determinants of bank growth choice abstract we study the determinants of bank growth in a two stage logistic regression model we first compare banks that branch bank acquire or product expand with banks that do not grow externally banks that are federally chartered in states with higher income growth and with higher labor prices are less likely to grow externally larger banks are more likely to grow externally in the second stage we study determinants of growth activity for banks that expand products branch or acquire other banks depending on the time period bank structure regulatory environment performance and balance sheet characteristics determine bank growth choices

the determination of foreign banking location abstract in this paper we examine the determinants of foreign bank location we initially present some time series data on the postwar expansion of international banking we show that foreign branching increased very rapidly from about 1960 to the mid 1980s and slowed significantly after 1985 one interpretation of this growth in foreign branching is that it largely paralleled the increase in trade and foreign direct investment although it may also have been encouraged by the improvements in communications and the rapid financial innovation of the 1960s and 1970s to assess the role of trade and foreign direct investment on bank expansion we employ a cross sectional analysis of the pattern of foreign bank offices whereas previous studies have focused on a single parent or host country our study extends the existing literature by analyzing the location of nearly 2000 overseas offices across 37 patent and 82 host countries our results suggest a significant relationship between the pattern of bank location trade and foreign direct investment we define a banking centre as one in which there are more foreign banks than can be explained in terms of real business activity and we show that the usa uk switzerland singapore and indonesia most clearly qualify as banking centres we also provide some evidence for a sample of host countries that the abnormal number of bank offices is related to capital market activities

another day another collar an evaluation of the effects of nyse rule 80a on trading costs and intermarket arbitrage in 1990 the new york stock exchange amended its rule 80a to restrict stock index arbitrage on days of large price movements the authors find that rule 80a significantly curtails or collars index arbitrage activity in spite of this curtailment in index arbitrage volume they find that rule 80a appears to have had little overall impact on trading costs and intermarket linkage although pricing discrepancies between the markets do appear to be eliminated less quickly the authors results are consistent with the hypothesis that information is conveyed from one market to the other by means other than formal arbitrage copyright 1998 by university of chicago press

an empirical investigation of changes in scale economies for the commercial banking firm 1979 1986 the period of the 1980s represents a particularly turbulent time for the banking industry a number of technological and regulatory changes have occurred including the elimination of regulation q which had limited the explicit interest payments that banks could pay on some types of deposits it would be expected that these changes would affect the structure of costs for banks the behavior of the cost function is studied over the 1979 1986 time period and in contrast to previous studies using earlier data increasing economies of scale are found in the later years for banks in both unit and branch banking states these results indicate that there may be increased cost pressure for smaller banks to become larger either through mergers and acquisitions or through internal growth this may lead to further consolidation pressures within the industry and reductions in the overall number of banking firms copyright 1991 by ohio state university press

commercial bank offices and the mobilisation of private savings in selected sub saharan african countries the mobilisation of domestic savings has remained a thriving issue in discussions of ways and means of harnessing resources for development in africa this work attempts to examine the role of a deliberate policy of extending offices of banks to the rural areas in savings mobilisation efforts using ordinary least squares methods data from five african countries that have pursued this policy in recent times are examined to see if there is any significant relationship between the savings rate and their population per bank office ratio our results are consistent with the hypothesis that the extension of branch offices of banks to rural areas could help attenuate the poor savings performance in most african economies

performance measurement expectancy and agency theory an experimental study theoretical analyses of optimal performance measures are typically performed within the realm of the linear agency model this model implies that for a given compensation scheme the agent s optimal effort is unrelated to the amount of noise in the performance measure in contrast expectancy theory as developed by psychologists predicts lower effort levels for noisier performance measures we conduct a real effort laboratory experiment and find that effort levels are invariant to changes in the distribution of the noise term i e to expectancy this suggests that enriching the economic linear agency model commonly applied within this area by including an expectancy parameter is not needed

