bank competition and ecb s monetary policy in a model of oligopolistic competition in the banking sector we analyse how the monetary policy rule chosen by the central bank can influence the incentive of banks to set high interest rates on loans over the business cycle we exploit the basic model to investigate the potential impact of emu implementation on collusion among banks in particular we consider the possible eaects of the european central bank s policy criteria with regard to the cost of credit in national markets 2000 elsevier science b v all rights reserved

clustering and competition in asset markets economists financial commentators regulatory agencies and the legal community have recently criticized the nasdaq stock market inc because there is greater clustering of stock quotations on even eighths on nasdaq than on the new york stock exchange or the american stock exchange a phenomenon which critics attribute to collusion or some other defect in nasdaq market structure however as this article demonstrates clustering occurs in varying degrees in many other incontestably competitive financial markets including the nyse the amex the london stock exchange the london gold market and the international foreign exchange market this article provides a competitive theory of clustering that emphasizes the effect of uncertainty the size of transactions volatility and the informational and transactional roles of quotations on the degree of clustering in addition the article examines how market structure can affect the degree of clustering and considers the relation between clustering spread

real exchange rate volatility and economic openness theory and evidence this paper relates the volatility of the trade weighted effective real exchange rate to the degree of trade openness of an economy the theoretical part presents an intertemporal monetary model of a small open economy with nominal rigidities both monetary and aggregate supply shocks are shown to produce ceteris paribus smaller real exchange rate movements if the country is more open to foreign trade empirical evidence on a cross section of forty eight countries confirms this relationship differences in trade openness explain a large part of the cross country variation in the volatility of the effective real exchange rate

third market reforms the overlooked goal of the sec s order handling rules in 1997 the securities and exchange commission enacted significant reforms in u s markets several studies document that the new order handling rules increased competition for nasdaq stocks but the reforms were designed with an additional goal in mind to increase quote competition for the trading of nyse listed securities on nasdaq i e third market trading an evaluation of the reforms in the third market indicates that they did not achieve this objective instead both quote quality and quoting frequency were diminished due primarily to elimination of the excess spread rule this suggests that more significant changes are needed to increase inter exchange competition

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

minimum price variations discrete bid ask spreads and quotation sizes exchange minimum price variation regulations create discrete bid ask spreads if the minimum quotable spread exceeds the spread that otherwise would be quoted spreads will be wide and the number of shares offered at the bid and ask may be large a cross sectional discrete spread model is estimated by using intraday stock quotation spread frequencies the results are used to project 1 16 spread usage frequencies given a 1 16 tick projected changes in quotation sizes and in trade volumes are obtained from regression models for stocks priced under 10 the models predict spreads would decrease 38 percent quotation sizes would decrease 16 percent and daily volume would increase 34 percent article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

incorporating technology buying behaviour into uk based long term domestic stock energy models to provide improved policy analysis the uk has a target for an 80 reduction in co2 emissions by 2050 from a 1990 base domestic energy use accounts for around 30 of total emissions this paper presents a comprehensive review of existing models and modelling techniques and indicates how they might be improved by considering individual buying behaviour macro top down and micro bottom up models have been reviewed and analysed it is found that bottom up models can project technology diffusion due to their higher resolution the weakness of existing bottom up models at capturing individual green technology buying behaviour has been identified consequently markov chains neural networks and agent based modelling are proposed as possible methods to incorporate buying behaviour within a domestic energy forecast model among the three methods agent based models are found to be the most promising although a successful agent approach requires large amounts of input data a prototype agent based model has been developed and tested which demonstrates the feasibility of an agent approach this model shows that an agent based approach is promising as a means to predict the effectiveness of various policy measures

fragmentation versus consolidation of securities trading evidence from the operation of rule 19c 3 stock exchanges defend their rules requiring members to trade listed stocks on an exchange floor as a means of achieving consolidation of trading which it is argued minimizes trading costs to investors by virtue of the securities and exchange commission s rule 19c 3 however these exchange rules cannot apply to stocks newly listed after april 26 1979 the objective of the securities and exchange commission rule was to end what was viewed as restraint of desirable competition that would more than compensate for any cost saving resulting from consolidation by comparing the cost of trading measured by bid ask spreads and returns variance for the two distinct groups of stocks those listed before april 26 1979 and those listed after we test these competing views we find that rule 19c 3 has not caused any reduction in spreads but may have caused an increase and has had no effect on returns variance

