limit order submission strategies under asymmetric information abstract this paper provides evidence that informed traders dominate the response of limit order submissions to shocks in a pure limit order market in the market we study informed traders are highly sensitive to spreads volatility momentum and depth by contrast uninformed traders are relatively insensitive to all these market conditions the dominance of the informed over limit order submissions is magnified by contrasts between them and the uninformed in the use of aggressively priced limit orders

trader see trader do how do small fx traders react to large counterparties trades abstract we show that information about the counterparty of a trade affects the future trading decisions of individual traders the effect is such that traders tend to reverse their order flow in line with the better informed counterparties informed traders primarily incorporate their own private as well as publicly available information into prices whereas uninformed traders mainly magnify the effect of the informed this pattern of interaction among traders extends to different order types traders treat their own and others market orders as more informative than limit orders

scheduling the production of several items with random demands in a single facility consider the problem of scheduling the production of several items in a single facility that can produce only one item at a time this problem occurs since it is often economic to produce several items in a single facility the objective is to reduce the long run average holding backorder and setup costs we assume that demands are random with constant expected rates we allow backorders and charge holding and backlogging costs at linear time weighted rates items are produced at continuous constant rates setup times and setup costs are item dependent constants these parameters however are independent of the order of setups a real time scheduling tool is developed in three steps first with demands replaced by their expectations we compute an optimal or near optimal target cyclic schedule next we study the problem of scheduling the facility after a single disruption perturbs the inventories the goal is to recover the target cyclic schedule at minimal excess over the average cost of the cyclic schedule we formulate this as a control problem and obtain a linear recovery policy that is optimal for a large configuration of disruptions finally we select safety stocks to minimize the long run average cost of following the target schedule with the recovery policy we show that optimal safety stocks are unique and have the property that in the long run the proportion of time that an item is in stock is the ratio of backorder to holding plus backorder cost we present an example that integrates the cyclic schedule the control policy and the safety stocks

limit order book as a market for liquidity we develop a dynamic model of an order driven market populated by discretionary liquidity traders these traders must trade yet can choose the type of order and are fully strategic in their decision traders differ by their impatience less patient traders demand liquidity more patient traders provide it three equilibrium patterns are obtained the pattern is determined by three parameters the degree of impatience of the patient traders which we model as the cost of execution delay in providing liquidity their proportion in the population which determines the degree of competition among the liquidity providers and the tick size which is the cost of the minimal price improvement despite its simplicity the model generates a rich set of empirical predictions on the relation between market parameters time to execution and spreads we argue that the economic intuition of this model is so basic its main results must be robust in much more general models

determination of safety stocks for cyclic schedules with stochastic demands abstract this paper considers the problem of scheduling the production of multiple items each with random demand on a single facility we show how the variance in demand during lead time can be estimated and present a model for determination of safety stocks and order up to levels for a fixed cyclic sequence both with and without idle time for systems with idle time we present a control model to make the decision to produce next item in sequence or idle the facility the performance of the model is tested in a simulation study

estimating the gains from trade in limit order markets we present a method to estimate the gains from trade in limit order markets and provide empirical evidence that the limit order market is a good market design using observations on order submissions and execution and cancellation histories we estimate both the distribution of traders unobserved valuations for the stock and latent trader arrival rates we use the resulting estimates to compute the current gains from trade the gains from trade in a perfectly liquid market and the gains from trade with a monopoly liquidity supplier the current gains are 90 of the maximum gains and 150 of the monopolist gains the majority of the world s stock exchanges operate some form of a limit order market a feature of good market design is that traders realize most of the potential gains from trade we develop a method for identifying and estimating the gains from trade in a limit order market and apply our method to a sample from a particular limit order market the vancouver stock exchange vse we find that gains from trade in the vse are approximately 90 of the gains from trade in a perfectly liquid market and approximately 50 more than gains from trade in a market in which liquidity is supplied by a profit maximizing monopolist our results therefore provide new empirical evidence that the limitorder market is a good market design a large number of experimental studies document that the gains from trade in a double auction are close to the maximum gains from trade see for example cason and friedman 1996 or the survey by holt 1995 similarly our empirical results show that the limit order market a market design similar to