the value of shorting abstract this paper assesses the effects of short sale constraints on asset prices the analysis focuses on a particular period in sweden during which shorting stocks was impossible but stock options were traded firstly the effect on both stock options and the underlying stock was investigated jointly by considering deviations from put call parity secondly the effects on only the derivatives were investigated by considering their implied volatilites the main findings are i the impact on pricing are consistent with a short sale constraint ii these effects are much more pronounced when shorting is not possible iii these effects are not solely attributable to the mispricing of the stock as previous research indicates and iv access to international shorting markets can alleviate local short sale constraints

the decision to establish a foreign bank branch or subsidiary an application of binary classification procedures this paper has two purposes first we model a key decision for inter national banks using data on the foreign direct investment fdi behavior of foreign banks in japan and california second we examine the utility of linear discriminant analysis and maximum likelihood logit analysis as statistical techniques for relating a qualitative dependent variable to a vector of inde pendent variables we apply these techniques to the decision by parent banks as to whether or not to have a subsidiary branch in california japan we treat the deci sion as a binary choice based on a consideration of various relevant factors the population for each of the countries consists of those foreign to the host country banks that already have a presence in the country the research ques tion then becomes given that a foreign bank is in the country does the extent of the parent bank s experience internationally and in the host country affect the probability that it will deepen its presence the choice of statis tical tools by which to examine this question gives rise to our methodological concerns

correspondent services and cost economies in commercial banking abstract prior bank cost function studies have ignored the fact that some banks obtain a substantial amount of services from their correspondents if these services are paid for with compensating deposit balances their cost to the purchasing bank is not reflected in standard expense reports this paper investigates whether explicit consideration of theese correspondent costs materially affects estimated bank returns to scale the results indicate that the level of banksoperating costs is underreported by as much as 15 while scale economy estimates for unit banks are not significantly affected by the addition of correspondent service costs prior studies have overestimated branch bank scale economies by a small but statistically significant amount

shared atm networks and banking competition abstract in this paper we study the incentives of banks to share their automatic teller machines atms when they are competitors in the market for deposits we construct a stylized model of banking competition which emphasises the distinctive features of atm compatibility we find that in equilibrium either a strict subset of banks share their atms or total incompatibility prevails we also derive the implications for atm compatibility of withdrawal fees interchange bank fees entry and depositor switching costs finally we investigate the normative implications of our model and draw some policy conclusions

the asian financial crisis the role of derivative securities trading and foreign investors in korea abstract this paper is part of a larger research program pertaining to the role of derivatives during financial crisis and also part of the research pertaining to the causes of the asian financial crisis the korean market is studied because of two reasons 1 it is an important example of the asian financial meltdown and 2 there is a detailed data set available of all transactions by different types of protagonists including foreign investors the results in this paper indicate that futures markets and trading by foreign investors played a key role during the korean stock market turbulence in 1997

the dynamics of stock index and stock index futures returns in rational efficiently functioning markets the returns on stock index and stock index futures contracts should be perfectly contemporaneously correlated this study investigates the time series properties of 5 minute intraday returns of stock index and stock index futures contracts and finds that sp however the effect is not completely unidirectional with lagged stock index returns having a mild positive predictive impact on futures returns

scale economies in banking a restructuring and reassessment the issue of scale economies in banking has a rich history most earlier studies report modest operating cost scale economies for small institutions those with less than about 50 million of deposits in 1968 dollars but are unclear where these economies might end if at all unfortunately these studies are limited in four important respects first those that were well specified did not measure the total cost of banking operations but concentrated on estimating scale economies for individual banking functions e g demand deposits separately from commercial loans second an average cost curve that could take a u shape over the full range of banks was not fitted either because larger banks were not included or because of the functional form used cobb douglas consequently the optimum or minimum cost size of a bank or office could not be determined third the variables measuring the costs of branching were misspecified fourth the branch

