The Yield Yen

The Yield Yen : A Case History of the Importance of Other Systematic Risk Influences

Is the quant quest for better risk measures an assault on windmills – a useless exercise that succeeds only in enabling academics to continue to play with their computers? No! It has important implications for protecting investors. Take, for example, the yield yen. The yield yen, which attracted a considerable following in the investment community by the 1980s, was the idea that institutional investors should place their funds in a yield-tilted index fund.

The reasoning behind this proposal seemed appealingly plausible. Dividends are generally taxed more highly than capital gains. This was especially true before the Tax Reform Act of 1986. since the market equilibrium is presumably achieved on the basis of after-tax returns, the equilibrium pre-tax returns ought to be higher for stocks that pay high dividends than for securities that produce lower dividends and correspondingly higher capital gains, which, even if fully taxed at regular rates when realized, provide some tax benefits since unrealized capital gains do not bear any tax at all. Hence, the tax-exempt investor should specialize in buying high-dividend-paying stocks. In order to avoid the assumption of any greater risk than is involved in buying the market index, however, this tax-exempt investor is advised to purchase a yield-tilted index fund; that is a very broadly diversified portfolio of high-dividend-paying stocks that mirrors the market index in the sense that it is constructed to have a beta coefficient exactly equal to 1.0.

Even on a priori grounds one might question the logic of the yield-tilted index fund. The validity of the proposal rests on the premise that the major market participants prefer to receive income through capital gains rather than through dividends. But many of the largest investors in the market (such as corporations) actually pay a higher tax on capital gains than on dividend income (For corporate investors, 70 percent of dividend income is currently excluded from taxable income, while capital gains are taxed at normal gains rates). It is far from clear that the most important investors in the stock market prefer to receive income in the form of capital gains. Therefore, the market may not price high-dividend-paying stocks so that they offer especially attractive returns to tax-exempt institutions. But apart from these a priori arguments, the statistical results just reviewed can be interpreted as providing another argument against the yield-tilted index fund.

If the traditional beta calculation does not provide a full description of systematic risk, a yield-tilted index fund may well fail to mirror the market index. Specifically, during periods when inflation and interest rates rise, high-dividend stocks may be particularly vulnerable. Public-utility common stocks are a good example. Although they are known as low-beta stocks, they are likely to have high systematic risk with respect to interest rates and inflation. This is so not only because they are good substitutes for fixed-income securities but also because public utilities are vulnerable to a profits squeeze during periods of rising inflation, as a result of regulatory lags and increased borrowing costs. Hence, the yield-tilted index fund with a beta of 1.0 may not mirror the market index when inflation accelerates.

The actual experience of yield-tilted index funds during the period of their popularity in the early 1980s was far from reassuring. The performance of these funds was significantly worse than that of the market. At other times, high yield stocks have significantly outperformed the market. Of course, we should not reject a model simply because of its failure over any specific short-term period. Nevertheless, we believe that an understanding of the wider aspects of systematic risk, as analyzed here, can potentially help to prevent serious investment errors.

A Summing Up

The stock market appears to be an efficient mechanism that adjusts quite quickly to new information. Neither technical analysis, which analzyes the past price movements of stocks, nor fundamental analysis, which analyzes more basic information about the prospects for individual companies and the economy, seems to yield consistent benefits. It appears that the only way to obtain higher long-run investment returns is to accept greater risks – and those risks can be horrendous, as any investor who has lived through the great bear markets of the late 1960s and 1970s and who suffered through October 1987 can tell you.

Unfortunatley, a perfect risk measure does not exist. Beta, the risk measure from the capital-asset pricing model, looks nice on the surface. It is a simple, easy-to-understand measure of market sensitivity, and differences in long-run rates of return form portfolios are clearly related to that single risk factor.

Unfortunately, beta also has its warts. The actual relationship between beta and rate of return does not correspond to the relationship predicted in theory. Moreover, the relationship is undependable in the short run and has even failed to work in periods as long as a decade, such as the 1980s. Finally, beta is not stable from period to period, and it is sensitive to the particular market proxy against which it is measured.

