short sales are almost instantaneously bad news evidence from the australian stock exchange this paper investigates the market reaction to short sales on an intraday basis in a market setting where short sales are transparent immediately following execution we find a mean reassessment of stock value following short sales of up to 0 20 percent with adverse information impounded within fifteen minutes or twenty trades short sales executed near the end of the financial year and those related to arbitrage and hedging activities are associated with a smaller price reaction trades near information events precipitate larger price reactions the evidence is generally weaker for short sales executed using limit orders relative to market orders this article analyzes the intraday price behavior surrounding short sales executed using market and limit orders within a transparent setting a number of recent studies have focused on daily or monthly stock price behavior surrounding short selling activity in u s markets e g senchack and starks 1993 figlewski and webb 1993 conrad 1994 hanley and seyhun 1994 asquith and meulbroek 1996 and dechow et al 1997 this research has been motivated by the continued interest of market regulators i n short selling activity and the controversy surrounding the desirability restrictions and disclosure requirements related to short selling see janvey 1992 and ramsay 1993 in particular several studies such as that by figlewski and webb 1993 have examined the relationship between short positions and subsequent abnormal returns without finding a strong relationship asquith and meulbroek 1996 in contrast focus on firms with large short positions and find a strong and consistent relationship dechow et al 1997 find a correlation between short selling strategies and strategies based on fundamental analysis these results are consistent with short sellers being able to identify

the information content of annual earnings releases a trading volume approach this paper reports the results of an empirical examination of the relations between the volume of securities traded the magnitude of surprises in annual earnings announcements and firm size although early trading volume studies e g beaver 1968 kiger 1972 and foster 1973 replicated basic information content studies with findings similar to those based on security prices we should not expect that security price and trading volume research will continue to yield identical results when more refined hypotheses are tested trading volume reflects investors activity by summing all market trades whereas security prices reflect an aggregation or averaging of investors beliefs as a result we will on occasion observe differences between price and volume reactions to earnings announcements as did morse 1981 this study extends the recent trend toward tests of more refined hypotheses by using a larger sample to examine the associations between unexpected earnings firm size and trading volume and testing whether such associations can be generalized across fiscal year end dates and stock exchange listing my results show a continuous positive relationship between trading

the sensitivity of vpin to the choice of trade classification algorithm abstract the vpin metric easley et al 2012b aims to detect and predict the toxicity of order flow this paper examines the sensitivity and robustness of vpin to the choice of trade classification scheme which is the major input used to compute vpin we compare deterministic trade by trade classification approaches with results computed using a newly proposed heuristic approach bulk volume classification we find substantial differences for all levels of aggregation trade classification order imbalance vpin and identifying toxic periods we also find that the detection of toxic periods does not yield consistent results in more than 60 of cases but regression analysis can identify volume and return volatility as parameters that contribute to higher levels of sensitivity

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

monetary policy uncertainty and the response of the yield curve to policy shocks this paper studies the non linear response of the term structure of interest rates to monetary policy shocks and presents a new stylized fact we show that uncertainty about monetary policy changes the way the term structure responds to monetary policy a policy tightening leads to a significantly smaller increase in long term bond yields if policy uncertainty is high at the time of the shock we also look at the decomposition of bond yields into expectations about future policy and the term premium the weaker response of yields is driven by the fall in term premia which fall even more if uncertainty about policy is high these findings are robust to the measurement of monetary policy uncertainty the definition of the monetary policy shock and to changing the model specification conditional on a monetary policy shock higher uncertainty about monetary policy tends to make yields of longer maturities relatively more attractive as a consequence investors demand even lower term premia this intuition is supported by long term monetary pol icy disagreement which leads to opposite effects with term premia increasing even more after a policy shock

a theory of trading volume a theory of trading volume is developed based on assumptions that market agents frequently revise their demand prices and randomly encounter potential trading partners the model describes two distinct ways informational events affect trading volume one is consistent with conjectures made by empirical researchers that investor disagreement leads to increased trading but the observation of abnormal trading volume does not necessarily imply disagreement and volume can increase even if investors interpret the information identically if they also have had divergent prior expectations simulation tests support the model and are used to contrast the random pairing environment with costless market clearing volume is lower in the costly market and volume increases caused by an informational event persist after the event period this is consistent with existing empirical evidence and suggests that markets do not immediately clear all orders or that investors have demands to recontract