one market stocks futures and options during october 1987 we provide new evidence regarding the degree of integration among markets for stocks futures and options prior to and during the october 1987 market crash where previous analyses have resulted in recommendations for the implementation of circuit breakers the coordination of margin requirements across markets and changes in regulatory jurisdiction our analysis indicates that delinkage between markets during the crash was primarily caused by an antiquated mechanism for processing stock market orders the results suggest that market integration may be better served by efficient order execution than by further restricting markets

international banking a survey two distinct sets of issues are involved in the analysis of international banking one set the industrial organization issues centers on the patterns of expansion of foreign branches and subsidiaries of banks headquartered in the united states great britain japan and a few other industrial countries and on the nature of the advantage that these branches and subsidiaries have in relation to their host country competitors the second set the international finance issues involves the role of banks in cross border and cross currency financial flows both from their head offices and from their foreign branches and subsidiaries despite the attention to international banking there are few uniquely international institutions rather international banks are a subset of domestic banks with significant numbers of foreign branches and subsidiaries moreover there are few uniquely international banking activities although foreign exchange trading may seem to be one in many countries most or all foreign exchange trading involves domestic banks with few if any foreign branches the growth of foreign branches and subsidiaries of major banks occurred in two waves the first occurred in the decades before world war i when the war started

arbitrage nontrading and stale prices october 1987 this article explains a puzzle created by the standard and poor s 500 cash and futures prices during the crash of october 1987 the cash index appears to be a moving average of the futures but nontrading in constituent stocks explains only the initial period of delayed openings however execution of stale limit buy orders given the high volume and nyse market mechanisms at the time resulted in extraordinary levels of stock prices that were not caused by nontrading the model is supported in aggregate s p data and transactions data for individual stocks copyright 1992 by university of chicago press

s p 100 index option volatility using transaction data on the s p 100 index options we study the effect of valuation simplifications that are commonplace in previous research on the timeseries properties of implied market volatility using an american style algorithm that accounts for the discrete nature of the dividends on the s p 100 index we find that spurious negative serial correlation in implied volatility changes is induced by nonsimultaneously observing the option price and the index level negative serial correlation is also induced by a bid ask price effect if a single option is used to estimate implied volatility in addition we find that these same effects induce spurious and unreasonable negative cross correlations between the changes in call and put implied volatility an important area of current research is the estimation and behavior of market volatility implied by option pricing models for example stein 1989 concludes that the s p 100 index option market is inefficient because longer term options overreact to changes in the implied volatility of short maturity options day and lewis 1988 document an increase in volatility around the quarterly expiration cycle schwert 1990 draws conclusions about the behavior of volatility around the stock market crash of 1987 by using implied volatility all of these studies use a simplified option pricing framework to estimate implied market volatility previous research generally assumes that the s p 100 index option is european style this option is actually american style it is also common to assume that the dividend yield is constant the dividends are not constant and exhibit distinct seasonal patterns harvey and whaley 1991b show that large pricing errors can be induced in the option prices if the american feature and the discrete dividends are ignored option pricing errors translate into errors in the implied volatility estimates this paper uses s p 100 index call and put transactions and an american style option pricing model with the exact discrete dividend series to calculate a time series of implied volatilities this valuation method

product line deregulation and the cost structure of us savings and loan associations recent legislative actions restrict thrift powers which were broadened by deregulatory actions in the early 1980s using nationwide data for savings and loans s ls evidence is found that these restrictions may rise intermediation costs for s ls by limiting their ability to exploit economies of scope between mortgage related and other outputs in addition economies of scale for a wide size range of s ls are found evidence is also found to suggest that insolvent s ls have higher costs for the same level of outputs than solvent s ls

banks financial liberalisation and financial crises in emerging markets the east asian financial crisis has raised a series of important issues amongst them is the question of the role of the banking sector and financial liberalisation in contributing to financial crises how do weaknesses in the domestic banking sector when combined with both domestic and international financial liberalisation engender currency crises what is lacking in the literature is a simple conceptual framework within which these connections can be conceptualised and drawn out and in which the role of banks is explicitly discussed this paper seeks to provide just such a framework within it international financial liberalisation can be seen as fuelling a boom in domestic credit which leads to acute balance sheet problems for domestic banks and exposes the country concerned to a currency crisis in the event of a sudden reversal of capital inflows which banking weaknesses may itself trigger