does payment for order flow to your broker help or hurt you the presumption is that a broker executing a stock trade for a retail investor will get the investor the best possible price execution for the transaction in fact the broker often sells the retail investor s trade to an intermediary for cash payment the broker s motivation to generate dealer profits seems to overcome the broker s fiduciary responsibility to obtain the best execution price for the customer raising ethical questions purchasers and internalizers of order flow in the market may cause prices quoted on the nyse to deteriorate making all investors worse off

price discovery and the effects of fragmentation on market quality evidence from cypriot cross listed stocks using a novel high frequency data set we examine the contribution of greek trading to the price discovery process of a pair of cypriot blue chip cross listed stocks during overlapping trading hours additionally we investigate the effects of market fragmentation on the home market s quality as measured by microstructure based liquidity measures contrary to earlier studies from other markets our findings show that foreign stock exchanges can act as the leading contributors to price discovery and can concentrate the majority of trading activity and produce the lowest transaction costs our results also show that market fragmentation can lead to negative effects on market liquidity

option listing and stock returns abstract this article examines the effect of option introductions on the underlying stocks in addition to the price increase and volatility decrease that take place when new options are listed we obtain and explain the following new empirical results i an increase in the value of the market around the listing dates of new options ii an increase in the value of an industry index which excludes the optioned stocks iii the dissipation of the price and volatility effects in recent periods and iv the existence of an announcement effect in one subperiod of our sample and its dissipation in recent periods

internalization and stock price clustering finnish evidence abstract internalization the practice of brokers executing trades in house is a significant phenomenon in the helsinki stock exchange during the continuous trading session 97 5 upstairs market trades are internalized the corresponding figure for after hours upstairs market trades is 73 1 the prices of internalized trades are somewhat more clustered than the prices of other trades during the continuous trading session but they are not more clustered than the prices of negotiated trades in the after hours upstairs market this suggests that finnish brokers do not use a more discrete set of prices for internalized trades than for other upstairs trades

consumer demand for green power and energy efficiency abstract this article examines reported willingness to pay for electric utility investments in renewable energy and energy efficiency resources using the results of deliberative polls conducted by electric utilities in texas 1 age education and salary tend to affect reported willingness to pay for utility investments in these resources intensive exposure to information about energy resource issues led to an increase in the number of respondents interested in paying a modest premium to support investments in both renewable energy resources and energy efficiency however average reported premiums actually declined following the polls as very high outlier responses moved to more reasonable values following the polls these results support the contention that informed dialogue about energy alternatives will result in broader interest in providing a modest level of support for these resources

stock price clustering and discreteness stock prices cluster on round fractions clustering increases with price level and volatility and decreases with capitalization and transaction frequency clustering is pervasive price clustering will occur if traders use discrete price sets to simplify their negotiations exchange regulations require that most stocks be traded on eighths clustering on larger fractions will occur if traders choose to use discrete price sets based on quarters halves or whole numbers an econometric model of clustering is derived and estimated projections from the results suggest that traders would frequently use odd sixteenths when trading low price stocks if exchange regulations permitted trading on sixteenths article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

does the specialist matter differential execution costs and intersecurity subsidization on the new york stock exchange this article tests for differences in execution costs among specialist firms for new york stock exchange listed securities execution cost differences provide a measure of the relative performance of specialist firms we find a substantial difference in effective spreads and order processing costs across specialist firms controlling for stock characteristics while economically significant the differences in execution costs between specialist firms are much smaller than the cross market differences reported by huang and stoll 1996 within a specialist firm there is a positive relation between order processing costs and trading activity that is consistent with the hypothesis that active stocks subsidize inactive stocks this article investigates whether differential execution costs exist across new york stock exchange nyse specialist firms and among stocks traded by the same specialist firm execution costs are paid by investors when completing a trade and are separate from the commission costs paid to a broker execution costs arise from the bid ask spread and the price impact of an investor s order on the future bid ask quote stoll 1985 shows that a transactionally efficient financial market which minimizes execution costs also minimizes the deviation in transaction prices from the true price of the underlying security evidence of differential execution costs for similar securities can be used to identify high cost and low cost liquidity providers on the nyse furthermore differential execution costs among stocks traded by the same specialist firm provide evidence consistent with a subsidy from actively traded to inactively traded stocks

