short selling and the price discovery process we show that stock prices are more accurate when short sellers are more active first in a large panel of nyse listed stocks intraday informational efficiency of prices improves with greater shorting flow second at monthly and annual horizons more shorting flow accelerates the incorporation of public information into prices third greater shorting flow reduces post earnings announcement drift for negative earnings surprises fourth short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values these results are robust to various econometric specifications and their magnitude is economically meaningful the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

speculative investor behavior and learning as traders learn about the true distribution of some asset s dividends a speculative premium occurs as each trader anticipates the possibility of reselling the asset to another trader before complete learning has occurred small differences in prior beliefs lead to large speculative premiums during the learning process this phenomenon helps explain a paradox concerning the pricing of initial public offerings the result casts light on the significance of the common prior assumption in economic models

infrastructure and aggregate agricultural productivity international evidence a relationship has long been recognized between a country s agricultural development and its investment in infrastructure capital such as transportation and communication facilities that is not directly related to the agricultural production process the relevant literature spans adam smith s proposition that the division of labour is limited by the extent of the market the work of von thtinen numerous studies by historians and economic historians and the work of economists such as schultz kuznets wharton owens and johnston and kilby to mention a few despite the apparently widespread recognition and acceptance that a relationship exists between agricultural development and infrastructural development few if any empirical studies test this as a hypothesis and provide estimates of the magnitude of such a relationship 2 the aim of this paper is to utilize 1965 aggregate agricultural production data and the concept of the aggregate production function to study the effects of transportation and communication infrastructure on aggregate agricultural productivity the aggregate data come from 47 less developed countries ldcs and 19 developed countries dcs the sample countries are listed in the appendix the use of intercountry comparisons for development studies dates to clark and the pioneering work of kuznets and it has been exploited econometrically by chenery 3 an important contribution to the study of international agricultural productivity was made by hayami and ruttan who showed that an aggregate agricultural production function that accounts for intercountry differences in resource endowments technical modern inputs and human capital can explain a large proportion of the variation in aggregate agricultural output across more and less developed agricultures 4 evenson and kislev modified hayami and ruttan s model by including a variable measuring each country s investment in agricultural research 5 essentially the same

short sale constraints divergence of opinion and asset values evidence from the laboratory the overvaluation hypothesis miller 1977 predicts that a stocks are overvalued when there are short selling restrictions and that b the overvaluation is increasing in the degree of divergence of opinion we design an experiment that allows us to test these predictions in the laboratory our results support the hypothesis that prices are higher in the presence of short selling constraints the overvaluation does not depend on the degree of divergence of opinion

effects of short sale ban on financial liquidity in crisis and non crisis periods a propensity score matching approach abstractwe investigate the impact of banning the short selling shorting ban on liquidity of stocks traded in the hong kong stock exchange hkex on the basis of the 20 revisions of the designated list of shortable stocks from january 2006 to december 2010 in order to avoid endogeneity due to the liquidity adaptive implementation of the ban policy we use the propensity score matching of shortable and unshortable stocks and apply the double and triple difference methods embedded in the fixed effect panel regression for the matched data using two outcome variables for illiquidity the amihud price impact measure and the bid ask spread our results suggests that the shorting ban in this market may have a liquidity supporting effect in terms of the price impact with no regard to market tranquility and in terms of the spread with regard to the 2008 2009 financial crisis

the effects of macroeconomic news on high frequency exchange rate behavior this paper studies the high frequency reaction of the dem usd exchange rate to publicly announced macroeconomic information emanating from germany and the u s by us ing data sampled at a five minute frequency we are able to identify significant impacts of most announcements on the exchange rate change in the 15 minutes post announcement although the significance of these effects decreases rapidly as the interval over which the post announcement change in exchange rates is increased the direction of the exchange rate response conforms in general with a reaction function interpretation whereby reac tions to macroeconomic news are driven by the likely operations of monetary authorities in domestic money markets further we detect influences of german monetary policy deci sions on the reaction of the exchange rate and also differences between u s and german announcements in the exchange rate reaction time pattern i introduction this paper studies the high frequency reaction of the dem usd exchange rate to macroeconomic information emanating from germany and the u s specif ically we utilize exchange rate data covering the period 1 1 92 to 31 12 94 sam pled at a five minute frequency to investigate how the major monthly macroe conomic releases from these two countries impact the dem usd the infor mation contained in announcements over this three year period is extracted via a set of market expectation series supplied by money market services interna tional mms 1 our analysis improves on previous work in this area in two main respects first our study is conducted using very high frequency data whereas most earlier work has used exchange rate data sampled at a frequency of a number of hours or more this allows us to construct a very precise characterization of