the role of location related factors in u s banking involvement abroad an empirical examination this study examines the role of major location specific advantages in the international branch banking involvement of u s banks using pooled time series 1976 82 cross sectional thirty countries regression analysis this study finds that the u s business presence in foreign country has a strong positive effect on u s branch banking activity in that country in contrast the local market opportunity appears to have no significant effect these results hold for the entire set of countries as well as each of five subsets developed less developed european latin american and asian countries the openness of the host country to the establishment of new foreign bank branches does affect u s branch banking involvement this effect is most pronounced in the less developed countries particularly those in asia

options resilience during extreme volatility evidence from the market events of may 2010 abstract using intraday trades and quotes data we study the stock options market before during and after the market events of may 6 2010 focusing on the s p 500 and s p 100 stock options we explore if the options market provided any discernible signals that forewarned the extreme volatility on that day and whether the recovery was fast and without a permanent impact we find that the options market reacted to the volatility rather than predicting it and almost all of the variables are indistinguishable from their previous levels in the next few trading days intraday empirical analysis suggests that most of the impact was over within a few hours from the peak of market volatility

international lending patterns of u s commercial banks the international lending behavior of the u s commercial banks depends upon economic links between countries much of the difference between the international loan portfolios of u s banks and those of the non u s banks may be explained by the patterns of trade flows and investments by nonfinancial corporations these trade flows and investment patterns explain most of the variations in the bank lending patterns for 70 80 percent of the countries the analysis points to an increasing influence of economic ties on the lending process over time

a computation of interest equivalences for nonprice characteristics of bank products this paper seeks to price the nonprice features of british retail bank products it outlines a methodology for computing interest equivalences for a selection of characteristics estimates are obtained for a full observation set and a subset of survivor products on an efficiency frontier its main findings are that certain nonprice features are significant and there does not appear to be a strong case for separating out those products that lie on an efficiency frontier copyright 1992 by ohio state university press

salaries and piece rates compensation can take many forms remuneration can come as pecuniary payments as fringes such as health and pension benefits or as a nonpecuniary reward such as plush office furniture that costs the firm less than it benefits the worker a significant literature has examined the trade offs between pecuniary and nonpecuniary compensation the modern work having been pioneered by rosen 1974 more recently another body of literature has examined the selection of method of total compensation ignoring the distinction between pecuniary and nonpecuniary payment this work has focused on risk and incentive factors it has resulted in comparisons of compensation based on absolute output levels to that based on relative performance it has also led to explorations of the relation of compensation to experience over the work life 2 little attention has been paid to what may be among the most important and obvious distinction in methods of compensation namely the choice between a fixed salary for some period of time that is paying on the basis of input and some workers receive compensation that is specified in advance and not directly contingent on performance instead it depends on an input measure such as hours worked for others compensation is directly related to output this essay is an attempt to predict a firm s choice of compensation method piece rates are defined more rigorously among the more important factors discussed are worker heterogeneity incentives sorting considerations monitoring costs and asymmetric information one result is that salary workers tend to be of lower quality and more homogeneous than are their piece rate counterparts numerous additional results are provided helpful comments by victoria lazear and yoram weiss are gratefully acknowledged support was provided by the department of labor and the national science foundation 1 see lazear and rosen 1981 stiglitz 1981 holmstrom 1982 green and stokey 1983 2 see lazear 1979 1981 and harris and holmstrom in press

