting and investing damage awards. Historical rates methods are represented by intermediate term government bonds; historical average five-year Treasury yields are used for discounting the damage award, with annual bond rollover required afterwards to maintain the award investment in comparable instruments, creating realized total returns from investing. These alternative methods are compared, ex ante in terms of the present value of the awards, and also ex post, in terms of how well each method's award, based on the same projected lost earnings, is able to support paydowns based on actual lost earnings. Key findings include: (a) both methods result in widely varying lump sum awards; (b) the idea that historical rates offer greater stability of results over time is empirically unsupportable; (c) that a good measure of methodological accuracy is the relative variance in award present values observed by first discounting and then subsequently investing under each method using the same instruments; (d) that different economic conditions greatly affect the relative ex post accuracy of each method; and (e) that neither method is very accurate in projecting present value of earnings losses upon ex post analysis.

A Confirmatory Investigation of a Job Demands-Resources Model Using a Categorical Estimator

2012 ◽  
Vol 111 (2) ◽  
pp. 528-544 ◽  
Author(s):  
Leon de Beer ◽  
Sebastiaan Rothmann ◽  
Jaco Pienaar
Keyword(s):  
Organizational Commitment ◽  
Structural Equation ◽  
Job Demands ◽  
Theory And Practice ◽  
Dual Process ◽  
Alternative Methods ◽  
Job Resources ◽  
Medium Effect ◽  
Economic Sectors ◽  
The Relationship

A confirmatory investigation of a job demands-resources model was conducted with alternative methods, in a sample of 15, 633 working adults aggregated from various economic sectors. The proposed model is in line with job demands-resources theory and assumes two psychological processes at work which are collectively coined “the dual process.” The first process, the energetic, presents that job demands lead to ill-health outcomes due to burnout. The second process, the motivational, indicates that job resources lead to organizational commitment due to work engagement. Structural equation modelling analyses were implemented with a categorical estimator. Mediation analyses of each of the processes included bootstrapped indirect effects and kappa-squared values to apply qualitative labels to effect sizes. The relationship between job resources and organizational commitment was mediated by engagement with a large effect. The relationship between job demands and ill-health was mediated by burnout with a medium effect. The implications of the results for theory and practice were discussed.

Lump-Sum versus Periodic Damage Awards

1981 ◽  
Vol 10 (1) ◽  
pp. 131-154 ◽  
Author(s):  
Samuel A. Rea,
Keyword(s):  
Damage Awards ◽  
Lump Sum

Vocational Qualifications in Britain and Europe: Theory and Practice(1)

1991 ◽  
Vol 136 ◽  
pp. 86-92 ◽  
Author(s):  
S.J. Prais
Keyword(s):  
Teacher Assessment ◽  
Theory And Practice ◽  
Alternative Methods ◽  
National Council ◽  
Large Measure ◽  
Proper Role ◽  
Vocational Qualifications ◽  
First Time ◽  
Vocational Testing

This Note considers three questions bearing on the reform of vocational qualifications in Britain, against the background of changes being introduced by the National Council for Vocational Qualifications. First, in what important respects did Britain need a reformed and centrally-standardised system of vocational qualifications? Secondly, what are the proper criteria for choosing between alternative methods of awarding qualifications? Much that is at issue hinges on the relative importance of externally-marked written tests as compared with practical tasks assessed by an instructor; the discussion and conclusions reached here in relation to vocational testing apply in large measure also to current debates in other contexts, such as the proper role of teacher-assessed coursework in school examinations at 16+ (GCSE) and the official teacher-assessment of pupils at age 7 (SATs) currently being administered in British schools for the first time. Our third question is: in what significant ways do Continental systems of awarding qualifications differ from those now proposed for Britain?

scholarly journals AN ACTUARIAL APPROACH TO ASSESSING PERSONAL INJURY COMPENSATIONS IN SINGAPORE: THEORY AND PRACTICE

2010 ◽  
Vol 55 (04) ◽  
pp. 705-731
Author(s):  
FELIX W. H. CHAN ◽  
WAI-SUM CHAN ◽  
JOHNNY S. H. LI
Keyword(s):  
Theory And Practice ◽  
Personal Injury ◽  
Time Value Of Money ◽  
Stochastic Mortality ◽  
Time Value ◽  
Lump Sum ◽  
Actuarial Approach ◽  
Clean Break ◽  
Real Returns ◽  
Value Of Money

In Singapore personal injury litigations, successful claimants usually receive their compensations as a lump sum. The main advantage of a lump sum payment is that the proceedings can be concluded with a 'clean break' between the parties. The lump sum is a result of discounting the future pecuniary values into a single present-day amount, considering the time value of money and the claimant's mortality. Conventionally, lump sum awards are determined by making reference to a spread of amounts in comparable cases. However, a fairer method would be one that involves input from not only lawyers but also other experts including economists and actuaries. This study, which is carried out by an inter-professional working group, provides a set of actuarially computed tables for use in personal injury settlements in Singapore. The calculations involve a consideration of recent advancements in stochastic mortality modeling and an empirical study on the econometrics of real returns on risk-free assets in Singapore. We then present two recent personal injury cases in Singapore, aiming at helping the Singapore legal profession understand and use the economic principles with actuarial tables, and educating economists and actuaries the legal concerns and concepts in personal injury cases.