liquidity adjusted intraday value at risk modeling and risk management an application to data from deutsche borse abstract this paper develops a high frequency risk measure the liquidity adjusted intraday value at risk livar our objective is to explicitly consider the endogenous liquidity dimension associated with order size by reconstructing the open limit order book of deutsche borse changes in the tick by tick ex ante frictionless return and actual return are modeled jointly the risk related to the ex ante liquidity premium is then quantified our model can be used to identify the impact of ex ante liquidity risk on total risk and to provide an estimation of the var for the actual return at a point in time in our sample liquidity risk can account for up to 32 of total risk depending on order size

transaction costs order placement strategy and existence of the bid ask spread by considering investor order placement strategy this paper demonstrates that transaction costs cause bid ask spreads to be an equilibrium property of asset markets with transaction costs the probability of a limit order executing does not go to unity as the order is placed infinitesimally close to a counterpart market quote thus with certainty of execution at the counterpart market quote a gravitational pull is generated that keeps counterpart quotes from being placed infinitesimally close to each other an equilibrium spread is defined and its size linked to market thinness implications are noted for the design of a trading system

an eoq model for perishable products with fixed shelf life under stochastic demand conditions abstract the paper presents a mathematical stochastic model for perishable open dating foods including shortage and outdating costs the demand fluctuations have been taken into account modeling them through a normal distribution and their impact on the storage time has been studied considering the stochastic nature of such a parameter in turn the quantification of perished products has been also addressed determining the probability for a product of remaining in stock beyond the end of its shelf life on the basis of such premises the optimal set of parameters that minimize the total unit cost has been determined a numerical application and a sensitivity analysis show the practical applicability of the proposed model in the context of warehouse management underlining managerial insights

ford whitman harris and the economic order quantity model ford whitman harris first presented the familiar economic order quantity eoq model in a paper published in 1913 even though harris s original paper was disseminated widely it apparently was unnoticed for many years before its rediscovery in 1988 during this period much confusion developed over the origin of the eoq model this paper explores the early literature on this model and traces the evolution of the confusion it also sketches the remarkable life of harris who made contributions as an engineer inventor author and patent attorney even though he received no formal education beyond high school harris s original 1913 essay is reprinted following this paper

so what orders do informed traders use we present a simple glosten milgrom type equilibrium model to analyze the decision of informed traders on whether to use limit or market orders we show that even after incorporating an order s price impact not only may informed traders prefer to use limit orders but the probability that they submit limit orders can be so high that limit orders convey more information than market orders we further show that the horizon of the private information is critical for this decision and is positively related to the use of limit orders our empirical analysis using torq suggests that informed traders do prefer limit orders to market orders and that limit orders are indeed more informative our model is in contrast to the literature that assumes that informed traders use market orders only and the literature that examines the limit order versus the market order decision of uninformed traders

new jobs worklessness and households in poland abstract has the new polish labour market created opportunities for all or has the distribution of work been split unequally across household types are low unemployment outflows caused by increased congestion from employed job seekers or by low entry wages relative to benefit levels using data from waves of the polish labour force survey beginning in may 1992 we document the type of new jobs created and analyse the household groups most likely to benefit from the transformation process in order to assess the likely distributional consequences of the employment generation process

order characteristics and stock price evolution an application to program trading abstract this paper is an econometric analysis of the information content of automated orders arriving at the nyse the model captures the joint behavior of automated orders and also the return on the stock index future and the futures spot basis the results indicate that orders contain information useful in predicting stock returns beyond the information contained in the reported trades furthermore program and index arbitrage orders contain information beyond that available from the futures return and basis suggesting that these orders are not merely passive conveyors of common factor information nonprogram program and index arbitrage orders have roughly similar price impacts