trading and pricing in upstairs and downstairs stock markets we provide empirical evidence on the economic benefits of negotiating trades in the upstairs trading room of brokerage firms relative to the downstairs market using helsinki stock exchange data we find that upstairs trades tend to have lower information content and lower price impacts than downstairs trades this is consistent with the hypotheses that the upstairs market is better at pricing uninformed liquidity trades and that upstairs brokers can give better prices to their customers if they know the unexpressed demands of other customers we find that these economic benefits depend on price discovery occurring in the downstairs market copyright 2002 oxford university press

stock price reactions to lifo adoptions the association between excess returns and lifo tax savings although long a topic of accounting research little is known about the motives for or effects of voluntary changes in accounting techniques among the motives which have been suggested are attempts by managers to smooth reported earnings gordon 1964 copeland 1968 cushing 1969 white 1972 and ronen and sadan 1981 to influence man agement compensation to reduce regulatory or political costs watts and zimmerman 1978 and to avoid bond covenant restrictions holthausen 1981 while some of these motives may be consistent with a market value rule they often fail to provide unambiguous accounting change predictions e g which accounting changes result in lower regulatory costs moreover empirical verification has been constrained by the unobservability of the variables to which the managers allegedly respond the stock price reaction which should be expected for a given account ing change depends not only on its implications for the valuation of securities but also on the extent to which the implications are already known or anticipated by investors 3 ultimately our ability to detect these stock price effects if any depends on the power of our tests previous studies of the effects of accounting changes have generally not found significant stock price reactions archibald 1972 ball 1972 kaplan and roll 1972 harrison 1977 and holthausen 1981 4 for the most part these studies dealt with accounting changes which had no direct cash flow effects in contrast changes in inventory costing methods especially those involving the last in first out lifo cost flow assumption can generate potentially large changes in a firm s cash flows due to their impact on taxable earnings these cash flow effects provide not only a motive for lifo changes5 which is consistent with the market value rule but also implications for associated stock price effects if investors react to lifo s cash flow implications rather than to its effects on reported earnings then positive stock price adjustments should be associated with lifo adjustments however the evidence from previous studies of stock price reactions to lifo adoptions is inconclusive ball 1972 sunder 1973 1975 abdel khalik and mckeown 1978 brown 1980 and ricks 1982 while several factors may account for these results see section 2 it can be noted that the previous studies have considered only a dichotomous variable whether or not a firm has adopted lifo yet because the cash flow consequences of a lifo adoption decision depend on a number of firm specific factors this approach ignores potentially large differences among firms in the economic consequences of lifo adoptions most firms switching to lifo now reveal in their financial statement disclosures the tax savings which have been realized this study uses these disclosures to examine the association between unsystematic re turns and the magnitudes of first year lifo tax savings for all nyse firms which adopted or extended their use of lifo during the period 1972 80 subject to data availability 6 the research design employs within group comparisons based on cumulative monthly unsystematic excess returns with appropriate controls for unexpected earnings per formance 7 this design avoids several methodological weaknesses inherent in the previous studies and allows more definitive tests of hypotheses relating investor reactions to the income and cash flow effects of lifo adoptions as reported more fully below results based on lifo adoptions made in 1974 are consistent with a positive association between cumulative excess stock returns and the magnitudes of lifo tax savings 8 the results also provide evidence that changes in systematic risk may accompany lifo adoptions however contrary to previous studies most of the sample firms exhibit downward rather than upward changes in systematic risk section 2 reviews the previous studies of stock price reactions to lifo adoptions and suggests explanations for their results section 3 discusses the alternative approach employed in this study while section 4 describes the test methodologies employed the data and data selection procedures are described in section 5 the results and a discussion are presented in section 6 section 7 offers some conclusions