the location of international financial activity an interregional analysis goldberg m a helsley r w and levi m d 1989 the location of international financial activity an interregional analysis reg studies 23 1 7 this paper examines the determinants of the spatial distribution of financial activity the determinants of the sizes of the financial services sector are estimated using data for a sample of us states although our analysis is limited by the availability of data the results are strong and clear the level of international financial activity is positively and significantly related to per capita income the level of imports and the number of corporate headquarters the results indicate that international trade is intensive in its use of financial services and that financial services tends to be exported along with goods goldberg m a helsley r w et levi m d 1989 la localisation des operations financieres internationales une analyse interregionale reg studies 23 1 7 cet article examine les determinants de la distribution geographique des opera

branching scale economies and banking costs abstract in this paper we develop and estimate a model of bank costs based on a theory of the branch cost function first we show that convenient branch location is important to banking customers and implies that banks do not necessarily operate branches at minimum average cost this theoretical result provides a rationale for including branch variables in the bank cost function second we estimate a statistical cost equation derived explicitly from assumptions about the branch cost function and including branch output variables our empirical results suggest substantial economies of scale at the branch level but no economies from expansion by branching finally we show that the resulting cost structure of the banking industry does not imply that a highly concentrated banking structure is necessary for efficiency thus economies of scale would not be expected to force small banks out of the market even if current restrictions on interstate banking are liberalized

adaptive expectations and stock market crashes a theory is developed that explains how stocks can crash without fundamental news and why crashes are more common than frenzies a crash occurs via the interaction of rational and naive investors naive traders believe that prices follow a random walk with serially correlated volatility their expectations of future volatility are formed adaptively when the market crashes naive traders sell stock in response to the apparent increase in volatility since rational traders are risk averse as well a lower price is needed to clear the market the crash is a self fulfilling prophecy frenzies cannot occur in this model

box spread arbitrage profits following the 1987 market crash real or illusory we examine market efficiency before and after the 1987 market crash using the box spread strategy implemented with european style s p 500 index spx options before the crash apparent arbitrage opportunities were rare and simulated trades were unprofitable assum ing a one minute execution delay after the crash apparent arbitrage opportunities were frequent and simulated trades were profitable even assuming a five minute execution delay our analysis makes the routine assumption that quotes are good until updated to construct a time series of prevailing quotes sampled at 30 second intervals if this assumption is valid then arbitrage profits were actually available if this assumption is invalid then such profits could have been illusory either scenario however implies that spx market effi ciency decreased following the crash prevailing price quotes repeatedly failed to satisfy the fundamental parity relation underlying the box spread

size growth and transnationality among the world s largest banks this essay investigates the relationship between size and growth rate of large international banks and then relates these to the banks degree of transnationality we test two sets of three propositions each the first three propositions are pi that the growth rate of each bank over some period is independent of its size p2 that the variability of growth rates is independent of the banks size and p3 that the banks growth rates in two consecutive periods are independent of each other the second three propositions are p4 that there is no association between size and transnationality p5 that transnationality and growth are independent and p6 that there is no relationship between transnationality and the variability of growth rates the growth referred to is primarily that of assets as a measure of size for the two propositions concerning the variability of growth rates we supplement this measure with one of the market value of the banks equity the results have implications for concentration in internathis paper investigates six propositions relating to gibrat s law of proportionate growth the growth referred to is that of book assets and total market value the results have implications for concentration in international banking and for depositor safety and the social cost of insuring it and provide evidence on economies of scale and on the transnational spread of the industry

the structure of international banking abstract this paper investigates the factors that determine the number and form of foreign banking operations from 60 foreign countries in the united states our equilibrium model of three banking forms representative offices agencies and branches and three explanatory variables export activity merchant banking activity and capital market development explains more than 74 per cent of the variation in numbers of offices across the 60 different foreign countries in addition we identify the equilibrium model of competition among the types of operations that is most consistent with the empirical results jel f33

the structure of technology in a multioutput branch banking firm we formulate and estimate a multioutput bank s cost function amenable for distinguishing between economies of scale and economies of network density we find significant returns to network density especially for smaller banks diseconomies of scale are found for the larger banks whereas the hypothesis of constant returns to scale could not be rejected for the smaller banks