do competing specialists and preferencing dealers affect market quality we empirically demonstrate that the opportunities the boston stock exchange and the cincinnati stock exchange offer members to take the other side of their customers orders through affiliated market makers to internalize orders have little short run effect on posted or effective bid ask spreads this is true despite substantial movement of order flow away from the new york stock exchange when trading under one of these regional stock exchange programs begins these results contrast with the adverse effects of market fragmentation and internalization predicted by some theoretical market microstructure analyses and the popular financial press article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

competitive depreciation and the role of distorting taxes in an interdependent economy abstract this paper investigates the manners in which international cooperation in monetary policies affects the rate of inflation in a two country sticky price model within reasonable parameter values international monetary coordination increases the steady state inflation for given tax policies when the tax regime is endogenously chosen however self oriented monetary policies can engage in competitive depreciation and induce a higher average inflation than the first best inflation rate

competition among markets the repeal of rule 390 abstract the new york stock exchange repealed its rule 390 on may 8 2000 the rule disallowed exchange members from trading stocks listed prior to april 26 1979 outside of an exchange we examine the implications of the rule s repeal on the competition for order flow as well as on measures of market quality such as spreads depth and price improvement for stocks impacted by the rule we use a second sample of stocks not subject to rule 390 rule 19c 3 stocks to control for market wide trends we have three important findings 1 quoted spreads decrease by about 18 for rule 390 stocks three times more than the reduction for rule 19c 3 stocks 2 effective spreads do not change and 3 the nyse lost little market share even in smaller trades that were supposed to migrate following the repeal our results indicate a paradigm shift in the way the nyse specialists make a market prior to the repeal the specialists set wider quotes but provided extensive price improvement following the repeal the specialists set tighter quotes with lesser price improvement possibilities we believe that this shift is a strategic response by the specialists to retain market share not by improving market quality but by making order flow internalization and payment for order flow less profitable as a result competition improves market quality but not in the way we would generally expect

the new open economy macroeconomics of government debt in this paper we introduce an overlapping generations structure of the blanchard type in a new open economy macroeconomics model this allows us to study a wider range ofscal shocks compared to the traditional mundell fleming and to the baseline redux models one important policy implication of our model is that the tax cut imple mented in the us in 2001 might have contributed to the appreciation of the dollar vis a vis the euro in contrast the imposition ofscal constraint such as the golden rule proposed by the uk government can have opposite exchange rate e ects

the initiation and withdrawal of odd eighth quotes among nasdaq stocks an empirical analysis christie and schultz 1994 journal of finance 49 1813 1840 nd that market makers in many active nasdaq stocks avoid odd eighth quotes this paper studies 67 58 nasdaq stocks whose market makers initiate withdraw odd eighth quotes these regime shifts are often completed within the span of a day and coincide with dramatic changes in dollar percentage and e ective spreads in most cases we are unable to identify comparable changes in the costs of making markets we do identify long run changes in average prices that may provide a partial explanation however we also nd

quote based competition and trade execution costs in nyse listed stocks abstract this study examines quotations order routing and trade execution costs for seven markets that compete for orders in large capitalization nyse listed stocks the competitiveness of quote updates from each market varies with measures of the profitability of attracting additional order and with volatility and inventory measures the probability of a trade executing on each market increases when the market posts competitive quotes execution costs for non nyse trades when the local market posts competitive non competitive quotes are virtually the same substantially exceed costs for matched nyse trades collectively these results imply a significant degree of quote based competition for order flow and are consistent with off nyse liquidity providers using competitive quotations to signal when they are prepared to give better than normal trade executions

high frequency trading competition we analyze trading dynamics as successive high frequency trading hft firms begin to trade stocks in an equity market entrants compete with incumbents for volume and there is crowding out