trading on inside information evidence from the share structure reform in china abstract we examine stock trading activities in days before chinese listed firms made public announcement to start share structure reform there is significant evidence that relative to a benchmark period institutional investors bought more event firms shares in the last two trading days prior to announcement randomization tests show significant differences in institutional trading activities between event firms and matched control firms which suggests that some institutions had inside information moreover large trades account for a significant proportion of daily stock price changes in the last 2 days the evidence is consistent with the prediction by holden and subrahmanyam 1992 that when multiple informed investors acquire the same piece of information they will trade aggressively we also find that over the reform period the median share value change of event firms is 6 higher than that of control firms our findings have important implications for enforcement of insider trading regulations in china

the accuracy of the tick test evidence from the australian stock exchange abstract in the absence of information regarding whether a trade is buyer or seller initiated many researchers have employed the tick rule as a proxy these researchers have been supported in their endeavours by the work of lee and ready 1991 which suggests that the tick rule is 90 accurate unfortunately the difficulty of securing data on this issue has made lee and ready s paper somewhat unique in that there have been few attempts to confirm their result in us markets and no attempts in other markets the purpose of this work is to test the robustness of their result in the australian securities market using cleaner intra day data we mimic the lee and ready study to cast some doubt upon the robustness of their findings in different markets our results suggest an overall accuracy of approximately 74 as opposed to lee and ready s 90 however accuracy in excess of 90 is documented when zero ticks are excluded further analysis provides evidence that a volatile or trending market will decrease the accuracy of the tick rule it is also demonstrated that the tick rule is less likely to accurately classify seller initiated trades and small buyer initiated trades

return autocorrelation and institutional investors abstract we propose and test the hypothesis that trading by institutional investors contributes to serial correlation in daily returns our results demonstrate that nyse particles and individual security daily return autocorrelationsare an increasing function of the level of institutional ownership moreover the results are consistent with the hypothesis that institutional trading reflects information and increases the speed of price adjustment the relation between autocorrelation and institutional holdings does not however apparent to be driven by market frictions or rational time varying required rates of return we conclude that institutional investors correlated trading patterns contribute to axial correlation in daily returns

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

comparative social mobility revisited models of convergence and divergence in 16 countries this paper reanalyzes 3 stratum intergenerational mobility classifications assembled by hazelrigg and garnier for men in 16 countries in the 1960s and 1970s log linear and log multiplicative models are used to compare mobility regimes and to estimate effects of industrialization educational enrollment social democracy and income inequality on immobility and other parameters of the mobility process several models of mobility fit the data equally well so criteria of plausibility and parsimony are applied to choose one model of stratum specific immobility and another model of vertical mobility with uniform immobility we find substantial similarity in mobility and immobility across countries but the exogenous variables do explain systematic differences among countries cross national variations are complex because most of the exogenous variables have different effects on different parameters of the mobility regime relative to other factors industrialization and education have weaker effects on mobility regimes than has usually been supposed

panel discussion price stability how should long term monetary policy be determined these comments address the question of monetary strategy as distinct from monetary tactics they are not directed at the question of what monetary policy is appropriate at the present time or of how monetary policy should be determined at any specific point as a function of prevailing conditions instead the issue i take is one that has been of increasing interest to economists in recent years what should be the long terrn objectives of the monetary authority increased interest in this issue as opposed to the issue of fine tuning the economy reflects the general intellectual consensus that has emerged on two points first what the monetary authority surely can control in the long run is the growth rate of nominal income second issues of dynamic consistency and commitment are crucial to the design of appropriate monetary policies beyond its recognition of these points my view is that most of what the academic economics community has had to say on the issue of long run monetary strategy has been tangential at best and i fear that many of the papers at this conference have not done much to improve the situation i wish to advance four propositions about monetary policy and to discuss their implications first an optimal tax theory has little or nothing to do with sensible inflation policy second positive rates of inflation are almost certainly desirable third to an important extent institutions do the work of rules and monetary rules should be avoided instead institutions should be drafted to solve time inconsistency problems fourth h j res 409 the proposed zero inflation amendment is a good idea if it is not taken too seriously or too literally but is instead viewed as a device for strengthening the independence of the federal reserve system my first proposition is that the connection between optimal tax theory and infla

fair inequality attitudes toward pay differentials the united states in comparative perspective are american attitudes toward economic inequality different from those in other countries one tradition in sociology suggests american exceptionalism while another argues for convergence across