cyclical schedules vs dynamic sequencing replenishment dynamics and inventory efficiency abstract this paper addresses the efficiency of fixed sequence cyclical scheduling systems relative to that of dynamically sequenced order point methods of production control the criterion for comparison is the aggregate inventory required to achieve a target fill rate taking into account the alternative replenishment dynamics arising under the respective systems a simulation analysis demonstrates that cyclical scheduling may have smaller aggregate inventory requirement when the production process is highly utilized and when this utilization is due to demand for a small number of items having large setup times

economic lot scheduling heuristic for random demands abstract an extension to the economic lot scheduling problem is given for a single machine multi product line under random demands the goal is to find the length of production cycles that minimizes the sum of setup and inventory holding costs per unit of time and satisfies the demand for each product at the required service level first the single product finite replenishment inventory model is extended to the case of random demand then a heuristic procedure uses this extension to determine the production cycles for the multi product case computational results and comparisons with other models are reviewed

learning information processing and order submission in limit order markets by introducing a genetic algorithm learning with a classifier system into a limit order market this paper provides a unified framework of microstructure and agent based models of limit order markets that allows traders to determine their order submission endogenously according to market conditions it examines how traders process and learn from market information and how the learning affects limit order markets it is found that measured by the average usage of different group of market information trading rules under the learning become stationary in the long run also informed traders pay more attention to the last transaction sign while uninformed traders pay more attention to technical rules learning of uninformed traders improves market information efficiency but not necessarily when informed traders learn opposite to the learning of informed traders learning makes uninformed traders submit less aggressive limit orders and more market orders furthermore private values can have significant impact in the short run but not in the long run one implication is that the probability of informed trading pin is positively related to the volatility and the bid ask spread

private information flow and price discovery in the u s treasury market abstract using intraday data we identify the intensity of private information flow in the u s treasury market our results show that the intensity of private information flow is highly correlated with public information shocks and higher for longer maturity bonds more importantly we find that bond price changes associated with high intensity of private information flow tend to be persistent whereas those associated with low intensity of private information flow are more likely reversed while public information and private information are the main determinants of bond price variations on days with news announcements private information and liquidity shocks are important determinants of bond price variations on days with no significant events finally we show that the depth of limit order book is inversely related to the intensity of private information flow nevertheless informed dealers do not seem to use hidden orders to disguise their trading intentions

quasi fixed cyclic production schemes for multiple products with stochastic demand abstract in this paper we present an approach to generate cyclic production schemes for multiple products with stochastic demand to be produced on a single production unit this scheme specifies a fixed and periodic production sequence called a cycle where each product may occur more than once in the sequence in order to stabilize the cycle length alternative control strategies are introduced these strategies keep the cycle length close to a target length by means of adding idle time to the cycle cutting production short or overproduction on basis of the selected control strategy as well as a base stock policy target inventory levels are determined for each production run in the cycle demand can be backlogged but a certain service level is required setup times are sequence dependent and the storage is capacitated employing the developed strategies we investigate the tradeoff between stability of cycle length and total cost induced by the production schedule in a computational study based on both real world data and random test instances

market sidedness insights into motives for trade initiation we infer motives for trade initiation from market sidedness we define trading as more two sided one sided if the correlation between the number of buyer and seller initiated trades increases decreases and assess changes in sidedness relative to a control sample around events that identify trade initiators consistent with asymmetric information trading is more one sided before merger news consistent with belief heterogeneity trading is more two sided before earnings and macro announcements with greater dispersion in analyst forecasts and after news with larger announcement surprises we examine the codeterminacy of sidedness bid ask spread volatility number of trades and order imbalance