experimentation in financial markets in this paper we use a unique data set on the italian interdealer bond market to empirically estimate the process of strategic experimentation the results show how the information generated in the process of interdealer trading affects the incentive to experiment upon receipt of an order dealers deliberately engage in trade with other dealers either to exploit the information contained in the order they receive or if they are uncertain about its quality to assess it by actively experimenting with other dealers we therefore identify hiding and experimenting as main types of dealer strategies

useful government spending direct crowding out and fiscal policy interdependence this paper introduces perfect substitutability between private and public consumption in a dynamic open economy with imperfect competition and nominal rigidities this implies a direct crowding out effect that generalising to the two country case some well known properties of a closed economy tends to reduce consumption following both domestic and foreign expansions a less expected result is that sub stitutability has a positive effect on the short run output spillover we also show that if we modify the model to allow for home bias in government spending temporary fiscal expansions display a quasi neutrality property

competition and collusion in dealer markets this article develops a game theoretic model to analyze market makers intertemporal pricing strategies we show that dealers who adopt noncooperative pricing strategies may set bid ask spreads above competitive levels this form of implicit collusion differs from explicit collusion where dealers cooperate to fix prices price discreteness or asymmetric information are not required for collusion to occur rather institutional arrangements that restrict access to the order flow are important determinants of the ability to collude because they reduce dealers incentives to compete on price public policy efforts to increase interdealer competition should focus on such restrictions

competing with the new york stock exchange research on information economics and securities markets dating back to stigler journal of political economy 69 1961 213 225 journal of business 37 1964 117 142 argues that trading will tend to centralize in major market centers such as the new york stock exchange nyse the nyse s recent mergers with archipelago and euronext bring questions about the viability and effects of competition between stock exchanges to the policy forefront we examine the largely forgotten but unparalleled episode of competition between the nyse and the consolidated stock exchange of new york consolidated from 1885 to 1926 the consolidated averaged 23 of nyse volume for approximately forty years by operating a second market for the most liquid securities that traded on the big board our results suggest that nyse bid ask spreads fell by more than 10 when the consolidated began to trade nyse stocks and subsequently increased when the consolidated ceased operations the empirical analysis suggests that this historical episode of stock market competition improved consumer welfare by an amount equivalent to us 9 6 billion today

does order preferencing matter 1we would like to thank david easley eugene kandel the referee g william schwert the editor participants at the dealer markets conference at ohio state university and an anonymous referee for helpful comments we gratefully acknowledge financial support from the johnson graduate school of management and the national science foundation 1 abstract this study examines how order preferencing affects the competitiveness and efficiency of laboratory financial markets we operationalize preferencing by allowing some dealers to execute a portion of the order flow by matching the most favorable quotes available increasing the proportion of order flow that is preferenced can increase bid ask spreads reduce the informational efficiency of prices and benefit dealers at the expense of liquidity traders preferencing has none of these effects however when two or more dealers are not receiving preferencing orders preferencing may significantly degrade market performance if preferencing arrangements affect all or virtually all dealers

quotes order flow and price discovery the goal of this article is to examine the impact of 1975 congressional mandate to integrate the trading of nyse listed stocks the conclusions are most of the time the new york stock exchange nyse quote matches or determines the best displayed quote and the nyse is the most frequent initiator of quote changes non nyse markets attract a significant portion of their volume when they are posting inferior bids or offers indicating they obtain order flow for other reasons such as payment for order flow yet when a non nyse market does post a better bid or offer it does attract additional order flow

do customer information programs reduce household electricity demand the irish program abstract we study empirically the effectiveness of a customer information program to decrease energy demand by increasing efficient electricity use this demand side management dsm program aims at reducing the lack of information on the customers side that is documented in related literature we study the irish dsm program which is particularly well suited to investigate this issue as strategic behavior is ruled out in this setting for both customers and suppliers on the customers side because information programs allow only for a limited substitution of own effort on the producers side because the specificity of the irish case left no room for strategic behavior we find that providing customers with information reduced overall electricity demand by roughly 7 as well as reducing demand fluctuations over the year further we find that the dsm program had a larger impact upon long run demand with consumers short run demand behavior not being changed significantly