No single measure is likely to capture adequately the variety pf systematic risk influences on individual stocks and portfolios. The actual relationship between beta and rate of return does not correspond to the relationship predicted in theory. Moreover, the relationship is undependable in the short run and has even failed to work in periods as long as a decade, such as the 1980s. Finally, beta is not stable from period to period, and it is sensitive to the particular market proxy against which it is measured.

I have argued here that no single measure is likely to capture adequately the variety of systematic risk influences on individual stocks and portfolios. Returns are sensitive to general market swings, to changes in interest and inflation rates, to changes in national income, and, undoubtedly, to other economic factors such as exchange rates. And if the best single risk estimate were to be chosen, the traditional beta measure would not be the only possibility. The mystical perfect risk measure is still beyond our grasp.

To the great relief of assistant professors who must publish or perish, there is still much debate within the academic community on risk measurement, and much more empirical testing needs to be done. Undoubtedly, there will yet be many improvements in the techniques of risk analysis, and the quantitative analysis of risk measurement is far from dead. Our guess is that future risk measures will be even more sophisticated – not less so. Nevertheless, we must be careful not to accept beta or any other measure as an easy way to assess risk and to predict future returns with any certainty. You should know about the best of the modern techniques of the new investment technology – they can be useful aids. But there is never going to be a handsome genie who will appear and solve all our investment problems. And even if he did, we would probably foul it up – as did the little lady in the following favorite story of Robert Kirby of Capital Guardian Trust:

She was sitting in her rocking chair on the porch of the retirement home when a little genie appeared and said, ”I’ve decided to grand you three wishes.”

The little old lady answered, “Buzz off, you little twerp, I’ve seen all the wise guys I need to in my life.”

The genie answered, “Look, I’m not kidding. This is for real. Just try me.”

She ahrugged and said, “Okay, turn my rocking chair into solid gold.”

When, in a puff of smoke, he did it, her interest picked up noticeably. She said, “Turn me into a beautiful young maiden.”

Again, in a puff of smoke, he did it. Finally, she said, “Okay, for my third wish turn my cat into a handsome young prince.”

In an instant, there stood the young prince, who then turned to her and asked, “Now aren’t you sorry you had me fixed?”

Intact Insurance. Photo: Elena

The Rise of the Office Romance

The Rise of the Office Romance

Old rules about dating co-workers are giving way to new realities

Ask a couple of our times where they were when Cupid’s arrow struck and chances are they’ll say the office. We’ve become very work-centered, so the reality is that the workplace is now one of our primary meeting places.

Long workdays that leave little time or energy for the social circuit and the increasing presence of women in formerly male-dominated spheres have made the office a viable, even attractive, alternative to cruising the club scene or scanning the personal ads. People in the same line of work can be sure they have at least one major interest in common. And co-workers who date each other avoid fear of the unknown (as Lisa Mainiero, a professor of management at Fairfield University, pointed out in her book Office Romance: Love, Power and Sex in the Workplace.

“With the difficulties involved in meeting people of kindred spirit, and the rampant fear of sexually transmitted diseases, we are more comfortable establishing relationships with those whom we already know well”, she writes.

It also helps that companies are updating their attitudes toward office lovebirds. The fraternization policies that pervades corporate culture in the past almost always required one member of a soon-to-be-married office couple to leave the company.

“The woman usually ended up looking elsewhere for work,” Mainiero says. “In the past decade, corporations have realized that those policies were somewhat neanderthal.”

In fact, a recent Fortune magazine survey of 200 corporate chief executives found that 70 percent of them believe office romance is “none of the company’s business.” And the Society for Human Resource Management reports that in a survey of its members, who are personal managers in industries from construction to finance, nearly 72 percent don’t think employers should be allowed to require a member of a co-working couple to resign if they marry.

You spend too much time listening to what people say. That’s your trouble. (J.R. Tolkien)

Though companies’ approaches to office romance are changing, a slight generation gap is still noticeable in the opinions of their employees. According to Gallup polls, working men and women under 40 are more likely than their older counterparts to say they would consider dating a co-worker.