celebrating a century of the economic order quantity model in honor of ford whitman harris abstract this writing presents a brief introduction to the papers included in the special issue celebrating a century of the economic order quantity model in honor of ford whitman harris published by the international journal of production economics forty one papers covering an extensive scope of inventory management have been incorporated in this volume from contributing authors from 20 countries located in america asia europe and africa this special issue also provides a basis for new directions in inventory management research

the costs and determinants of order aggressiveness abstract this paper examines the costs and determinants of order aggressiveness aggressive orders have larger price impacts but smaller opportunity costs than passive orders price impacts are amplified by large orders small firms and volatile stock prices to minimize the implementation shortfall the optimal strategy is to enter buy sell orders at the bid ask aggressive buy sell orders tend to follow other aggressive buy sell orders and occur when bid ask spreads are narrow and depth on the same opposite side of the limit book is large small aggressive buys are more likely than sells to be motivated by information

optimal order execution using hidden orders abstract hidden orders are offered by many lit trading venues for participants to hide the true size of their orders to help a risk neutral trader executing a target volume to minimize the execution cost by benefitting from the setting of a limit order market allowing hidden orders we propose a multi stage dynamic programming model to determine the optimal trading strategy involving hidden orders we consider two settings where in the first setting the trader uses market and hidden orders and in the second setting the trader uses limit and hidden orders in intermediate periods and market orders at the final stage in both settings we derive analytical solutions to the dynamic programming model under certain assumptions and discuss economic implications of our results we use order message data from nasdaq to estimate the model parameters and demonstrate the generality of our assumptions

the strategic use of capacity slack in the economic lot scheduling problem with random demand growing interest in designing systems with capacity slack as one form of flexibility raises many questions about its use and its usefulness in the framework of the economic lot scheduling problem with stochastic demand we develop on optimization based model that considers capacity slack safety stock and overtime explicitly and has the objective of minimizing the expected cost per unit time of inventory overtime and where applicable setup costs the solution is a continuous time production plan that consists of a time dependent inventory trajectory for each of the parts including the placement of planned idle time in the schedule we consider schedule stability to be desirable because of potential effects on upstream and downstream operations in multistage production settings thus the plan also has certain characteristics that contribute to achieving stability our results on the relative merits of capacity slack and safety stock indicate that capacity slack in the form of planned idle time is

the microeconomics of market making this paper examines the influence of risk aversion on the pricing policies of a market maker for securities it is shown that a market maker s bid ask spread can be decomposed into a portion for the known limit orders a risk neutral adjustment for expected market orders and a risk adjustment for market order and inventory value uncertainty it is dem onstrated that a risk averse market maker may set a smaller spread than a risk neutral specialist finally this paper demonstrates the pervasive role of inventory in affecting both the placement and size ofthe spread

how many parts to make at once reprinted from factory the magazine of management volume 10 number 2 february 1913 pp 135 136 152 interest on capital tied up in wages material and overhead sets a maximum limit to the quantity of parts which can be profitably manufactured at one time set up costs on the job fix the minimum experience has shown one manager a way to determine the economical size of lots

optimizing service level and relevant cost for a stochastic multi item cyclic production system a multi item make to order production system in a stochastic environment is analyzed assuming a common cycle production approach the impact of safety stock cycle time demand processing time and setup time on service level and total relevant cost holding setup and backorder cost is determined to illustrate this relationship a trajectory for the service level with respect to the relevant cost holding and setup is presented furthermore algorithms to calculate the cycle time which leads to maximum service level at constant safety stock and to calculate the pair cycle time and safety stock which minimize total relevant cost are introduced

econometric models of limit order executions we develop and estimate an econometric model of limit order execution times using survival analysis and actual limit order data we estimate versions for time to first fill and time to completion for both buy and sell limit orders and incorporate the effects of explanatory variables such as the limit price limit size bid offer spread and market volatility execution times are very sensitive to the limit price but are not sensitive to limit size hypothetical limit order executions constructed either theoretically from first passage times or empirically from transactions data are very poor proxies for actual limit order executions r 2002 elsevier science b v all rights reserved jel classification g23