does short selling amplify price declines or align stocks with their fundamental values critics of short selling argue that short sellers amplify price declines by targeting firms with falling prices in an unwarranted manner contrary to this viewpoint we find that increases in short interest for firms following a price decline are associated with measures of overpricing based on financial statement analysis our results extend to short selling activity following marketwide declines we also find evidence consistent with the profitability of short selling following price declines being driven by valuation based positions overall our findings suggest short sellers primarily undertake valuation based strategies following price declines and have implications for regulators limiting short selling following price declines is likely to impede efficient price discovery this paper was accepted by mary barth accounting

the theory of taxation for developing countries tax policy has far reaching implications for economic development and public administration this book which presents a modern theory of public finance brings together many of the most distinguished economists who have written on the subject they provide coherent principles for tax design and a systematic framework for the analysis of practical questions of tax reform and pricing policy in developing countries the book is especially timely as countries experience increasing shortages of government revenue and the distortions brought about by poorly designed tax systems it pays particular attention to the special problems of developing countries such as the taxation of agriculture the aim throughout is to develop techniques that can be quantitatively applied given the data available and empirical case studies illustrate the methods in action the authors analyze the links between tax theory social cost benefit analysis and the pricing of publicly supplied goods and services they also explore the empirical and econometric problems of identifying the tradeoffs between equity and efficiency other topics treated include the analysis of labor markets the taxation of foreign private investment and of fuel and the pricing of education although the models used concentrate on developing countries most of the methods and discussion apply as well to the problems of more affluent countries

u s intervention assessing the probability of success this paper estimates the unconditional and conditional probabilities that u s interventions successfully smooth short term mark dollar and yen dollar exchange rates the sample period extends from february 1987 to february 1990 assuming a binomial distribution the number of observed successes usually is greater than one would expect to see randomly results from a logit model suggest that coordinated intervention has a higher probability of success than unilateral intervention the probability of success also increases with the dollar amount of an intervention other conditioning variables are not significant the paper presents a reaction function with adjustments for the incidentally truncated nature of intervention data predicted values serve as instruments for intervention in the logit models

price discovery in euro area sovereign credit markets and the ban on naked cds abstract the sovereign debt crisis in the euro area saw credit spreads on sovereign bonds and credit default swaps cds surge for a number of member states the rise in sovereign yields was accompanied by a significant increase in sovereign cds market activity this pattern raised concerns that destabilising speculation via outright short selling of cds so called naked cds was behind the increase in bond yields in response policy makers introduced a ban on naked cds trading we investigate the effect of the ban on the price discovery process of sovereign credit risk contrasting results for the post ban period with those obtained prior to the ban we use intraday data on sovereign cds and bonds across a number of euro area countries our first main finding is that the cds market dominates the bond market in terms of price discovery that is cds premia in most cases adjust quicker to reflect new information than bond spreads this result holds also when taking into account transaction costs our second main finding is that the ban on short selling did not alter price discovery dynamics or reduce the efficiency of the market finally we find that prior to the ban cds spreads were persistently higher than bond credit spreads even after controlling for transaction costs this points to the presence of market frictions that limit the ability of arbitrage forces to fully close pricing gaps between the two markets however these pricing discrepancies were in many cases largely eliminated following the introduction of the ban

central bank secrecy in the foreign exchange market abstract this paper argues that with sticky goods prices and a forward looking exchange rate the central bank will only want a partial dissemination of its information about shocks to the economy it is shown that in such a model the central bank may prefer to intervene secretly in the foreign exchange markets when responding in anticipation of future shocks but openly when reacting to current shocks the model thus provides a rationale for secrecy in central bank foreign exchange operations the model also elucidates the relationship between the signaling and portfolio balance channels of sterilized intervention

real time effects of central bank interventions in the euro market abstract this paper investigates the real time effects of sterilized foreign exchange intervention using official intraday intervention data provided by the danish central bank our analysis employs a two step weighted least squares estimation procedure we control for macro surprises address the issue of endogeneity and carry out an array of robustness tests only when the direction of intervention is consistent with the monetary policy stance do we find that intervention exerts a significant influence on exchange rate returns

