Jeff Coulton

Corporate Payout Policy in Australia and a Test of the Life Cycle Theory

We provide evidence on the frequency and size of corporate payouts by Australian firms, and test whether the life cycle theory explains Australian payout policies. Regular dividends remain the most popular mechanism for distributing cash to shareholders, despite a slight decline in the proportion of dividend payers since the relaxation of buy-back regulations in 1998. Off-market share buy-backs return the largest amount of cash to shareholders. Dividend paying firms are larger, more profitable, and have less growth options that non-dividend paying firms. Consistent with the life cycle theory, we observe a highly significant relation between the decision to pay regular dividends and the proportion of shareholders’ equity that is earned rather than contributed.

The Impact of Sentiment on Price Discovery

We study how investor sentiment affects the speed with which prices reflect information. Price discovery is more timely for firms with greater sensitivity to sentiment, as measured by a sentiment beta. Our research improves our understanding of the price formation process when sentiment is not assumed to be constant. Our research design is novel as it considers a sentiment beta as well as economy-wide sentiment. This provides more comprehensive evidence on the impact of differing types of sentiment on the price formation process.

An integrated economics model for ISRU in support of a Mars colony - initial status report

The aim of this effort is to develop an integrated set of risk-based financial and technical models to evaluate multiple Off-Earth Mining (OEM) scenarios. This quantitative, scenarioand simulation-based tool will help identify combinations of market variables, technical parameters, and policy levers that will enable the expansion of the global economy into the solar system and return economic benefits. Human ventures in space are entering a new phase in which missions formerly driven by government agencies are now being replaced by those led by commercial enterprises – in launch, satellite deployment, resupply of the International Space Station, and space tourism. In the not-too-distant future, commercial opportunities will also include the mining of asteroids, the Moon, and Mars. This investigation will examine the role of OEM in a growing space economy. (In this investigation, the term ‘mining’ is taken to embrace minerals, ice/water, and other in situ resources.) OEM can be the engine that drives the space economy, so it would be useful to understand what OEM market conditions and technology requirements are needed for that economy to prosper. These specific elements will be studied in the wider context of creating an economy that could ultimately support a sustainable Mars Colony. Such a colony will need in situ resources not only for its own survival, but to prosper and grow, it must create viable business ventures, essentially by fulfilling the demand for in situ resources from and on Mars. This investigation will focus on understanding the role and economic prospect for OEM associated with the Human Colonization of Mars (HCM).

The Informativeness of Dividends and Associated Tax Credits

This paper investigates the informativeness of dividends and the associated tax credits with respect to earnings persistence. After confirming that dividend-paying firms have more persistent earnings than non-dividend-paying firms, we show that the taxation status of the dividend is also important. Firms that pay dividends with a full tax credit attached have significantly more persistent earnings than firms that pay dividends which carry no associated tax credit. Consistent with higher levels of tax credits identifying more mature firms, those paying dividends with full tax credits have significantly less persistent losses than firms that pay dividends with only partial tax credits. Further, market pricing tests confirm that the incremental information in dividends and tax credits contributes to reductions in market mispricing of the persistence of earnings and earnings components. Our results are robust to alternative model specifications and controlling for dividend size and firm age.

Determining the chaotic behaviour of copper prices in the long-term using annual price data

Mineral commodity prices are influenced by economic, technological, psychological, and geopolitical factors. Stochastic approaches, and time series and econometric techniques have been used to represent the dynamics of mineral commodity markets and predict prices. However, these techniques cannot provide a comprehensive representation of market dynamics because they do not recognise the relationship between these factors over time, and they are unable to capture both the evolution and the cumulative effects of these factors on prices. Stability of motion and chaos theories can detect sensitivity to initial conditions, and therefore the evolutionary patterns allowing a proper understanding and representation of mineral commodity market dynamics. Most of the techniques used to assess chaos require a colossal amount of data, so the use of small data sets to assess chaos has been largely criticised. Nevertheless, by definition, the dynamics of a chaotic system remain at different scales owing to its self-organisation features that exhibit ordered patterns in the absence of codes or rules. Therefore, any deterministic chaotic behaviour of mineral commodity prices can be captured by using small data sets if a detailed qualitative and quantitative analysis are carried out. This paper examines the chaotic behaviour of annual copper prices between 1900 and 2015. To do so, we combine chaos theory, stability of motion and statistical techniques to reconstruct the long-term dynamics of copper prices. First, we examine the time dependency and the presence of a strange attractor by a visual analysis of the time series and phase space reconstruction based on Takens’ theorem and determine embedding parameters. Then we examine the dynamic characteristics of the system which assesses its complexity and regularity patterns to measure the system’s entropy. Finally, we calculate the largest Lyapunov exponent λ to assess the sensitivity to initial conditions and determine chaotic behaviour supported by a surrogate test. We find that annual copper prices have a chaotic behaviour embedded in a high-dimensional space and short time delay. The study suggests that copper prices exhibit only a single state of low prices, which fluctuate through transitional periods of high prices. It challenges the assertion that metal markets have fluctuated over four major super cycles and debate the adequacy of stochastic and econometric models for representing mineral commodity market behaviour.This study recommends that the use of chaotic behaviour improves our understanding of mineral commodity markets and narrows the data searching, processing and monitoring requirements for forecasting. Therefore, it improves the performance of traditional techniques for selecting key factors that influence the market dynamics, and may also be used to select the most suitable algorithm for forecasting prices.

The Informativeness of Dividends and Franking Credits

We investigate the informativeness of dividends and franking credits with respect to earnings persistence. We find strong evidence that dividend paying firms have more persistent earnings than non-dividend paying firms. Firms that pay franked dividends have significantly more persistent earnings than firms that pay unfranked dividends. Consistent with higher levels of franking identifying more mature firms, fully franked dividend paying firms have significantly less persistent losses than firms that pay partially franked dividends. Market pricing tests show that investors do rationally price earnings persistence once we control for profit compared with loss observations. Our results are robust to alternative model specifications and controlling for dividend size and firm age.