An empirical analysis of the dynamic relation among investment, earnings and dividends

2014 ◽  
Vol 40 (2) ◽  
pp. 118-136
Author(s):  
Richard A. DeFusco ◽  
Lee M. Dunham ◽  
John Geppert
Keyword(s):  
Capital Markets ◽  
Research Question ◽  
Alternative Methods ◽  
Striking Difference ◽  
Sample Period ◽  
Firm Level ◽  
Content Type ◽  
Future Earnings ◽  
Long Run ◽  
The Universe

Purpose – The purpose of this paper is to examine the dynamic relationships among investment, earnings and dividends for US firms. The sample period is 1950-2006. Design/methodology/approach – The authors use a firm-level vector auto-regression (VAR) framework to examine the firm-level dynamics among investment, earnings and dividends. The firm-level VAR yields Granger causality results, impulse response functions, and variance decompositions characterizing the dynamics of these three variables at the firm level. Findings – For the average firm in the sample, Miller and Modigliani dividend policy irrelevance is not supported, even in the long run; the shocks to dividends do have long-run consequences for investment and vice versa. Dividend changes are an ineffective signal of future earnings in both the short and long-term. The cost of an increased dividend is on average an immediate decrease of $3 in investment for every dollar increase in dividends and the effect is persistent up to six years after the increase in dividends. Research limitations/implications – The firm-level VAR used in the study requires that sample firms have long histories of investment, earnings and dividend data. The study addresses the interaction between dividends and investment and therefore necessitates examining dividend-paying firms. By the nature of the research question, the sample firms will not be representative in all respects to the universe of firms. The most striking difference between the sample and the universe of firms is firm size. As such, the study's conclusions are most applicable to larger, stable, dividend-paying firms. The study is also limited to dividend payout. Alternative payout policies, such as share repurchases, are not considered in this work. Practical implications – In theory, increases in dividends can signal higher future earnings; however, the evidence does not support this hypothesis. When capital markets are constrained or incomplete, increases in dividends come at a cost to investment. Firms should consider alternative methods of signaling future earnings that have less of an impact on investment. Investors should carefully evaluate the possible impact of an increase in dividends on investment and future earnings growth. Originality/value – This study is the first to examine the dynamics of earnings, dividends and investment at a firm level and over such a long sample period. By including the dynamics of earnings, the authors emphasize the potential opportunity costs that increasing dividends has on investment when capital markets are imperfect. The dynamic system also allows the authors to consider long-run effects as well as immediate responses to system shocks.

Regulating prices and profits in utility industries in low‐income economies

2005 ◽  
Vol 18 (3) ◽  
pp. 241-255 ◽  
Author(s):  
David Parker ◽  
Colin Kirkpatrick
Keyword(s):  
Low Income ◽  
Theory And Practice ◽  
Alternative Methods ◽  
Rate Of Return ◽  
Low Income Countries ◽  
Price Cap Regulation ◽  
Price Cap ◽  
Content Type ◽  
Sliding Scale ◽  
Return Regulation

PurposeThe aim of the paper is to examine alternative methods of regulating prices and/or profits of privatised utilities in low‐income countries with a view to identifying their strengths and weaknesses.Design/methodology/approachThe economics of regulation literature has favoured the use of a price cap over rate of return or cost of service regulation because of its greater incentive effects. A third alternative, sliding‐scale regulation, has been put forward as a compromise between the price cap and a controlled rate of return, which is said to combine the merits of both methods. This paper considers the operation of a price cap, rate of return regulation and sliding‐scale regulation in the context of low‐income economies by reviewing the theory in relation to the conditions likely to be found in low‐income economies.FindingsIt is concluded that the case for the use of a price cap is much reduced in low‐income economies. This is because of its information requirements, need for regulatory expertise and, more broadly, the institutional endowment found in many low‐income countries.Research limitations/implicationsIt is recognised that this conclusion is tentative and deserves further research, comparing theory and practice.Practical implicationsCountries need to consider carefully which method of regulation will work best in the context of the institutions of the country, rather than simply copy a method from the developed world.Originality/valueThis is one of the first papers to challenge the prevailing belief that price cap regulation is superior to rate of return regulation in the context of economic development.

Modern Corporate Finance: Theory and Practice.

1995 ◽  
Vol 50 (4) ◽  
pp. 1335
Author(s):  
Thomas M. Krueger ◽  
Donald R. Chambers ◽  
Nelson J. Lacey
Keyword(s):  
Corporate Finance ◽  
Theory And Practice ◽  
Finance Theory
Sign in / Sign up

Export Citation Format

Share Document