why does the option to stock volume ratio predict stock returns we use data on signed option volume to study which components of option volume predict stock returns and resolve the seemingly inconsistent results in the literature we find no evidence that trades related to synthetic short positions in the underlying stocks contain more information than trades related to synthetic long positions purchases of calls that open new positions are the strongest predictor of returns followed by call sales that close out existing purchased call positions overall our results indicate that the role of options in providing embedded leverage is the most important channel why option trading predicts stock returns

skewness short interest and the efficiency of stock prices abstractwe examine the association between return skewness short interest and the efficiency of stock prices since preferences for skewness have been shown to impact asset prices we examine how skewness relates to market efficiency we find that stocks with positive skewness are less efficient which might be explained by investor preferences for positive skewness next we document that short interest reduces both total skewness and idiosyncratic skewness finally while research has shown that short selling can improve the efficiency of markets generally we show that short interest s ability to improve market efficiency is strongest in stocks with the highest skewness

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

how central banks prepare for financial crises an empirical analysis of the effects of crises and globalisation on international reserves central banks international reserve holdings have increased significantly in the recent past while traditional models fail to explain this accumulation of reserves the more recent literature argues that reserves are used as a lifejacket against currency crises however research so far has neglected the question whether and how central banks change their precautionary reserve holdings after the country was affected by a currency crisis this paper tests the hypothesis that central banks revise their reserve policy in the aftermath of currency crises a dynamic panel data model is estimated for developing and industrial countries covering the period from 1975 to 2003 the evidence suggests that currency crises induce a permanent increase of reserves this effect is particularly strong for recent currency crises since the asian financial crisis

do exchange rates respond to day to day changes in monetary policy expectations when no monetary policy changes occur this paper addresses whether exchange rates respond to changes in expectations of future u s monetary policy when no actual monetary policy changes occur we employ data on federal funds futures contracts for extracting a measure of policy expectations control for the surprise element of macroeconomic news and policy developments and analyze more than 12 years of daily exchange rate data our findings show that continuous day to day changes in expectations of future monetary policy are associated in a highly significant and systematic way with day to day changes in exchange rates even when no actual monetary policy changes occur this suggests that monetary policy matters for daily exchange rate determination in more ways than merely through infrequent actual policy changes

is foreign exchange intervention effective some microanalytical evidence from the czech republic abstract i estimate a two equation system on the czech koruna euro exchange rate and order flow at hourly frequency with transactions data from the reuters spot matching market in the second half of 2002 during which the czech national bank intervened to stem the appreciation of the koruna i find a significant impact of order flow on the exchange rate equal to 7 6 basis points per 10 million of which 80 persists throughout the day the news of intervention increases the price impact of order flow by 3 9 basis points per 10 million the order flow equation yields inconclusive results

the advantage to hiding one s hand speculation and central bank intervention in the foreign exchange market abstract we analyze an asymmetric information model of sterilized intervention in the foreign exchange market we characterize an equilibrium in which a central bank with inside information about its exchange rate target trades with risk averse speculators who have private information about future spot rates the model identifies circumstances in which perverse responses to intervention will be observed i e the domestic currency depreciates when the central bank purchases it and it provides conditions under which the exchange rate will be highly sensitive to intervention the model also provides an explanation for two forms of policy secrecy i secrecy about the scale of an intervention operation is always desirable ii secrecy about the target is sometimes desirable

official fx interventions through derivatives abstract we use high frequency data to study the effects of currency swap auctions carried out by the brazilian central bank on the usdbrl exchange rate we find that official currency swap auctions impact the exchange rate in a significant way even though they do not directly alter the supply of foreign currency in the market we show that during our sample period auctions of contracts in which the central bank took a short position in usd had larger effects than those in which the central bank took a long position the supply of currency swaps to the market provides an alternative for traders that demand foreign currency for financial speculative or hedging rather than transactional reasons and thus affects the demand for foreign currency and its price this mechanism is likely to be particularly relevant when forecasters extrapolate exchange rate trends at short term horizons

short sale constraints information acquisition and asset prices abstract during financial crises financial market regulators often restrict short selling to support prices and curb volatility however evidence suggests that short selling bans during the turmoil in financial markets in 2007 2009 failed to achieve regulators goals we analyze a model of costly private information acquisition and asset pricing under short sale constraints to examine a possible cause of this failure we show that the constraints increase return volatility by adversely affecting the production of private information when investors are highly risk averse or are holding highly correlated risky assets the distortion in private information production arising from imposing short sale constraints leads to undervaluation implying that imposing short selling bans during economic crises not only fails to curb volatility but also may fail to support prices