delphic and odyssean monetary policy shocks evidence from the euro area abstract what drives the reaction of financial markets to central bank communication on the days of policy decisions we highlight the role of two factors that we identify from high frequency monetary surprises news on future macroeconomic conditions delphic shocks and news on future monetary policy shocks odyssean shocks these two shocks move the yield curve in the same direction but have opposite effects on financial conditions and macroeconomic expectations they also have a different impact on macroeconomic outcomes so that central bankers cannot infer the degree of stimulus they provide by looking at the mere reaction of the yield curve

are trade size based inferences about traders reliable evidence from institutional earnings related trading the use of observed transaction sizes to differentiate between small and large investor trading patterns is widespread a significant concern in such studies is spurious effects attributable to misclassification of transactions particularly those originating from large investors such effects can arise unintentionally strategically or endogenously we examine comprehensive records of a sample of institutional investors i e large traders including their order sizes and overall position changes to assess the degree to which such misclassifications give rise to spurious inferences about small and large investor trading activities our analysis shows that these institutions are heavily involved in small transaction activity it also shows that they increase their order sizes substantially in announcement periods relative to nonannouncement periods presumably as an endogenous response to earnings news in the immediate earnings announcement period transaction size based inferences about directional trading are quite misleading producing spurious small trader effects and more surprisingly erroneous inferences about large trader activity

the earnings announcement premium around the globe abstract u s stocks have been shown to earn higher returns during earnings announcement months than during non announcement months we document that this earnings announcement premium exists across the globe moreover it is not isolated to a few countries of the 20 countries with enough data to conduct a within country analysis nine exhibit a significantly positive premium a cross country analysis finds that the premium is strongest in countries with the greatest increase in idiosyncratic volatility around the time of their firms earnings announcements suggesting that uncertainty over the earnings information to be disclosed is a primary driver of the global announcement premium

google search keywords that best predict energy price volatility abstract internet search activity data has been widely used as an instrument to approximate trader attention in different markets this method has proven effective in predicting market indices in the short term however little attention has been paid to demonstrating search activity for keywords that best grab investor attention in different markets this study attempts to build the best practically possible proxy for attention in the market for energy commodities using google search data specifically we confirm the utility of google search activity for energy related keywords are significant predictors of volatility by showing they have incremental predictive power beyond the conventional garch models in predicting volatility for energy commodities prices starting with a set of ninety terms used in the energy sector the study uses a multistage filtering process to create combinations of keywords that best predict the volatility of crude oil brent and west texas intermediate conventional gasoline new york harbor and us gulf coast heating oil new york harbor and natural gas prices for each commodity combinations that enhance garch most effectively are established as proxies of attention the results indicate investor attention is widely reflected in internet search activities and demonstrate search data for what keywords best reveal the direction of concern and attention in energy markets

earnings news and small traders an intraday analysis abstract this study separates trading volume into buyer and seller initiated activities and examines the directional volume reaction in small and large trades to different types of earnings news good bad news triggers brief but intense buying selling in the large trades however a persistent period of unusually high buying activity is observed in the small trades irrespective of the news this anomalous proclivity of small traders to buy is robust across firm size trading volume and different earnings expectation models several explanations are discussed although the behavior does not seem fully explained by existing theories

cross country differences in intergenerational earnings mobility international studies of the extent to which economic status is passed from one generation to the next are important for at least two reasons first each study of a particular country characterizes an important feature of that country s income inequality second comparisons of intergenerational mobility across countries may yield valuable clues about how income status is transmitted across generations and why the strength of that intergenerational transmission varies across countries the e rst section of this paper explains a benchmark measure of intergenerational mobility commonly used in u s studies the second section summarizes comparable empirical e ndings that have accumulated so far for countries other than the united states the third section sketches a theoretical framework for interpreting cross country differences in intergenerational mobility

solidaristic unionism and support for redistribution in contemporary europe using data from the european social survey 2002 14 this article explores the effect of union membership on support for redistribution the authors hypothesize that the wage bargaining practices of unions promote egalitarian distributive norms which lead union members to support redistribution and that this effect is strongest among high wage workers consistent with the authors expectations the empirical analysis shows that the solidarity effect of union membership is strongest when unions encompass a very large share of the labor force or primarily organize low wage workers the authors also show that low wage workers have become a significantly less important union constituency in many european countries over the time period covered by the analysis