No surprise there. The younger workforce has a totally different attitude about work anyway. For example, they’re not motivated as much by power and money and success. They tend to look more for a balance between work and family.

Office romances can be wonderful, but they require careful planning and maintenance. Mainiero says the most successful relationships she has come across in her research involve people who work in different departments, have different business contacts, and follow different career paths.

The same tendency among couples: as long as people aren’t working together too closely, there doesn’t seem to be any negative impact on their relationship. One executive actually saw increased productivity when two employees became romantically involved – they spent more time at the office because they weren’t always rushing off to see each other.

Though the office may be a good place to meet a potential mate, the pick-up tactics tolerated at a singles bar are unacceptable at the water cooler. Companies are responding to the increasing awareness of sexual harassment by creating strict policies to deal with the issue. But sexual harassment guidelines shouldn’t be extended to outlaw consensual office romances.

Polices will fail that forbid all relationships. When people find each other attractive, they will act on that. And people who work together can have very satisfying relationships.

Sexual harassment policies have made people a little more cautious, but they are not putting a lid on the number of officer romances. Though people sometimes try to lump them together, the two issues are separate. Trying to control one is not necessarily going to prevent the other.

The benefits of an office relationship can extend even beyond the couple involved. Mainiero’s observations of couples in the workplace have convinced her that their influence can motivate other employees, minimize personality conflicts, and increase communication among departments.

Attraction and romance at work bring out the best in all of us, she writes, as long as it is handled properly by the couple.

In the Company of a Colleague

Some important do’s and don’ts of an office love affaire

Office romantics who want to keep their careers and their love lives out of the circular file should heed to advice to Lisa Mainiero, the author of Office Romance : Love, Power and Sex in the Workplace.

Don’t fall in love with your boss. While peer relationships can be manageable in the workplace, research shows very clearly that hierarchical romance brings up concerns about favoritism, exploitation, and low morale among employees. The lower-level person struggles (usually without success) to live down the stigma of sleeping his or her way to the top, while the higher-level person’s business judgment suddenly looks questionable. People can end up committing career suicide.

Be clear about your intentions, but don’t force the issue. If you sense that your interest in a co-worker is not reciprocated, back off immediately. The office is not the place to be persistent. At the first indication that the other person is not interested, drop your pursuit because if you don’t, it can be considered harassment.

Be professional at all times. Don’t have lunch with your lover every day, hang out in his or her office, or hold hands in the hallway. When you’re at work, act as you would around any other colleague. Most co-working couples with successful relationships lead separate lives at work as much as possible. Some married couples drive in separately, for example, or use different last names. There should be clear boundaries between work and after-hours relationships.

Keep up the professionalism when it’s over. Though breaking up is hard to do, couples who successfully maintain their work relationship after the romance has died have an easier time. It’s a good idea to set up a kind of “psychic contract” at the beginning of the relationship, outlining ground rules for making the office a romance-fee zone and talking about the best way to handle a possible breakup

First Aid

First Aid

When you are the Good Samaritan : Emergencies require quick action.The worst mistake is to do nothing

Accidents are the leading cause of death among children and young adults in the United States. Heart attacks and strokes claim almost half of all deaths in the country each years, and millions of Americans end up in the hospital with injuries annually. Although the odds of having to cope with a first aid crisis are slim, the consequences of not knowing how to deal with one can be fatal.

One common reaction to happening upon an accident scene is to hold back out of uncertainty over fear of contracting a disease, or even of being sued. The fat that AIDS can be transmitted through infected blood has only added to the reluctance of many to get involved.

The worst mistake is to do nothing, say experts at the American Red Cross. At a minimum, you should call the rescue squad or 911. The risks of catching a disease from helping are also not very great. Usually you will know the accident victims that need your help because they are likely to be family members or friends. That increases the likelihood that you will know their health condition and can take precautions to guard against any special risks of infection. Whether you know the victim or not, it is best to avoid direct contact with blood, which is the most likely transmitter of infectious disease, including the AIDS virus. Wear gloves, if available, when treating a bleeding victim and wash your hands before and after giving first aid, if possible.

