This study uses recent developments in the theoretical modelling of the links between unrecorded accounting goodwill, accounting profitability and the cost of equity, together with Capital Asset Pricing Model (CAPM) betas, to estimate the ex-ante equity risk premium in the UK. The results suggest that, over our sample period from 1968 to 1995, the premium has been in the region of 5%. Our estimate lends support to the view that the ex-ante equity risk premium is substantially less than the historical average of the excess of equity returns over the risk-free rate, and is similar to the rates applied recently by UK competition regulators. Copyright Blackwell Publishers Ltd 2000.

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The funds provided by HEFCE for research are distributed to the universities as a block grant; which the universities in turn distribute to the departments. This 'research grant' is a function of the quality of the research undertaken (as measured by the research assessment exercise) and the number of (submitted) research active staff for each unit of assessment (subject area). Hence universities have to take strategic funding positions in regard to trade-offs between volume and quality.The Research Assessment Exercise is therefore a budgeting exercise tool to measure past performance benchmarked against the other 'units', upon which future budgets are based. The total resources available are allocated based on ex-post reported performance. The 'units' (i.e. universities) participate in the budgetting exercise by having the managerial choice of selective submission of their past performance. The properties of the budget allocation for higher education means any 'signal' is accepted; as submissions under the research assessment exercise allow the manager (the university department) to decide on the contents of submission in as far as whom to submit.The 'submission strategy' for the research assessment exercise (RAE) is the primary locus of this paper. The paper provides a brief description of the research funding process and introduces the research funding formula in the first section. A maximisation formula is then derived for optimum coalition of staff submissions. The marginal analysis of the optimum coalition is discussed. If 2/3 (two thirds) of the staff submitted are in a higher category than current rating then partial submission is optimal. The marginal analysis impact on human resource management strategies is described; in particular the value of the mentor type 'star' researcher.This paper analyses the budgeting exercise for English Universities concerned with research funding. Though all UK Universities were subject to the Research Assessment Exercise (RAE), different funding

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