large block transactions the speed of response and temporary and permanent stock price effects abstract the paper investigates how quickly prices attain new equilibrium levels after large block transactions and measures the associated temporary and permanent price effects we find that prices adjust within at most three trades with most of the adjustment occurring in the first trade the temporary price effect for seller initiated transactions is related to block size but the temporary price effect observed for buyer initiated transactions is no larger than that observed in 100 share trades most of the price effect associated with block trades is permanent and is related to block size regardless of the initiating party

the tips treasury bond puzzle we show that the price of a treasury bond and an inflation swapped treasury inflation protected securities tips issue exactly replicating the cash flows of the treasury bond can differ by more than 20 per 100 notional treasury bonds are almost always overvalued relative to tips total tips treasury mispricing has exceeded 56 billion representing nearly 8 of the total amount of tips outstanding we find direct evidence that the mispricing narrows as additional capital flows into the markets this provides strong support for the slow moving capital explanation of arbitrage persistence

social mobility and redistributive politics just like economists voters have conflicting views about redistributive taxation because they estimate its incentive costs differently we model rational agents as trying to learn from their dynastic income mobility experience the relative importance of effort and predetermined factors in the generation of income inequality and therefore the magnitude of these incentive costs in the long run left wing dynasties believing less in individual effort and voting for more redistribution coexist with right wing dynasties this allows us to explain why individual mobility experience and not only current income matters for political attiitudes and how persistent differences in perceptions about social mobility can generate persistent differences in redistribution across countries

intergenerational inequality a sociological perspective when economists are concerned with the inheritance of inequality they typically focus on the intergenerational transmission of income or wealth in contrast sociologists are more likely to analyze intergenerational mobility between and immobility in different class positions

the ex ante and ex post price effects of quarterly earnings announcements reflected in option and stock prices the subject of this study is the effect of investors anticipations of impending informative disclosures on the behavior of option and stock prices our approach introduced in a previous paper patell and wolfson 1979 and substantially extended here represents the following significant departure from traditional information content studies instead of analyzing security price reactions to announcements we analyze preannouncement option prices in order to discern investors beliefs about the range of possible stock price reactions expected to accompany a forthcoming disclosure whose actual content is not yet known in the tests reported here we focus on quarterly earnings announcements as disclosure events whose timing is predictable and we attempt to detect their systematic influence on the relationship between stock and option prices our operational definition of information content emphasizes changes in the variability of common stock returns in response to earnings disclosures while market efficiency precludes investors from predicting the direction of the stock price change which will accompany a future earnings announcement it is likely that investors will anticipate increased price variability at the time of disclosure and indeed several studies have documented announcement date increases in stock price volatility

innis lecture equity and equality is horizontal equity he the most widely accepted principle of equity or does it stand in opposition to the advancement of human welfare this paper argues that the case for the he principle is not as straightforward as is usually thought and that it requires advanced notions of justice and well being the most likely ethical basis for he appears to combine a rawlsian maximin principle and a view of well being that allows for relative local comparison effects the paper also explores some of the dimensions of equality and well being along which the he principle can be applied and presents a number of examples showing how he considerations can provide an important input into policy analysis le principe d d equite horizontale he constitue t il le principe ethique le plus largement admis ou est il un frein a l avancement du bien etre cet article explique pourquoi les assises ethiques du principe d eh ne sont pas aussi claires qu il est parfois suggere et demontre que ce principe fait plutot appel a des notions avancees de justice et de bien etre les assises morales les plus susceptibles d appuyer le principe d eh semblent combiner un argument de type maximin rawlsien et une perspective du bien etre qui tient compte des effets locaux relatifs de comparaison le papier explore egalement certaines des dimensions de l egalite et du auxquelles le principe d eh peut etre applique et presente un certain nombre d exemples montrant en quoi de considerations de type eh peuvent influencer l analyse de politiques

the association between accounting earnings and security returns for large and small firms abstract the differential information hypothesis advanced by atiase 1980 states that information production and dissemination by private parties for the purpose of identifying mispriced securities is an increasing function of firm size this study examines two corollaries of that hypothesis first security prices of large firms anticipate accounting earnings earlier than security prices of small firms second for a given level of unexpected earnings the cumulative abnormal returns of small firms exceed those of large firms the results are generally consistent with atiase s hypothesis