A nice park. Photo by Elena

Most states have “Good Samaritan” laws, which protect rescuers who assist accident victims from being sued, provided the Samaritan acts in a reasonable manner. That means moving a victim only if his life is imperiled or if another person’s will be if you don’t move the first. Ask permission of a victim who is conscious before giving first aid, calling the rescue squad or 911 as soon as possible.

To obtain permission to provide assistance, you must tell a conscious victim who you are, what training you have, and what first aid you intend. If permission is refused, stop immediately. If the victim is an infant or child and there is a responsible adult available, ask permission of that adult. If no such adult is present, permission is implied. Permission is also assumed if a victim is unconscious or cannot reply.

For detailed instructions on vital first aid techniques, see the following material from the American Red Cross:

Checking an Unconscious Victim

When a victim does not respond to you, assume he or she is unconscious. Call for an ambulance at once, if possible. The check to see if the victim is breathing, has a pulse or is bleeding severely.

To check for breathing, look, listen and feel for breathing for about five seconds. Watch the chest to see if it rises.

To find out if the heart is beating, check the victim’s pulse. Check the pulse of an adult or a child at the side of the neck. Check the pulse of an infant at the inside of the arm between the shoulder and the elbow.

Check for bleeding by looking over the victim’s body from head to foot. Bleeding is severe when blood spurts out of a wound. Often the situation may look worse than it is.

Abdominal Thrusts for Choking Adults

Chocking is a common breathing emergency. A conscious person who is choking has the airway blocked by a piece of food or another object. The airway may be partly or completely blocked. If a chocking person is coughing forcefully, encourage him or her to cough up the object.

If the person is unable to cough, speak or breathe :

    Step 1. Place thumb side of fist against middle of abdomen just above the navel. Grasp fist with other hand.

    Step 2. Give quick upward thrusts.

Repeat until object is coughed up or person becomes unconscious.

Give chest thrusts when choking person is too big to reach around or is noticeable pregnant.

Give Back blows and Chest Thrusts to Babies Who Are Chocking

Chocking is a leading cause of death and injury in infants, who love to put small objects such as pebbles, coins, beads, and parts of toys, in their mouth.

Babies also chocke often while eating because they have not yet fully mastered chewing and swallowing. Foods like grapes and nuts are particularly risky. Never let an infant eat or drink alone, the American Red Cross advises.

If an Infant is Unable to Cry, Cough or Breathe…

Step 1. With infant facedown on forearm so that the head is lower than the hest, give five back blows with heel of hand between the infant’s shoulder blades.

Step 2. Holding the infant firmly between both forearms, turn the infant to faceup position on forearm.

Step 3. Using two fingers, give five chest thrusts on about the center of the breastbone.

Repeat the sequence of five back blows and five chest thrusts alternately until the object is coughed up, the infant begins to breathe on his own, or the infant beomes unconscious.

Stop as soon as the objet is oughed up or the infant starts to breathe or ough. Watch the infant and make sure that he or she is breathing freely again.

Call the local emergency number if you haven’t already done so. The infant should be taken to the local emergeny department to be checked, even if the infant seems to be breathing well.

Rescue Breathing for Adults and Children

The timing intervals for administrating artificial respiration to adults and children are somewhat different, but the mechanics are the same.

If an adult is unable to breathe…

Step 1. Begin by tilting the head back and lifting the chin to move the tongue away from the back of the throat. Pinch the nose shut.

Step 2. Make a tight seal around the victim’s mouth with your mouth. Breathe slowly into the victim until chest gently rises. Give two breaths, each lasting one to two seconds. Pause between breaths to let the air flow out.

Step 3. Check for pulse after the two initial slow breaths.

If pulse is present but person is still not breathing…

Step 4. Give one slow breath about every five seconds. Do this for about one minute (12 breaths).

Step 5. After 10 to 12 breaths, recheck pulse to make sure the heart is still beating. Check the pulse and breathing about avery minute or 10 to 12 breaths.

Continue rescue breathing as long as a pulse is present but the person is not breathing.