third market broker dealers cost competitors or cream skimmers this article compares the bid ask spread for new york stock exchange nyse listed securities before and after a major third market broker dealer bernard l madoff investment securities madoff begins to selectively purchase and execute orders in those securities tests reveal the quoted bid ask spread tightens when madoff enters the market furthermore trading costs as measured by the difference between the transaction price and the midpoint of the contemporaneous bid ask spread do not increase together these results suggest that the adverse selection problem associated with allowing agents to selectively execute orders in exchange listed securities may be economically insignificant

can transparent markets survive abstract this paper investigates whether transparent markets can survive when faced with direct competition from less transparent markets we first construct a game theoretic model in which in equilibrium the low transparency dealers capture early order flow and use the resulting informational advantage to quote narrower spreads and earn more profits than their more transparent competitors we then conduct a laboratory experiment that tests and supports all of these predictions a second experiment shows that most dealers choose to be of lower transparency when they are allowed to do so however the informational advantage of low transparency decreases as there are more such dealers while the high transparency dealers get increasing benefit from informed traders who attempt to broadcast deceptive trades as a result a small number of transparent dealers persist in our markets

the macroeconomic effects of monetary and fiscal policy in a small open economy does the exchange rate regime matter abstract this paper develops a small open economy model in the spirit of obstfeld and rogoff 1995 the introduction of endogenous traded sector output unlocks current account and real exchange rate effects within this framework where specific consideration is given to the case with fixed but adjustable parities exchange rate devaluation generates similar qualitative effects as a money supply expansion under floating rates output and external effects of government spending shocks are broadly consistent with the adjusted basic non micro founded mundell and fleming mf framework but differ in significant ways from the baseline mf model contrary to the textbook mf model a government expenditure shock depreciates the nominal exchange rate and generates real effects under the fixed rate system

welfare and macroeconomic interdependence we develop a baseline model of monetary and fiscal transmission in interdependent economies the welfare effects of expansionary policies are related to monopolistic supply in production and monopoly power of a country in trade an unanticipated exchange rate depreciation can be beggar thyself rather than beggar thy neighbor as gains in domestic output are offset by deteriorating terms of trade smaller and more open economies are more prone to suffer from inflationary shocks larger economies benefit from moderate demand led expansions but may be worse off if policy makers attempt to close the output gap fiscal shocks are generally beggar thy neighbor in the long run in the short run they raise domestic demand at given terms of trade thus reducing the welfare benefits from monetary expansions analytical tractability makes our model uniquely suitable as a starting point to approach the recent new open economy macroeconomic literature

fiscal consolidation under fixed exchange rates abstract we present the fixed exchange rate version of the obstfeld and rogoff model and analyze the international transmission of fiscal policy shocks the welfare effects of an unanticipated contraction in government expenditure in the home country are shown to depend crucially on the way in which world money stock is set if home authorities alone are responsible for pegging the exchange rate a fiscal adjustment leads to a decrease in the real interest rate stimulates private consumption and limits the contraction in world output compared with a situation in which a cooperative scheme is implemented the model is then used to propose a new interpretation of recent events in the eu countries that have enacted restrictive fiscal policies while pegging their currencies to the dm

antitrust and prices this study examines the effects of antitrust prosecution on prices charged by firms indicted for price fixing in a survey of 25 cases filed between 1973 and 1984 prices are found to gradually rise by about 7 percent over the 4 years following an indictment however the severity of penalties is negatively correlated with prices these two findings suggest either that penalties are too lenient or that prosecution is too broad penalizing economically efficient conspiracies along with those that are inefficient

a bibliometric review energy consumption and greenhouse gas emissions in the residential sector residential sector has been one key sector for reducing its greenhouse gas emissions due to its significant contribution to global warming researchers in different countries have studied household energy consumption patterns and greenhouse gas emissions in order to promote low carbon lifestyles however few review papers have been published in this regard leading to a lack of systematic understanding on the related research achievements hence by using a bibliometric approach this paper aims to review the existing literature and examine the evolution of such a field so that the research trends can be uncovered including popular research methods citation analysis is performed to assess the influence of most productive journals countries territories and authors network analysis is also conducted to evaluate the relationship among different countries territories authors and keywords research outcomes of this paper present a comprehensive research picture on residential energy consumption and corresponding greenhouse gas emissions ree related papers published from 1997 to 2016 the most productive journals countries territories authors are also analyzed based on citation analysis and network analysis in addition results also revealed that behavioral analysis input output analysis life cycle assessment and cost benefit analysis are the most commonly used methods in this field results obtained from this study can provide valuable information for researchers interested in the ree related field