reconsidering pay dispersion s effect on the performance of interdependent work reconciling sorting and pay inequality pay dispersion in interdependent work settings is virtually universally argued to be detrimental to performance we contend however that these arguments often confound inequality with inequity t

technical change organizational form and the structure of bank production of those technological characteristics related to the nature of competition among firms in an industry or market scale economies and technical change are especially important economies of scale are said to exist when an equiproportional increase in all inputs results in a greater than proportional increase in output or equivalently when an increase in output at constant input prices leads to a less than proportional increase in total costs thus average costs decline as output expands depending upon the extent to which costs decline as output increases regulation of the firms in the industry may be necessary l the literature analyzing scale economies in commercial banking is voluminous the early studies on scale economies in banking include those by benston 1965 1972 greenbaum 1967 murphy 1972 and bell and murphy 1968 more recent studies include those by benston hanweck and humphrey 1982 and clark 1984 2 this literature has established that mild scale economies exist in bank

the efficiency effects of a single market for financial services in europe abstract this paper examines the potential efficiency effects of a single market for financial services in europe the topics covered include universal banking the merger and acquisition process itself cross border ownership and management of financial institutions and the effects of consolidation of financial institutions on the supply of relationship lending services to informationally opaque small businesses the research reviewed here suggests that the creation of a single market for the european financial services industry is not likely to bring about strong efficiency gains and that cross border efficiency barriers may prevent the single market from becoming a reality

a note on the location choice of multinational banks the case of japanese financial institutions abstract there are many studies investigating the location choice of foreign direct investment fdi of us banks nigh et al journal of international business studies 17 1986 59 72 find that the choice does not depend on local banking opportunity this paper examines what factors affect the location choice of japanese multinational financial institutions our results are consistent with previous studies analyzing us banks in that the fdi of the manufacturing industry is an important determinant of the location choice of japanese financial institutions however our results differ from nigh et al in that japanese financial institutions choose their locations at least partially based on the local banking opportunity in the host countries

returns to scale and input substitution for large u s banks the united states commercial banking industry has experienced significant changes in recent years the recent wave of mergers and the near term prospects of interstate banking suggests that the industry is moving toward much larger average banking organizations rhoades 1985 will a more concentrated banking industry result in lower costs due to scale economies we address this question by examining the cost function for large banks numerous studies of economies of scale in banking exist generally tracing their roots to the classic papers by benston 1965 and bell and murphy 1968 a good review of the most recent studies can be found in clark 1988 the majority of the papers uses samples of smaller banks that is under 1 billion in deposits finding generally that economies of scale are quickly exhausted and that further increases in bank size occur at constant or possibly increasing cost the extrapolation of previous findings for samples of smaller banks to large banks may be problematic especially in the current environment first large banks service a different mix of markets and customers than small banks suggesting that large and small banks probably face different cost structures second the process of deregulation may have rendered the results of prior studies moot since the data pertain to periods before significant deregulation since we

the effects of the international banking act on domestic bank profitability and risk the passage of the international banking act of 1978 was the first major step towards imposing consistent and uniform federal regulations on the growing number of foreign banks entering the united states prior to this date foreign banks had been subject to a patchwork of state laws of varying degrees of stringency covering their entry expansion and portfolio behavior see white 1982 and walker 1983 the net result of this patchwork of state regulation was that by 1978 foreign banks had developed certain competitive advantages over domestic banks these advantages emanated from the fact that foreign bank branches and agencies i were not required to meet federal reserve determined reserve requirements on liabilities such as large cds and ii they were not subject to federal laws governing interstate banking the 1927 mcfadden act and activity diversification the 1933 glass steagall act and the 1956 bank holding company act including its 1970 amendments however foreign banks were also subject to certain disadvantages compared to domestic banks in particular they were inhibited from entering into retail banking markets by being ineligible for fdic insurance and being denied access to fed services such as check collection and the discount window to eliminate these discrepancies in relative regulation the international banking act iba was introduced in the house of representatives in february 1978 re