the common cycle approach to the elsp problem with insufficient capacity abstract a production facility is used to produce more than a single item in order to maximize its utilization this however introduces a well known phenomenon of interference which gives rise to the class of economic lot scheduling problems in solving this problem researchers have always assumed that the production capacity is high enough to meet the demand of all items that are produced in this paper we relax the capacity constraint and analyze the lot scheduling problem under insufficient capacity we specifically study the two product problem using the common cycle approach and then discuss a special extension that treats any number of products

measuring investors opinion divergence numerous proxies for divergence of investors opinions have been suggested in the empirical accounting and finance literatures i offer a new proxy constructed from proprietary limit order and market order data this allows me to capture additional information on investors private valuations proxies from the extant literature based on publicly available data do not contain such information given my new measure i ask which of the extant proxies correlates best with it in my regression analysis unexplained volume is the best proxy for opinion divergence conditioning on various firm specific and order specific characteristics generally does not change this conclusion the main exception is the sample of firms without ibes forecast dispersion data for which bid ask spread is the best proxy for opinion divergence factor analysis also suggests that unexplained volume is the preferred proxy for opinion divergence

lot size effects on process lead time lead time demand and safety stock abstract a comprehensive process lot sizing order point model is developed in which queuing relationships are used to endogenously model the effects of lot size on the lead time demand distribution the model is used to examine the effect of shortage penalty on the optimal lot size when the model reflects job queuing dynamics arising from the lot size decision a coordinated policy of safety stock adjustment and lead time reduction through lot size adjustment is shown be more efficient than responding to changes in the shortage penalty parameter solely through adjustment of safety stock

the multiple family elsp with safety stocks the multiple family economic lot scheduling problem with safety stocks mfelsp ss with normally distributed time stationary demand is considered in a manufacturing setting where the relevant costs include family setup costs item setup costs and inventory holding costs for both cycle and safety stocks a family is a subset of the items that share a common family setup with its associated setup cost and setup time each item within the family may have its own setup time and setup cost the families form a partition of the set of items manufactured on a single facility the safety stock level for any item is a function of the time interval between production runs for the item the service level specified and the variance of its demand we consider safety stocks explicitly in the formulation as their holding costs vary nontrivially with the models decision variables the mfelsp ss differs from multilevel inventory models with family setups in that the former assumes noninstantaneous inventory replenishment and considers the cost of holding safety stocks the latter assumes instantaneous replenishment and does not directly assess the impact of safety stock levels on the total cost an efficient solution procedure is developed for this model properties of the nonconvex feasible space are identified and used in the solution approach the solution to the mathematical model comprises the basic period length the family multipliers and the item multipliers that give the lowest total cost of setups and carrying inventory the family multipliers and item multipliers are restricted to integer powers of two

informed traders and limit order markets abstract we consider a dynamic limit order market in which traders optimally choose whether to acquire information about the asset and the type of order to submit we numerically solve for the equilibrium and demonstrate that the market is a volatility multiplier prices are more volatile than the fundamental value of the asset this effect increases when the fundamental value has high volatility and with asymmetric information across traders changes in the microstructure noise are negatively correlated with changes in the estimated fundamental value implying that asset betas estimated from high frequency data will be incorrect