does the limit order routing decision matter we examine the impact deciding to route limit orders away from the new york stock exchange nyse has on three dimensions of execution quality with methodologies controlling for market conditions and order submission strategies overall differences in limit order execution quality between regional stock exchanges and the nyse are small suggesting that the order routing decision may not affect retail limit order traders substantively conditioning on the distance between the limit order s price and prevailing quotes however reveals systematic differences in execution quality this implies that brokers can strategically route limit orders to improve retail limit order execution quality copyright 2002 oxford university press

preferencing internalization of order flow and tacit collusion evidence from experiments this paper examines preferencing arrangements and tacit collusion in laboratory asset markets in the experiments dealers may internalize by matching the best quote or by passing orders to the dealer posting the best quote although some markets were highly competitive several markets reached a collusive equilibrium with wide spreads and near complete intemalization of order flow the paper further examines the role of market transparency and passed order flow on quote setting behavior and suggests that these affect the mechanism leading to tacitly collusive equilibria

the behavioural economics of climate change this paper attempts to bring some central insights from behavioural economics into the economics of climate change in particular it discusses i implications of prospect theory the equity premium puzzle and time inconsistent preferences in the choice of discount rate used in climate change cost assessments and ii the implications of various kinds of social preferences for the outcome of climate negotiations several reasons are presented for why it appears advisable to choose a substantially lower social discount rate than the average return on investments it also seems likely that taking social preferences into account increases the possibilities of obtaining international agreements compared to the standard model however there are also effects going in the opposite direction and the importance of sanctions is emphasized

the persistence of dominant firm market share raising rivals cost on the new york stock exchange to explain the persistence of dominant new york stock exchange nyse market share in stock trading of listed securities from 1992 to 2002 we develop a dominant firm price leadership model and hypothesize that nyse specialists raised the costs of rival market makers the model predicts that natural and induced cost advantages will determine the nyse s market share vis a vis the regional exchanges electronic trading systems and nasdaq dealers empirically nyse market share increases with economies of scale and scope abnormal price volatility high asymmetric information and with trading practices that raise rivals costs such as failure to display limit orders that bettered the existing quotes

stock market quality in the presence of a traded option we use an economic experiment to examine the implications of asymmetric information for linkages between a stock and a traded option we find the presence of the option splits price discovery across markets and changes the process by which conditional expectations are updated the time series properties of the stock price depend directly on the intrinsic value of the option when the intrinsic value of the option is positive informational efficiency is higher in the market for the stock and volatility is lower we provide evidence that the introduction of an option improves market quality in the underlying asset

why nasdaq market makers avoid odd eighth quotes recent studies argue that implicit collusion explains the tendency of nasdaq market makers to avoid odd eighth price quotes this paper focuses on the role that preference trading plays in determining quoted spreads under the postulated effects of preference trading an analysis of the relation between spreads and price fractions explains the paucity of odd eighth quotes on nasdaq empirical results from a comprehensive data set show that exogenous economic characteristics explain the distribution of price fractions across securities and illustrate the stability of that distribution over time these results contradict empirical results offered as support for the collusion hypothesis

cross border listings and price discovery evidence from u s listed canadian stocks we examine the contribution of cross listings to price discovery for a sample of canadian stocks listed on both the toronto stock exchange tse and a u s exchange we nd that priceson the tse and u s exchange are cointegrated and mutually adjusting the u s share of price discovery ranges from 0 2 percent to 98 2 percent with an average of 38 1 percent the u s share is directly related to the u s share of trading and to the ratio of proportions of informative tradeson the u s exchange and the tse and inversely related to the ratio of bid ask spreads with the enhanced globalization of nancial markets the number of non u s rms cross listing shares on a u s exchange has substantially increased attracting non u s listings is now a top priority of the u s stock exchanges at the end of 2000 420 non u s rmswere listed on the new york stock exchange nyse the number of foreign rmslisted on nasdaq waseven higher the popularity of international cross listings has prompted many academic studies on the topic 1 most of these studies focus on the bene ts of international cross listings including the reduced cost of capital and the enhanced liquidity of a rm s stock studiessuch asalexander eun and janakiramanan 1987 1988 and foerster and karolyi 1993 suggest that the cost of capital declines because the portion of the risk premium that compensates for cross border investment barriers dissipates miller 1999 and foerster and karolyi 1999 propose increased investor recognition as another possible explanation several studies examine changes in trading volume and costs due to international cross listing foerster and karolyi 1998 nd that the bid ask spreads in canada decrease after the cross listing of canadian stocks in the united states domowitz glen and madhavan 1998 suggest that the impact of cross listing is complex and depends on the degree of quote transparency that is the extent to which price information is observable in the two markets smith and so anos 1997 examine if cross listing is a zerosum game with increased trading in the united states being oiset by reduced