what factors cause foreign banks to stay in london the banking literature focuses extensively on the phenomenon of bank entry and pays less attention to the factors driving the continuation of banking activities in foreign markets in this paper we analyze this important but overlooked issue by constructing a unique database of foreign banks that continue operating and those that have withdrawn from arguably the world s most international banking center london this new data set comprises information on 408 offices from 77 countries spanning the period from 1945 to 1999 giving us 4643 observations of which 2795 represent offices that continue operating and 1848 that withdrew from london during this period our empirical work shows that the continuation of international banking activity in london is positively related to the setup of locally integrated organizational forms at entry the experience in the local market and the size of local operations continuation of banking activities is however negatively related to the setup of organizational forms integrated into the parent bank at entry and to the geographic distance of the home country to london we also find that higher global economic activity increases the likelihood of international banking operations continuing in london however the more volatile the global economic environment the greater the prospect of a cessation of this activity

order imbalances and stock price movements on october 19 and 20 1987 on october 19 1987 nyse stocks in the s p index declined seven percentage points more than nyse stocks not in this index in the first hour of trading on october 20 the s p stocks virtually recovered to the level of the non s p stocks there is a strong relation between order imbalances and stock price movements both in analyses of time series and cross sections thus in addition to the breakdown in the linkage between future prices and the spot index on these two days there were also breakdowns in the linkage among nyse stocks

recent trends in international banking abstract the paper defines international banking more as a geographical expression than as a particular type of activity and points out that the internationalization of the world s major banking systems was in many cases an evolutionary phenomenon governed by market or institutional developments it analyses both the development of international banking structures stressing the process that brought banks to prefer international retail activity rather than wholesale and the relationship between domestic and international banking finally the paper deals with the not easy to resolve problem of the establishment of lender of last resort facilities in international banking

mean reversion of standard poor s 500 index basis changes arbitrage induced or statistical illusion mean reversion in stock index basis changes has been presumed to be driven by the trading activity of stock index arbitragers we propose here instead that the observed negative autocorrelation in basis changes is mainly a statistical illusion arising because many stocks in the index portfolio trade infrequently even without formal arbitrage reported basis changes would appear negatively autocorrelated as lagging stocks eventually trade and get updated the implications of this study go beyond index arbitrage however our analysis suggests that spurious elements may creep in whenever the price change or return series of two securities or portfolios of securities are differenced mean reversion in stock index basis changes has been amply documented mackinlay and ramaswamy 1988 find significant negative first order autocorrelation in normalized intraday basis changes of the s p 500 index futures traded on the chicago mercantile exchange cme yadav and pope 1990 find similar behavior using financial times stock exchange ftse 100 index futures data from the london international financial futures exchange liffe as does lim 1990 using nikkei 225 index futures from the singapore international monetary exchange simex the trading activity of stock index arbitragers has been presumed to be driving this elastic realignment of stock index and index futures prices when the basis widens beyond its theoretical level arbitragers simultaneously sell index futures and buy the index portfolio pulling the difference between the futures and index

the extension of international credit by us banks a disaggregated analysis 1988 1994 abstract we use simultaneous equation estimation techniques to analyze decisions made by 35 us banks with respect to credit extended domestically and to credit extended within 16 foreign countries 1988 1994 our results indicate that foreign credit extension by us banks follows the commercial expansion of us businesses abroad and is greater in countries with expanding economies they are inconsistent with the notion that banks trade off credit activities undertaken domestically and abroad

the determinants of us banking activity abroad abstract the banking industry provides an excellent example of the internationalization of world business and economic interdependencies across countries analysis of the past growth of international banking operations can also prove useful to banks interested in augmenting their current business or expanding their international coverage and to banks who anticipated future competition in their markets from new or strengthened foreign competitors this study provides the most comprehensive examination of the development of us bank branches in other countries is presented and tested in order to facilitate the understanding of the expansion of international banking