implications of the discreteness of observed stock prices stock prices on the organized exchanges are restricted to be divisible by 1 8 therefore the true price usually differs from the observed price this paper examines the biases resulting from the discreteness of observed stock prices it is shown that the natural estimators of the variance and all of the higher order moments of the rate of returns are biased an approximate set of correction factors is derived and a procedure is outlined to show how the correction can be made the natural estimators of the beta and of the variance of the market portfolio on the other hand are nearly unbiased the behavior of stock prices has been an issue of interest to the financial economist for many years this interest resulted in a growing number of empirical studies which attempt to estimate this behavior e g blattberg and gonedes 2 fama 6 fama and roll 7 8 barnea and downes 1 to date stock price behavior is estimated under the assumption that the observed trading price is the true equilibrium price however observed stock prices and stock price changes on the organized exchanges are restricted to multiples of 1 8 of a dollar 1 therefore if the true distribution of stock prices is continuous an observed trading price can be different from the true price this paper examines the biases in estimating the moments of stock price changes caused by the discreteness of observed stock prices the major focus of the paper is in noting this problem providing a model which explains the source of these biases and quantifying their size section i demonstrates that due to the discrete nature of observed stock prices the natural estimators for the variance and for the higher order moments of the rate of returns are biased upward this bias is larger for stocks with lower prices and smaller standard deviation for instance assuming that the standard deviation a is 0 001 the stock price is one dollar the true probability distribution of stock prices is lognormal and the observed prices are as close as possible to the true prices then the natural estimator of r has expectation 0 01400 hence it is biased upward by 1300 significant biases have important implications in option pricing we derive an approximate set of correction factors which can be applied to the

or forum the cost of latency in high frequency trading modern electronic markets have been characterized by a relentless drive toward faster decision making significant technological investments have led to dramatic improvements in latency the delay between a trading decision and the resulting trade execution we describe a theoretical model for the quantitative valuation of latency our model measures the trading frictions created by the presence of latency by considering the optimal execution problem of a representative investor via a dynamic programming analysis our model provides a closed form expression for the cost of latency in terms of well known parameters of the underlying asset we implement our model by estimating the latency cost incurred by trading on a human time scale examining nyse common stocks from 1995 to 2005 shows that median latency cost across our sample roughly tripled during this time period furthermore using the same data set we compute a measure of implied latency and conclude that the median implied latency decreased by a

the optimality of hedging point policies for stochastic two product flexible manufacturing systems this paper studies the stochastic two item periodic review single facility flexible manufacturing systems where stochasticity comes from random demands or and unreliable production process based on a notion called difference monotone introduced in this paper we prove that the hedging point policy is optimal to the systems in general for both finite and infinite horizon cases of the problems this result is demand distribution free and does not require strict convexity or even differentiability of the one period expected cost function a general characterization of the hedging point policy together with monotone switching curves is provided

optimal order display in limit order markets with liquidity competition abstract order display is associated with benefits and costs benefits arise from increased execution priority while costs are due to adverse market impact we analyze a structural model of optimal order placement that captures trade off between the costs and benefits of order display for a benchmark model of pure liquidity competition we give a closed form solution for optimal display sizes we show that competition in liquidity supply incentivizes the use of hidden orders to prevent losses due to over bidding thus because aggressive liquidity competition is more prevalent in liquid stocks our model predicts that the proportion of hidden liquidity is higher in liquid markets our theoretical considerations ares supported by an empirical analysis using high frequency order message data from nasdaq we find that there are no benefits in hiding orders in il liquid stocks whereas the performance gains can be significant in liquid stocks

order aggressiveness and the diagonal effect in experimental double auction markets this paper analyzes the behavior of players in experimental double auction markets we show that the diagonal effect a well known phenomenon observed in real markets also shows up in experimental markets and is mainly due to order splitting

estimation bias induced by discrete security prices commonly equilibrium security prices are modeled by continuous state stochastic processes while observed prices are rounded into discrete units this paper models the rounding mechanism and examines the probabilistic structure of the resultant rounded process we provide accurate and simple estimates of the inflation in estimated variance and kurtosis induced by ignoring rounding in particular the maximum likelihood estimate of security price volatility using rounded prices is developed and a simulation analysis is performed to examine the small sample properties of this estimator for many practical applications a simple correction for rounding becomes available

data watch research data from transition economies ten years into the transition from communism in the countries of the former soviet union and central and eastern europe a cursory search of the econlit database turns up hundreds of empirical studies published in refereed journals that deal with various issues in transition economies even so we suspect that many economists are prevented from making full use of the possibilities offered by the transition by the difficulties of obtaining and interpreting data from the region the purpose of this brief essay is to indicate some possible sources for data that can be used for economic analysis as well as some cautions regarding the use of these data