If a child is unable to breathe…

Step 1. Begin by tilting the head back and lifting the chin to move the tongue away from the back of the throat. Pinh the nose shut.

Step 2. Make a tight seal around the victim’s mouth with your mouth. Breathe slowly into the victim until chest gently rises. Give two breaths, each lasting one to two seconds. Pause between breaths to let the air flow out.

Step 3. Check the pulse after the two initial slow breaths.

If pulse is present but person is still not breathing…

Step 4. Give one slow breath about every three seconds. Do this for about one minute (20 breaths).

Step 5. Recheck pulse and breathing about every minute, or 20 breaths.

Call the local emergency number if you have not already done so. Then, continue rescue breathing as long as a pulse is present but the hild is not breathing.

Rescue Breathing for Infants

Because a baby’s mouth is very small, you need to seal your mouth over both the infant’s mouth and nose

If an infant is not breathing…

Step 1. Begin by tilting the head back and lifting the hin to move the tongue away from the back of the throat.

Step 2. Make a tight seal around the infant’s nose and mouth with your mouth.

Step 3. Breathe slowly into the victim until chest gently rises. Give two breaths, each lasting one to two seconds. Pause between breaths, each lasting one to two seconds. Pause between breaths to let the air flow out.

Step 4. Check for pulse after the two initial slow breaths.

Step 5. Give one slow breath about every three seconds. Do this for about one minute (20 breaths).

Step 6. Recheck pulse and breathing about every minute. Call the local emergeny number if you haven’t already done so. Continue rescue breathing as long as a pulse is present but the child is not breathing.

Clearing an obstruction with abdominal thrusts

When an unconscious person’s airway is obstructed, getting air in is more important than removing the object.

If air does not go in…

Step 1. If you don’t see the chest rise as you give rescue breathing, retilt the person’s head.

Step 2. Give two breaths, each lasting one to two seconds. Pause between breaths to let the air flow out. If air still won’t go in…

Step 3. Straddling the victim’s legs, place the heel of one hand just above the navel. Place your other hand on top of the first. Point the fingers of both hands toward the victim’s head.

Step 4. Give five quick thrusts toward the head and into the abdomen.

Step 5. After giving five thrusts, lift the victim’s lower jaw and tongue with your fingers and thumb. Slide one finger down the inside of the cheek and try to hook the object out.

Step 6. Tilt head back, lift chin, and give two slow breaths again. Repeat breaths, thrusts, and sweeps until breath go in.

Pink plant. Painting by Elena

When it’s an infant with the blokage

The technique for clearing an unconscious baby’s airway is the same as for one who is choking.

If you are unable to breathe into an infant…

Step1. Retilt the infant’s head, lifting the chin.

Step 2. Give two breaths again. If air still won’t go in.

Step 3. Position infant on forearm, then turn him face-down.

Step 4. While holding infant facedown on forearm so that the head is lower than the chest, give five back blows with heel of hand between the infant’s shoulder blades.

Step 5. Holding the infant firmly between both forearms, turn the infant to a faceup position of forearm.

Step 6. Give five chest thrusts on about the center of the breastbone.

Step 7. Lift the infant’s lower jaw and tongue and check for object. Sweep one finger inside the mouth to hook the object out.

Step 8. Tilt head back and give two breaths again. Repeat back blows, chest thrusts, sweeps, and breaths until breaths go in.

Basic CPR for Adults and Children

Give CPR when there is no breathing and no pulse. Without CPR, brain damage can set in within four minutes.

If a Person Is Not Breathing and Has No Pulse

Step 1. Find hand position – the notch where the ribs meet the lower breastbone. Place the heel of your hand on the breastbone just above your index finger.

Step 2. Place your other hand on top of the first. Use the heel of your bottom hand to apply pressure on the breastbone. Position your shoulders diretly over your hands with elbows locked. Press the chest down about two inches, and then release. Repeat 15 times keeping a smooth even rhythm.

Step 3. Retilt the head, lift the hin and give two slow breaths.

Step 4. Do three more sets of 15 compressions and 2 breaths. Each cycle takes about 15 seconds.