the october 1987 s p 500 stock futures basis five minute changes in the s p 500 index and futures contract are examined over a ten day period surrounding the october 1987 stock market crash since nonsynchronous trading problems are severe in these data new index estimators are derived and used the estimators use the complete transaction history of all 500 stocks nonsynchronous trading explains part of the large absolute futures cash basis observed during the crash the remainder may be due to disintegration of the two markets even after adjustment for nonsynchronous trading the index displays more autocorrelation than does the futures and the futures leads the index

signaling in secret pay for performance and the incentive and sorting effects of pay secrecy although the vast majority of u s firms follow a policy of pay secrecy research provides a limited understanding of its overall utility to organizations building on signaling theory we develop

branch bank operating costs evidence from savings banks in finland empirical findings on branch bank operating costs are presented the analyses examine 1988 data for 646 individual branch offices representing 43 savings banks in finland another sample of 48 unit banks with no branches is collected comparisons of plant scale economics are made using the more traditional approach based on aggregate branch bank data versus individual branch office data moreover effects of the number of branches in the branching organization on individual branch office operating costs are examined finally direct comparisons of branch office versus unit bank operating costs are provided

international trade in banking services abstract this paper investigates which of the theories of international trade best explains trade in international banking in its various forms branches subsidiaries and representatives strong evidence is found to support the newer economies of scale theories and it is proposed that the foreign exchange and capital markets exhibit declining costs to production it is also discovered that the relaxation of exchange and capital controls by potential host countries diminishes the incentives of banks to seek direct representation

intraday price change and trading volume relations in the stock and stock option markets this study investigates intraday relations between price changes and trading volume of options and stocks for a sample of firms whose options traded on the cboe during the first quarter of 1986 after purging the price change series of the effects of bid ask spreads multivariate time series analysis is used to estimate the lead lag relation between the price changes in the option and stock markets the results indicate that price changes in the stock market lead the option market by as much as fifteen minutes the analysis of trading volume indicates that the stock market lead may be even longer the intense trading activity in and in fact the very existence of organized stock option markets attest to the economic benefits that these financial contracts provide reduced transaction costs and increased financial leverage are two reasons why trading in the stock option market may be more attractive than trading in the market for the underlying stock in addition these cheaper and more flexible trading opportunities attract new and differently informed investors to the marketplace the resulting increase in trading activity together with the inextricable arbitrage linkage between stock and option prices imply an increase in market efficiency this study investigates empirically the intraday price change and trading volume relations between stocks and options for a sample of firms whose options were actively traded on the chicago board options exchange during the first quarter of 1986 in particular intraday call option price changes are translated into implied stock price changes using the american call option pricing model these intraday implied stock price changes are then compared with the actual stock price changes to identify which if either market leads the other in perfectly functioning capital markets there should be complete simultaneity between the series that is new information disseminating into the marketplace should be reflected in the prices and the trading activity of both securities simultaneously institutional factors however may make the stock option market more attractive to information traders this may cause price changes and trading activity due to new information to be observed in the option market first followed by price

depository institution competition in the deregulated environment the case of the large credit union the purpose of this paper is to analyse the effect of deregulation and enhanced competition on the costs and performance of large credit unions using a sample of large credit unions over the period 1979 through to 1985 we find no evidence that credit unions average costs have risen nor do we find evidence that credit unions have suffered adverse changes in operating margins large credit unions not only compete with other depository institutions but appear to have responded well in the newly competitive environment

exporting financial institutions management via foreign direct investment mergers and acquisitions we test the relevance of the new trade theory and the traditional theory of comparative advantage for explaining the geographic patterns of international m as of financial institutions between 1985 and 2000 the data provide statistically significant support for both theories we also find evidence that the u s has idiosyncratic comparative advantages at both exporting and importing financial institutions management