short selling constraints as cause for price distortions an experimental study in this paper we explore the influence of the possibility to short stocks and or borrow money in laboratory markets a key innovation of our study is that subjects can simultaneously trade two risky assets on two double auction markets allowing us to differentiate between assets with relatively high versus low capitalization divergence of opinions is created by providing each trader with noisy information on the intrinsic values of both assets we find that when borrowing money or shorting stocks is restricted prices are systematically distorted specifically stocks with high low capitalization are traded at lower higher prices than their fundamental value lifting the restrictions leads to more efficient prices and more liquidity thereby also lowering volatility and bid ask spreads

short sales constraints and price discovery evidence from the hong kong market short sales practices in the hong kong stock market are unique in that only stocks on a list of designated securities can be sold short by analyzing the price effects following the addition of individual stocks to the list we find that short sales constraints tend to cause stock overvaluation and that the overvaluation effect is more dramatic for individual stocks for which wider dispersion of investor opinions exists these findings are consistent with miller s 1977 intuition and other optimism models we also document higher volatility and less positive skewness of individual stock returns when short sales are allowed the question of how short sales impact capital markets is highly controversial with short sale regulations varying widely across countries and capital markets 1 although short selling has been carried out for years in major financial markets around the world its effects on market efficiency especially on pricing efficiency remain of interest to financial researchers miller 1977 theorizes that in the presence of short sales constraints security prices tend to reflect a more optimistic valuation than the average opinion of potential investors and thus tend to be upward biased this overvaluation argument is based on two conditions 1 a security s short sales are either prohibited or costly and 2 investors have heterogeneous beliefs or information about the security s value the underlying intuition is quite straightforward pessimistic investors are forced to sit out of the market when short sales are not available and thus some negative information is not reflected in prices enabling enthusiastic buyers to bid prices above the level that average investors perceive as fair this argument has significant implications for market efficiency theories since one of the major functions of capital markets is price discovery indeed an efficient market should be a market in which prices always

optimal reserve composition in the presence of sudden stops abstract we analytically derive optimal central bank portfolios in a minimum variance framework with two assets and transaction demands caused by sudden stops in capital inflows in this model transaction demands become less important relative to traditional portfolio objectives as debt to reserve ratios decrease we empirically estimate optimal dollar and euro shares for 23 emerging market countries and find that optimal reserve portfolios are dominated by anchor currencies and at current debt to reserve ratios introducing transaction demand has a relatively modest effect for most countries we find that in general the dollar acts as a safe haven currency during sudden stops for country specific and global sudden stops increasing the optimal share of dollar bonds in central bank portfolios correspondingly our model predicts that dollar shares should decline as debt to reserve ratios fall as observed in recent data we also find that the denomination of foreign currency debt has little importance for optimal reserve portfolios

when r2 meets the short sales constraints we examine the short selling in the hong kong stock market and find that after the lift of short sales constraint the r2 increases contradicting the traditional wisdom that r2 is a proxy of price inefficiency moreover the change of r2 is from the decrease in idiosyncratic volatility

efficiency and the bear short sales and markets around the world we analyze cross sectional and time series information from 46 equity markets around the world to consider whether short sales restrictions affect the efficiency of the market and the distributional characteristics of returns to individual stocks and market indices we find some evidence that prices incorporate negative information faster in countries where short sales are allowed and practiced a common conjecture by regulators is that short sales restrictions can reduce the relative severity of a market panic we find strong evidence that in markets where short selling is either prohibited or not practiced market returns display significantly less negative skewness

short sales and speed of price adjustment evidence from the hong kong stock market abstract we present empirical evidence that short sales contribute to market efficiency by increasing the speed of price adjustment to not only private public firm specific information but also market wide information shortable stocks are characterized by weaker trade continuity and stronger quote reversals they adjust faster to new information than non shortable counterparts these findings remain robust even in an up market condition in which short sales are not binding the amount of information incorporated in each trade is also significantly higher for shortable than non shortable stocks in both up and down market conditions after controlling for firm size trading volume liquidity price and option trading short sales stand out as one of the significant factors that speed up the price adjustment

public investment and real price supports abstract the social rate of return to public investment in industries with fixed real price supports is studied using a simple general equilibrium model fixed real price supports are shown to enhance the likelihood of immiserizing growth due to capital accumulation or technological innovation in the supported sector general conditions under which an intervention price will induce a negative social rate of return to public investment are derived

