Does the EVA valuation model explain the market value of equity better under changing required return than constant required return?

Through the Economic-Value-Added(EVA)valuation model,the expected market value of equity can be determined by adding the book value of equity with the present value of expected EVAs under the assumption of constant required return and constant return on equity.The equation of EVA valuation model has taken its shape under the assumption of constant required return and constant return on equity.However,a large body of empirical evidence indicates that required rate of return never remain constant.The EVA-valuation model formulated under constant required return cannot be implemented under the scenario of changing required return.In this study,we explored whether the EVA valuation model could be implemented under changing required return by making any changes in the model and found that it could be implemented under the scenario of changing required return by replacing the book value of the equity of the existing model with the present value of required earnings or normal market earnings.We further examined whether the explanatory ability of the EVA valuation model under the assumption of changing required return is better than that of the valuation model under the assumption of constant required return.Relative information content analyses were conducted by considering sample of the intrinsic value of equities determined by valuation models and the market value of equities of 69 large-cap,88 mid-cap,and 79 small-cap companies.The results showed that the EVA-based valuation model with changing normal market return outperformed the EVA-based valuation model with constant required return.

Education, Employment and Human Capital Investment in China: Reality and Expectation

With the national population census data and sample survey data of 1990,2000,2005,2010 and 2015,this paper examines the evolving relationship between education and unemployment,and carries out an empirical analysis on how such correlation affects the expected return on education.Our findings suggest that education can significantly reduce the risk of unemployment,but this effect varied over time during 1990-2015.Education’s effect in reducing unemployment significantly increased from 1990 to 2000,but diminished from 2005 to 2015,particularly for the young group.This paper arrives at the ex post return on education estimated with 1995,2002,2007 and 2013 data of the Chinese Household Income Project(CHIP)and calculates the expected return on education based on such data.Results indicate that from 1995 to 2007,the expected return on education kept on the rise until it peaked in 2007.For the young group aged 22-29,the expected return on education started to decline after 2002.This result is of great significance to unravelling return on education during China’s transition period and households’decisions to invest in education.

Today＇s Risks and Difficulty of Chinese Commercial Banks

According to the Top 1,000 world banks released by the British authoritative magazine The Banker, the profits made by Chinese banking industry in 2011 had accounted for one-third of the global banking profits, and nearly 100 banks had been included in the Top 1,000 world banks list. This proves that China＇s commercial banks have been standing in the forefront of the world. While achieving such impressive results, China＇s risks and uncertainties due to the constraints of the internal and external environment cannot be ignored. Those risks are mainly about the risks of the over-estimation of the expected return for financial products, the high credit concentration, as well as the seldom use of financially derivative products. Therefore, it is difficult to avoid risks by the portfolio management, which restricts the further improvement of the competitiveness of commercial banks.

The cross section of Chinese commodity futures return

This paper investigates the cross-section of expected commodity futures returns in China using a large panel of 13 individual factors.We find that 6 out of 13 individual factors produce positive and significant returns.To aggregate the information among these factors,we apply not only the traditional Fama-Mac Beth regression(FM),but also a set of alternative methods,including the forecast combination method(FC),principal component analysis(PCA),principle component regression(PCR)and partial least squares(PLS).It turns out that PLS outperform other methods in forecasting the cross-section of Chinese expected futures returns.The equally weighted combination of 5 methods produces an even higher annualized return and lower standard deviation compared to each single method.The investigation of factor importance reveals that the skewness(SKEW)factor is more important than other factors in predicting expected futures returns in Chinese markets.

Grey Model of the Investment Portfolio Optimization

The theory of investment portfolio is a very important theory in the modern economical system. Based on the feature of the theory, the paper sets up new various kinds of models of investment portfolio, namely grey optimization models. These models are more practical and objective to existing problems.

Effects and characteristics of senior students’demand for the internationalization of higher education in China

By probing into the relationship of senior students’demand for“internationalization”,students’expected economic returns in future careers,and their individual concept of modernity,this study attempts to explore several factors that are influencing the demand for overseas higher education.