My Corporate Finance class and I will begin looking at dividend policy tomorrow. Today, Aviva, the insurance giant, announced that it was cutting its dividend by more than a quarter. Subsequent to this announcement its shares fell 12.5% (story here). Why did Aviva shares fall so much? After all, the classic Miller and Modigliani irrelevance theorem suggests that a firm's dividend policy has no effect on the value of the firm. One explanation is that Aviva's managers were signalling to its shareholders that the future prospects of the company are not as good as was once thought. In a paper with Qing Ye and Wenwen Zhan, I find that dividends also played a very important information communication role is early capital markets.
The Berkeley Earth Project , an independent study of global warming, has found that the earth has become a degree warmer over the past half century. However, the statistical uncertainty surrounding pre-1920 estimates makes it very hard to say much about long-term trends - click here for graph . This is one of my concerns with the global warming debate - we simply don't have trustworthy long-run data which looks at temperature changes over the last millennium (or two). My second concern with the global warming debate is that it is very hard to prove any sort of casual link between global warming and human activity. The scientists may be able to show correlation between global warming and our production of carbon dioxides etc., but correlation is not causation. My third concern with the debate is that those who are sceptical or agnostic are stereotyped as flat-earthers or intellectually-challenged crackpots. This only stifles debate and the progress of science itself.