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

price convexity and skewness this paper develops a model in which investors who are prohibited from short selling agree to disagree on the precision of a publicly observed signal the model implies that the equilibrium price is a convex function of the public signal the model predicts that 1 the stock price reacts more to good news than to bad news 2 the skewness of stock returns is positively correlated with contemporaneous returns but negatively correlated with lagged returns 3 short sale constraints increase rather than decrease skewness and 4 disagreement about information precision increases skewness empirical tests conducted find supportive evidence for all these predictions

short sales and stock price crash risk evidence from an emerging market abstract using a regulatory change in china as an exogenous shock we find that the removal of short sales constraints increases stock price crash risk this relation is attenuated when firms suffer less from information asymmetry highlighting the effect of interaction between uninformed and informed investors

the market microstructure of central bank intervention abstract how quickly do central bank intervention operations impact the foreign exchange market and do intra daily market conditions influence the effectiveness of central bank interventions this paper uses high frequency intra daily data to examine the relationship between the efficacy of intervention operations and the state of the market at the moment that the operation is made public the results indicate that some traders typically know that the fed is intervening at least 1 h prior to the public release of the information in newswire reports also the evidence suggests that the timing of intervention operations matters interventions that occur during heavy trading volume that are closely timed to scheduled macro announcements and that are coordinated with another central bank are the most likely to have large effects

optimal trade taxes on agriculture in developing countries subsistence foodcrops and incomes are hard to tax in developing countries it is easy and common to tax agricultural imports and exports if domestic transactions cannot be taxed how should agricultural trade taxes be set and how should indirect taxes on nonagricultural consumer goods be set this paper derives and quantifies formulas for the optimal export tax on a nonfood agricultural product ghanaian cocoa in which the country has market power and the level of indirect taxes on taxable consumer goods it asks whether starting from free trade on cereals there should be import tariffs or subsidies copyright 1990 by royal economic society

exchange rate effects of central bank interventions an analysis of transaction prices the impact of sterilised interventions by the swiss national bank on the swiss franc u s dollar exchange rate is examined for the 1986 94 period the paper extends results from earlier studies by using the actual prices of interventions based on the fact that all swiss national bank interventions are announced our test exploits the informational differences between interventions and customer transactions a key finding is that only initial interventions matter customer transactions and subsequent interventions have no influence when the bretton woods system of fixed exchange rates broke up in the early 1970s central banks continued to intervene on the foreign exchange market in the meantime a substantial literature has emerged that focuses on the effectiveness of official interventions this literature has been summarised by edison 1993 and almekinders 1995 chapter 3 its central policy issue is whether sterilised interventions defined as interventions that leave the monetary base unchanged can have a significant influence on exchange rate behaviour macroeconomic theory proposes various channels for interventions to operate through but the empirical evidence accumulated over the years is less encouraging it suggests that there is no permanent effect of sterilised interventions on the exchange rate more surprisingly perhaps even shortterm effects are hard to pin down the evidence is weak and sample dependent at best in most cases coefficients are either insignificant or have the wrong sign see almekinders 1995 chapter 6 baillie and humpage 1992 dominguez 1998 dominguez and frankel 1993 klein and rosengren 1991 lindberg 1994 and osterberg and wetmore humes 1995 during the last decade the bulk of the empirical research has concentrated on the analysis of daily or weekly data this line of research which adopts the view that exchange rate markets are highly efficient was stimulated by the decision of the federal reserve board and the deutsche bundesbank to make their daily intervention data available to outside researchers to rationalise the gap between the fragile empirical evidence and the manifest interest paid by the media and other observers to interventions various explanations have been offered in this paper we stress two measurement problems first there is the problem of properly defining the exchange rate change in the regression analysis since intervention exchange rates are not available the

arbitrage short sales and financial innovation the authors describe a model of general equilibrium with incomplete markets in which firms can innovate by issuing arbitrary costly securities when short sales are prohibited firms behave competitively and equilibrium is efficient when short sales are allowed these classical properties may fail if unlimited short sales are allowed imperfect competition may persist even when the number of potential innovators is large if limited short sales are allowed perfect competition may obtain in the limit but equilibrium can be inefficient because of the presence of an externality the private benefits of innovation for firms differ from the social benefits copyright 1991 by the econometric society

agricultural pricing and public investment abstract aggregate agricultural supply is price inelastic but responsive to investment in agricultural infrastructure irrigation roads research extension thus the government should tax agriculture and finance infrastructure although unlikely to pay for itself directly it will increase taxable agricultural surplus but by raising rural living standards and therefore the supply price of urban labour it reduces urban tax revenue its marginal social product is therefore overstated when measured at world prices though understated at distorted agricultural prices with scale economies in industry the case for taxing and investing in agriculture is strengthened it may allow the economy to escape stagnation