do investors prefer round stock prices evidence from israeli ipo auctions abstract we find round number clustering in orders submitted by investors in israeli ipo auctions explanations offered for price clustering such as dealer collusion or implicit agreement to simplify negotiations cannot explain price clustering in this market therefore this is direct evidence that investors prefer round numbers

an empirical study of the effect of rule 19c 3 the extent to which all orders for common stocks should be consolidated that is sent to a single marketplace and the effect of consolidation on competition in the securities markets have been the subject of much debate in the past quarter century this debate has focused on offboard trading restrictions for member firms for example new york stock exchange nyse rule 390 and american stock exchange amex rule 5 and on the institution of appropriate intermarket linkages for example the consolidated transactions tape the consolidated quotations system and the intermarket trading system while the securities and exchange commission sec has attempted to promote competition in the securities markets the results of its efforts are uncertain consequently the consolidation fragmentation debate continues in this article we examine a very specific case in which the sec tried to increase the degree of competition in market making rule 19c 3 allowed off board trading of nyse listed stocks by exchange members as we will show this rule had both beneficial and adverse effects section i describes rule 19c 3 the environment which led to its introduction and the controversy surrounding it in section ii we examine the effect of rule 19c 3 on over the counter otc market making activity we find that for about 34 percent of the eligible stocks the introduction of exchange member market makers increased the total level and also the continuity of otc market making activity in section iii we find that rule 19c 3 has had a statistically significant effect in reducing percentage bidask spreads which ceteris paribus is desirable in section iv our analysis shows that rule 19c 3 has led to an increase in returns variance which ceteris paribus is undesirable finally our summary and conclusion are presented in section v

the importance of composition of fiscal policy evidence from different exchange rate regimes abstract we study the macroeconomic effects of fiscal policies in an open economy we emphasize two transmission mechanisms the cost channel by which wage government spending and labor taxes raise the real wage firms must pay and the exchange rate channel by which the nominal exchange rate shifts induced by fiscal policy have real effects if some prices and wages are sticky the latter channel implies that changes in wage government spending or in labor taxation should have different effects under flexible than under fixed exchange rates in a 1964 93 panel of oecd countries we find significant evidence for both channels moreover we find that the real product wage and profitability are more responsive than quantities employment and output to fiscal policy innovations

tick size bid ask spreads and market structure we propose a link between market structure and the resulting market characteristics tick size bid ask spreads quote clustering and market depth we analyze transactions data of stocks traded on the london stock exchange a dealer market we conclude that market charateristics are endogenous to the market structure the london dealer market does not have a mandated tick size and it exhibits higher spreads higher quote clusterings and higher market depth than the nyse auction market clustering of trade prices is similar in london and new york

effects of market reform on the trading costs and depths of nasdaq stocks the relative merits of dealer versus auction markets have been a subject of significant and sometimes contentious debate on january 20 1997 the securities and exchange commission began implementing reforms that would permit the public to compete directly with nasdaq dealers by submitting binding limit orders additionally superior quotes placed by nasdaq dealers in private trading venues began to be displayed in the nasdaq market we measure the impact of these new rules on various measures of performance including trading costs and depths our results indicate that quoted and effective spreads fell dramatically without adversely affecting market quality