does information risk affect the implied cost of equity capital an analysis of pin and adjusted pin using a unique dataset of korean listed companies for which trade initiators are correctly identifiable we estimate bias free pin probability of informed trading that is no longer subject to the trade misspecification problem and test whether it is related to expected returns unlike prior studies we find that bias free adjpin the adjusted pin purged of a liquidity component is positively related to implied cost of equity our findings suggest that the errors in pin variables hamper a proper identification of pin pricing in prior studies

belief in a just world and redistributive politics international surveys reveal wide differences between the views held in different countries concerning the causes of wealth or poverty and the extent to which people are responsible for their own fate at the same time social ethnographies and experiments by psychologists demonstrate individuals recurrent struggle with cognitive dissonance as they seek to maintain and pass on to their children a view of the world where effort ultimately pays off and everyone gets their just deserts this paper offers a model that helps explain i why most people feel such a need to believe in a just world ii why this need and therefore the prevalence of the belief varies considerably across countries iii the implications of this phenomenon for international differences in political ideology levels of redistribution labor supply aggregate income and popular perceptions of the poor the model shows in particular how complementarities arise endogenously between individuals desired beliefs or ideological choices resulting in two equilibria a first american equilibrium is characterized by a high prevalence of just world beliefs among the population and relatively laissez faire policies the other european equilibrium is characterized by more pessimism about the role of effort in economic outcomes and a more extensive welfare state more generally the paper develops a theory of collective beliefs and motivated cognitions including those concerning money consumption and happiness as well as religion

measuring the effects of federal reserve forward guidance and asset purchases on financial markets i extend the methods of gurkaynak sack and swanson 2005 to separately identify the effects of federal reserve forward guidance and large scale asset purchases lsaps during the 2009 15 u s zero lower bound zlb period i find that both forward guidance and lsaps had substantial and highly statistically significant effects on medium term treasury yields stock prices and exchange rates comparable in magnitude to the effects of the federal funds rate before the zlb forward guidance was more effective than lsaps at moving short term treasury yields while lsaps were more effective than forward guidance and the federal funds rate at moving longer term treasury yields corporate bond yields and interest rate uncertainty however the effects of forward guidance were not very persistent with a half life of 1 4 months the effects of lsaps seem to be more persistent i conclude that overall in terms of these criteria lsaps were a more effective policy tool than forward guidance during the zlb period

a direct test of methods for inferring trade direction from intra day data this study directly tests the ability of several competing methods to identify market buy and sell orders using intra day quote and trade prices and identifies factors that affect the accuracy of the methods lee and ready s 1991 algorithm performs about the same as the tick test but the performance of both methods is worse than expected the results show that the use of either algorithm to classify trades can lead to significantly biased estimates of effective spreads and signed volume but the tick test provides better estimates of effective spreads and signed volume than lee and ready s method i introduction the use of intra day prices in empirical studies of securities markets is increasingly common and studies frequently require trades be identified as buyer or seller initiated unfortunately most data sets do not identify trade direction methods have however been proposed that allow trade direction to be inferred from adjacent prices and quotes the accuracy of these methods and the implica tions for microstructure research are still unresolved issues in large part because trade direction is unobservable in most financial data sets this study directly tests the ability of several competing methods to iden tify market buy and sell orders using intra day quote and trade prices the tests are conducted using the torq database a unique data set the new york stock exchange makes available to researchers that contains information on trades quotes and orders using the tick tests and lee and ready s lr hereafter 1991 method to classify trades as buys or sells and comparing the results to the direction of the actual orders i directly test the accuracy of the classification algorithms the tests also identify the factors that affect the accuracy of the clas sification methods additional tests demonstrate that using these algorithms can lead to biased inferences in two of their most common applications estimating effective spreads and signed volume trading test results also show that the tick