connecting supply short sellers and stock returns research challenges abstract one key challenge for the short selling literature is to identify the incremental contribution of various measures of short sale constraints although variables such as loan fee loan supply and short interest are determined simultaneously in the market for borrowing stock new incremental information may be found in each variable examined papers such as beneish et al 2015 attempt to disentangle the effect of one particular variable and attempt to shed light on the parallel challenge faced by investors in determining which variables will make the most impact on returns as well as trading costs we discuss a number of practical approaches to this challenge and we also consider a potentially new take that considers accounting data driven anomalies as one of the possible exogenously determined variables in the equilibrium of the equity loan market

does short sale restriction lower price efficiency when substitutes exist evidence from the korean market using kospi200 index options futures and warrants this study examines the effect of short sale restriction on price efficiency by circumventing the concerns regarding firm characteristics market conditions and limited information acquisition of investors in previous empirical studies this study finds that warrants are as price efficient as other derivatives products after market conditions are considered even though warrant investors cannot short sell this finding provides an example that short sale restriction on some assets may not hinder market efficiency if there are close substitutes for those assets in the market

volume volatility and the dispersion of beliefs i examine a two period noisy rational expectations model of a futures market and show that the dispersion of expectations about a weighted average of future prices measures both the additional volatility and the additional expected volume of trade associated with noisy information the role played by dispersion helps clarify several stylized facts concerning volume and price behavior specifically dispersion can be a factor contributing to the positive correlation between volume and absolute price changes and the positive correlation between consecutive absolute price changes article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

exchange rate management in emerging markets intervention via an electronic limit order book this paper describes and analyzes the implementation of a crawling exchange rate band on an electronic trading platform the placement of limit orders at the central bank s target rate serves as a credible policy statement that may coordinate beliefs of market participants we find for our sample that intervention increases exchange rate volatility and spread for the next minutes but that intervention days show a lower degree of volatility and spread than non intervention days we also show for intraday data that the price impact of interbank order flow is smaller on intervention days than on non intervention days these stabilizing effects however rely on the conditions of large currency reserves and the existence of capital controls an electronic market seems to support this goal

potential pilot problems treatment spillovers in financial regulatory experiments abstract the total effects of a regulatory change consist of direct effects and indirect effects spillovers but the standard difference in difference approach mostly ignores potential indirect effects during the 2007 full repeal of the uptick rule short sellers become much more aggressive across the board even in control stocks where the uptick rule is already suspended this finding is consistent with positive and significant indirect effects on control stocks likely driven by aggressive broad list based shorting in contract the indirect effect coefficients on shorting aggressiveness are negative for the 2005 partial uptick repeal possibly due to substitutions between control and treatment stocks

when do central bank interventions influence intra daily and longer term exchange rate movements this paper examines dollar interventions by the g3 since 1989 and the reasons that trader reactions to these interventions might differ over time and across central banks market microstructure theory provides a framework for understanding the process by which sterilized central bank interventions are observed and interpreted by traders and how this process in turn might influence exchange rates using intra daily and daily exchange rate and intervention data the paper analyzes the influence of interventions on exchange rate volatility finding evidence of both within day and daily impact effects but little evidence that interventions influence longer term volatility

short selling margin trading and price efficiency evidence from the chinese market abstract china launched a pilot scheme in march 2010 to lift the ban on short selling and margin trading for stocks on a designated list we find that stocks experience negative returns when added to the list after the ban is lifted price efficiency increases while stock return volatility decreases panel data regressions reveal that intensified short selling activities are associated with improved price efficiency short sellers trade to eliminate overpricing by selling stocks with higher contemporaneous returns following a downward trend and their trades predict future returns in contrast we find intensified margin trading activities for stocks with lower contemporaneous returns and these trades have no return predictive power

do sales of foreign exchange reserves lead to currency appreciation we employ novel time stamped reserve sales data provided by the czech national bank cnb to carry out a time series analysis of the exchange rate implications of czech reserve sales aimed at mitigating valuation losses on euro denominated assets the sales were explicitly not intended to influence the value of the koruna relative to the euro the period under study includes a well defined regime change in the cnb s approach to reserves sales allowing us to address whether the manner in which the sales are carried out matters for their influence on the relative value of the domestic currency we find little evidence that reserve sales influence the exchange rate when sales are carried out on a discretionary and relatively infrequent basis however when the sales are carried out daily we find a statistically and economically significant appreciation of the domestic currency follows