Step 5. Recheck pulse and breathing for about five seconds. If there is no pulse…

Step 6. Continue sets of 15 compressions and two breaths, pausing to check for pulse every few minutes. If you find a pulse, check breathing and give rescue breathing if necessary.

CPR for infants has important differences

Babies require lighter chest pressure delivered in shorter, more frequent cycles than do older children and adults

If an infant is not breathing and has no pulse…

Step 1. Place the infant on his or her back on a hard surface such as the floor or table. Place two fingers on the breastbone just below an imaginary line between the nipples.

Step 2 Give five compressions, about 3 seconds each. Count to help keep a regular, even rhythm

Step 3. Placing your mouth over the infant’s mouth and nose, give one slow breath, about 1,5 seconds.

Step 4. Begin compressions again. Do 12 cycles of five compressions and one breath, about one minute. Call the local emergency number if you haven’t already, carrying the infant to the phone so you can continue giving CPR. Then…

Step 5. Recheck pulse and breathing for about five seconds. If there is still no pulse…

Step 6. Continue sets of five compresions and one breath. Recheck pulse and breathing every few minutes. Continue CPR until help arrives.

How to Have Beautiful, Long Hair

How to Have Beautiful, Long Hair

Most of us would like to have luscious, healthy hair. But how to achieve it? The following article gives some simple tips and tricks.

First, hairdressers around the world suggest to trim hair every 3 months. According to this rule, hair should be cut by about an inch regularly, even if you’re trying to grow your hair long. The reason is that split ends can break your hair. Not only is it unsightly, but it can actually prevent your hair from growing below a certain length.

Another simple rule is quite obvious. The hairdresser must be good. Similar to most professions, some people are better than others at their job. So while saving money is an important factor in choosing any product or service, it might be worth to invest a little more and go to a high-end salon. The advice is especially true for those who dye or bleach their hair. Higher-end salons use better and newer products than lower-end ones.

The following is especially true for girls and women who style their hair using a flat iron or a curler. Heat damages hair. Styling with heat must be used sparingly, and if it is unavoidable, it is recommended to use low heat. Usually, curlers are less hot than flat irons. However, companies such as Chi have digitized flat irons that allow you to set your desired heat level.

Taking fair of the fur of long-haired cat breeds such Persians, Persian Silver Shaded depicted above, is a whole other story… Photo by Elena

Another simple tip is to rinse hair with cold water. The experience might be unpleasant, but it “seals” the hair. 

Using conditioner, treatment and restoring serums may also be helpful. Treatments can be done at the salon or at home. The usual recommendation is to use treatments every weak. Great hair treatments and masques can be bought at any salon. Brands such as Kerastase provide different lines according to hair damage and other hair needs. Also, it is helpful to wash hair as seldom as possible and to change shampoos often.

Finally, brushing hair has to be done holding the hair in a way that targets the ends first. Only once the ends are untangled is it safe to run the brush along the full length.

Web Site Province Quebec

Web Site Province Quebec

All you might want to know about Quebec : provincequebec.com

This is how it started: in 1534, French navigator Jacques Cartier landed on the Gaspé Peninsula claiming the territory in the name of France and naming it Canada. Several voyages later, in 1608, the City of Quebec was founded as a capital of New France…

New France, Lower Canada, the province of Quebec—so many names it carried through ages always playing a significant role in history and economic development of Canada.

This is who we are today: almost 8 million Quebekers—a quarter of the total number of Canadians—living and working in the province famous for its cutting-edge industry and cultural events, universities and research centers, social programs and French heritage.

Old province of Quebec. Photo by Elena

We invite you to read about Quebec’s early history and significant events that took place during the second half of the 20th century: EXPO-67 and the 1976 Olympic Games. This and a lot more at your fingertips!

Browse our site and learn more: Provincequebec.com was developed as an information resource for everybody who would like to learn about the province: its people, heritage, geography, tourist attractions, and the possibilities of working or studying here.

We value your feedback and your opinion does matter: you are welcome to write to us and to participate in our discussion forums.

At present we are working on its full English version: provincequebec.com

(Draft version for the landing page of the Website)