high frequency identification of monetary non neutrality the information effect we present estimates of monetary non neutrality based on evidence from high frequency responses of real interest rates expected inflation and expected output growth our identifying assumption is that unexpected changes in interest rates in a 30 minute window surrounding scheduled federal reserve announcements arise from news about monetary policy in response to an interest rate hike nominal and real interest rates increase roughly one for one several years out into the term structure while the response of expected inflation is small at the same time forecasts about output growth also increase the opposite of what standard models imply about a monetary tightening to explain these facts we build a model in which fed announcements affect beliefs not only about monetary policy but also about other economic fundamentals our model implies that these information effects play an important role in the overall causal effect of monetary policy shocks on output

information value and investor wealth the case of earnings announcements this paper empirically investigates the relation between investor wealth and the value of annual and quarterly earnings announcements as implied by 1 the behavior of mean stock trade transaction sizes at announcement dates and 2 transaction size stratified trading activity in postannouncement time periods announcement period mean transaction sizes are found to exceed expected mean transactions sizes estimated from trading activity occurring in nonannouncement periods this result is attributed to a greater relative trading response to earnings announcements by wealthier investors consistent with ohlson s 1975 proposition that information value increases with investor wealth in a security market setting further evidence of a positive relation between value and wealth is found when postearnings announcement stock transactions are stratified by share size into three strata where the first stratum small stratum is transactions of 100 and 200 shares the second stratum large stratum is transactions of 300 to 900 shares and the third stratum institutional

social mobility and the demand for redistribution the poum hypothesis this paper examines the often stated idea that the poor do not support high levels of redistribution because of the hope that they or their offspring may make it up the income ladder this prospect of upward mobility poum hypothesis is shown to be fully compatible with rational expectations and fundamentally linked to concavity in the mobility process a steady state majority could even be simultaneously poorer than average in terms of current income and richer than average in terms of expected future incomes a e rst empirical assessment suggests on the other hand that in recent u s data the poum effect is probably dominated by the demand for social insurance in the future everyone will be world famous for e fteen minutes andy warhol 1968

price and trading volume reaction surrounding earnings announcements a closer examination the process of information dissemination and interpretation in securities markets is very complex and mostly unobservable while changes in prices and the amount of trading that takes place at the market level provide evidence of information processing verrecchia 1981 demonstrated that these are not sufficient to describe completely the dissemination of information and its interpretation by investors a descriptive study of price changes and trading volume however may still provide some insights into how investors react to information this paper is an empirical investigation of price changes and trading volume during the days surrounding the announcement of quarterly and annual earnings in the wall street journal wsj in the original paper investigating trading volume and price changes surrounding earnings announcements beaver 1968 was primarily concerned with whether the annual earnings announcement had information content i e led to changes in investors assessments of the probability distribution of future returns if there were any significant price changes and or trading volume during the week of the announcement then the annual earnings announcement was assumed to have had

who benefits from secondary market price stabilization of iops abstract initial public offerings that receive secondary market price support from their underwriters are characterized by severely attenuated selling by small quantity presumably retail traders and more aggressive selling by large quantity presumably institutional traders the increase in institutional trading is concentrated in the first day of trading while the attenuation of retail trading persists this pattern exists in spite of the likelihood that retail investors receive relatively large initial allocations of fully priced stabilized offers thus the evidence is consistent with institutional investors being the primary beneficiaries of price stabilization efforts and with the use of penalty bids to constrain retail selling activity

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

what s the monetary value of distributive justice this paper proposes a model that can be implemented to estimate the willingness to pay for distributive justice defined as distribution according to desert we derive a formula that allows one to recover the willingness to pay for distributive justice from fiscal data and the estimated coefficients of a probit regression using this formula and data from a 1998 gallup social audit we find that on average the monetary value of justice for us households amounts to about one fifth of their disposable income moreover we find evidence of markedly heterogeneous preferences for justice along the lines of race and education

varieties of capitalism and job quality the attainment of civic principles at work in the united states and germany this article explores how institutional differences matter to the quality of a nation s jobs job quality is conceived as a dimension of a national economy s social performance and thus defined in accordance with civic principles focus is on the two archetypical varieties of capitalism the united states and germany using data from a 2009 telephone survey of u s and german workers we find that the overall attainment of civic principles as perceived by workers is no different in germany than in the united states even though the german institutional environment should be more conducive to them this is due to higher worker expectations in germany and a tendency for employer practices to compensate for the weaker liberal institutional environment in the united states once these are controlled german workers report substantially more positive outcomes we find that institutional differences also matter in how various employer practices are adopted and hence have indirect as well as direct implications