the stochastic economic lot scheduling problem cyclical base stock policies with idle times in this paper we discuss stochastic economic lot scheduling problems elsp i e settings where several items need to be produced in a common facility with limited capacity under significant uncertainty regarding demands production times setup times or combinations thereof we propose a class of production inventory strategies for stochastic elsps and describe how a strategy which minimizes holding backlogging and setup costs within this class can be effectively determined and evaluated the proposed class of strategies is simple but rich and effective when the facility is assigned to a given item production continues until either a specific target inventory level is reached or a specific production batch has been completed the different items are produced in a given sequence or rotation cycle possibly with idle times inserted between the completion of an item s production batch and the setup for the next item an optimal strategy within the class can be determined and all relevant performance measures can be evaluated in just a few cpu seconds using a 486 based pc we also derive a number of easily computable lower bounds for the optimal cost value and establish a comparison with deterministic elsps

trading and returns under periodic market closures this paper studies how market closures affect investors trading policies and the resulting return generating process it shows that closures generate rich patterns of time variation in trading and returns including those consistent with empirical findings 1 u shaped patterns in the mean and volatility of returns over trading periods 2 higher trading activity around the close and open 3 more volatile open to open returns than close to close returns 4 higher returns over trading periods than over nontrading periods 5 more volatile returns over trading periods than over nontrading periods it also shows that closures can make prices more informative about future payoffs we model a competitive stock market with periodic closures in which investors trade for both allocational and informational reasons we use the model to study how market closures intrinsically affect investors trading behavior and the return generating process the purpose of this analysis is to increase our understanding of the time variation in security trading and returns that are associated with regular market closures such as the intraday and intraweek patterns in stock returns volatility and trading volume we consider a stock market in which the exogenous information flow is homogeneous over time and the market closes periodically when the market is open investors trade the stock either to rebalance their overall portfolio of assets which also includes other illiquid assets or to speculate on future stock payoffs using their private information in particular investors adjust their asset portfolio by trading the stock in order to hedge the risk of illiquid assets we refer to these trades as hedging trades and those motivated by private information as speculative trades when the market is closed hong is from the graduate school of business stanford university and wang is from the sloan school of management massachusetts institute of technology and nber the authors thank jennifer huang for programming assistance and an anonymous referee for many valuable suggestions they also thank glenn ellison john heaton craig holden andrew lo steve slezak jeremy stein rene stulz the editor the nber asset pricing lunch group and par

lot sizes in a capacity constrained facility a simulation study of stationary stochastic demand abstract this paper considers the scheduling of several different items on a single machine in literature known as the economic lot scheduling problem elsp one of the characteristics of this problem is that the demand rate is deterministic and constant however in a practical situation demand usually varies in this paper we examine if a deterministic model can be used if demand is stationary stochastic a dynamic programming approach from bomberger manage sci 12 11 1966 778 and a heuristic method from segerstedt int j production econom 59 1 3 1999 469 are used to calculate lot sizes for four items the production of these items is simulated with different variations in demand rates our conclusion is that a deterministic model of this kind can be used in a practical situation where the demand rate is stationary stochastic but the models must be complemented by a decision rule which item to produce and when to produce it in our tests the heuristic method and the dynamic programming approach perform rather similarly with respect to costs and inventory levels but the dynamic programming approach results in more backorders when there is small variation in demand rates this study indicates that the model used for determination of lot sizes is of less importance than the decision rule used for identification of the item to produce and when to produce it

local information in foreign exchange markets abstract this study shows that order flow in a foreign exchange market appears to have permanent price impact only if it comes from certain regions these regions are as predicted by the local information hypothesis centers of political and financial decision making it is revealing that orders from other regions only show a very short lived but no permanent price impact local information is so important that it carries over from the usually considered market orders to aggressively priced limit orders too the finding is robust to common news shocks to the consideration of feedback trading and to further controls

a transaction data study of weekly and intradaily patterns in stock returns abstract weekly and intradaily patterns in common stock prices are examined using transaction data for large firms negative monday close to close returns accrue between the friday close and the monday open for smaller firms they accrue primarily during the monday trading day for all firms significant weekday differences in intraday returns accrue during the first 45 minutes after the market opens on monday mornings prices drop while on the other weekday mornings they rise otherwise the pattern of intraday returns is similar on all weekdays most notable is an increase in prices on the last trade of the day

estimating the volatility of discrete stock prices this paper introduces an estimator of stock price volatility that eliminates at least asymptotically the biases that are caused by the discreteness of observed stock prices assuming that the observed stock prices are continuously monitored an estimator is constructed using the notion of how quickly the price changes rather than how much the price changes it is shown that this estimator has desirable asymptotic properties including consistency and asymptotic normality also through a simulation study the authors show that it outperforms natural estimators for the low and middle priced stocks furthermore the simulation study demonstrates that the proposed estimator is robust to certain misspecifications in measuring the time between price changes

competition signaling and non walking through the book effects on order choice abstract we investigate the effects of competition and signaling in a pure order driven market and examine the trading patterns of agents when walking through the book is not allowed our results suggest that the variables capturing the cost of a large market order are not informative for an impatient trader under this market mechanism we also document that the competition effect is not present only at the top of the book but persistent beyond the best quotes moreover it dominates the signaling effect for both a limit order and a market order trader finally we show that institutional investors order submission strategies are characterized by only a few pieces of the limit order book information this is consistent with informed traders placing orders based on their own private valuations rather than the state of the book

determination of an order up to policy in the stochastic economic lot scheduling model we consider a production inventory problem with compound renewal item demand the model consists of stockpoints one for each item controlled according to r s policies and one machine which replenishes them the replenishment orders are produced with a fixed rate on the machine with significant setup times and costs which are stochastic and sequence dependent the time between the release and the production of the replenishment order is called the waiting time we develop analytical approximations for the first two moments of this waiting time the order up to levels and the average physical inventory levels for all stockpoints given the target fill rates these analytical approximations allows for a quick evaluation of the waiting time which is important when optimization of the system is considered

nonparametric tests of alternative option pricing models using all reported trades and quotes on the 30 most active cboe option classes from august 23 1976 through august 31 1978

economic order quantities in production from harris to economic lot scheduling problems abstract this article provides a short historical overview from harris and his economic order quantity eoq formula to the economic lot scheduling problem elsp the aim is to describe the development of the elsp field from the eoq formula to the advanced methods of today in a manner that suits master and graduate students the article shows the complexities difficulties and possibilities of scheduling and producing several different items in a single production facility with constrained capacity the items have different demand cost operation time and set up time set up time consumes capacity and makes the scheduling more complicated idle time makes the scheduling easier but is bad from a practical point of view since it creates unnecessary costs due to low utilisation of the facility a heuristic solution method is used on a small numerical example to illustrate different solution approaches the solution method creates a detailed schedule and estimates the correct set up and inventory holding cost even if the facility works close to its capacity

labour market reforms in transition economies several lessons can be drawn from the natural experiments of central and eastern european countries with labour market policies two of them are particularly relevant also for oecd countries first it is not wise to reduce the duration of unemployment benefits when the length of unemployment spells are on the rise unless i unemployment is still low and there is the administrative capacity to implement active labour market policies on a wide scale or ii there are income support schemes of the last resort in place and an administration capable of cost effectively enforcing work tests for those falling off unemployment benefit compensation rolls the second and perhaps more positive lesson in the light of the above is that it is possible to transform institutions and create an efficient policy delivery mechanism within a short time span copyright 1997 by oxford university press