survey evidence on diffusion of interest and information among investors abstract questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications it was found that direct interpersonal communications are very important in investor decisions questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word of mouth communications or other salient stimuli randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth the survey evidence is interpreted as supporting such models

the federal reserve s large scale asset purchase programmes rationale and effects we provide empirical estimates of the effect of large scale asset purchases lsaps on longer term us treasury yields within a framework that allows for several transmission channels including the scarcity channel associated with the preferred habitat literature and the duration channel associated with interest rate risk we also clarify lsaps role in the broader context of historical monetary policy strategy results indicate that lsap style operations mainly impact longer term rates via the nominal term premium within that premium the response is predominantly embodied in the real term premium the scarcity and duration channels both seem to be of considerable importance

presidential address asset price dynamics with slow moving capital i describe asset price dynamics caused by the slow movement of investment capital to trading opportunities the pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade such as search costs for trading counterparties or time to raise capital by intermediaries i discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions which subsided afterward after presenting examples of price reactions to supply shocks in normal market settings i offer a simple illustrative model of price dynamics associated with slow moving capital due to the presence of inattentive investors i address the implications for asset price dynamics of the apparent slow movement of investment capital to trading opportunities the arrival of new capital to an investment opportunity can be delayed by fractions of a second in some markets for example an electronic limit order book market for equities or by months in other markets such as that for catastrophe risk insurance accordingly prices respond to supply or demand shocks with a sharp reaction because of the relatively small subset of capital and thus risk bearing capacity that is immediately available to absorb a shock on short notice such a price impact is substantially reversed over time as additional capital becomes available the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of attention costs to trade as well as institutional impediments to capital movement such as search costs for trading

market based measures of monetary policy expectations a number of recent articles have used different financial market instruments to measure near term expectations of the federal funds rate and the high frequency changes in these instruments around federal open market committee announcements to measure monetary policy shocks this article evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy all of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered among financial market instruments we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months for longer horizons the predictive power of many of the instruments we consider is very similar in addition we present evidence that monetary policy shocks computed using the current month federal funds futures contract are influenced by changes in the timing of policy actions tha

what does monetary policy do to long term interest rates at the zero lower bound this article uses a structural var with daily data to identify the effects of monetary policy shocks on various longer term interest rates since the federal funds rate has been stuck at the zero lower bound the var is identified using the assumption that monetary policy shocks are heteroskedastic monetary policy shocks have especially high variance on days of fomc meetings and certain speeches while there is otherwise nothing unusual about these days a complementary high frequency event study approach is also used i find that stimulative monetary policy shocks lower treasury and corporate bond yields but the effects die off fairly fast

the effects of asset purchases and normalization of u s monetary policy this paper examines changes in the effects of unconventional monetary policies in the united states to this end we estimate a markov switching var model with absorbing regimes to capture possible structural changes our results detect regime changes around the beginning of 2011 and the middle of 2013 before 2011 the u s large scale asset purchases lsaps had relatively large impacts on the real economy and prices but after the middle of 2013 their effects were weaker and less persistent in addition after the middle of 2013 which includes the monetary policy normalization period the asset purchase or balance sheet shocks had slightly weaker effects than during the early stage of the lsaps but stronger effects than during the late stage of the lsaps while interest rate shocks had insignificant effects on the real economy and prices finally our results suggest that the positive responses of durables and capital goods expenditures to interest rate shocks weakened the negative impacts of interest rate hikes after the middle of 2013 including the period of monetary policy normalization jel c32 e21 e52

institutional trades and intraday stock price behavior abstract this paper examines the price effect of institutional stock trading using a unique data set that reports the transactions large and small of 37 large institutional money management firms the direction of each trade and the identity of the management firm behind each trade are known although institutional trades are associated with some price pressure we find that the average effect is small there is also a marked asymmetry between the price impact of buys versus sells we relate our findings to various hypotheses on the elasticity of demand for stocks the cost of executing transactions and the determinants of market impact although market capitalization and relative trade size influence the market impact of a trade the dominant influence is the identity of the money manager behind the trade