market maker quotation behavior and pretrade transparency we examine the impact of differing levels of pretrade transparency on the quotation behavior of nasdaq market makers we find that market makers are more likely to quote on odd ticks and to actively narrow the spread when they can do so anonymously by posting limit orders on electronic communication networks ecns from a public policy perspective our findings suggest that making the level of pretrade transparency on nasdaq more opaque by allowing anonymous quotes could improve price competition and narrow spreads further

episodic liquidity crises cooperative and predatory trading we describe how episodic illiquidity arises from a breakdown in cooperation between market participants we first solve a one period trading game in continuous time using an asset pricing equation that accounts for the price impact of trading then in a multi period framework we describe an equilibrium in which traders cooperate most of the time through repeated interaction providing apparent liquidity to one another cooperation breaks down when the stakes are high leading to predatory trading and episodic illiquidity equilibrium strategies that involve cooperation across markets lead to less frequent episodic illiquidity but cause contagion when cooperation breaks down why is illiquidity rare and episodic pastor stambaugh 2003 detect only 14 aggregate low liquidity months over the time period 1962 to 1999 despite being of significant magnitude most of the episodes were short lived and were followed by long periods of liquidity 1 the origin of this empirical observation still remains a puzzle in this paper we attempt to shed light on this puzzle by developing a theoretical model in which a breakdown in cooperation between traders in the market manifests itself in predatory trading this mechanism leads to sudden and short lived illiquidity we develop a dynamic model of trading based on liquidity needs during each period a liquidity event may occur in which a trader is required to liquidate a large block of an asset in a relatively short time period this need for liquidity is observed by a tight oligopoly whose members may choose to predate or cooperate predation involves racing and fading the distressed trader to the market

make take structure and market quality evidence from the u s options markets we examine the make take structure which compensates liquidity suppliers and charges liquidity demanders in the options markets where it competes with a traditional structure that uses payments for order flow using the introduction of the make take structure as an event we find that execution costs including fees for liquidity demanders decline after the event for the affected options that the make take structure encourages market makers to improve quoted prices and that brokers change their routing behavior to include fees in the routing decision the decline in execution costs is consistent with the benefits of the increased quote competition from the make take structure prevailing over the fees the structure charges to liquidity demanders this paper was accepted by wei jiang finance

the new open economy macroeconomics a survey since the 1995 publication of obsteld and rogoff s redux model there has been an outpouring of research on open economy dynamic general equilibrium models that incorporate imperfect competition and nominal rigidities this paper offers an interim survey of this recent literature 2001 elsevier science b v all rights reserved

payments for order flow on nasdaq we present a model of nasdaq that includes the two ways in which marketmakers compete for order f low quotes and direct payments brokers in our model can execute small trades through a computerized system preferencing arrangements with marketmakers or vertical integration into market making the comparative statics in our model differ from those of the traditional model of dealer markets which does not capture important institutional features of nasdaq we also show that the empirical evidence is inconsistent with the traditional model which suggests that preferencing and vertical integration are important components in understanding nasdaq

symposium on market microstructure focus on nasdaq abstract this special issue of the journal of financial economics includes six articles that analyze the market microstructure of nasdaq in various ways the question of the costs of trading on nasdaq has become contentious in both the academic and legal regulatory arenas since the christie and schultz 1994 article first noted that many actively traded nasdaq stocks were almost never quoted on odd eights the articles in this symposium bring new and interesting insights to this debate

the clustering of ipo gross spreads international evidence patterns of clustering in ipo gross spreads can be identified not only in the u s but also in many other markets across the world the evidence indicates however that these clustering patterns are not necessarily collusive clustering is widespread in many countries with low gross spreads in fact the amount of clustering observed is negatively related to the gross spread level of a country additionally an analysis of abnormal gross spreads following hansen 2001 indicates that few clusters contain abnormal positive surpluses

a comparison of centralized and fragmented markets with costly search how does quotation transparency affect financial market performance biais s irrelevance proposition in 1993 shows that centralized markets yield the same expected bid ask spreads as fragmented markets other things equal however de frutos and manzano demonstrated in 2002 that expected spreads in fragmented markets are smaller and market participants prefer to trade in fragmented markets this paper introduces liquidity traders costs of searching for a better quote into the biais model and derives opposite conclusions to these previous studies expected spreads in centralized markets are smaller and liquidity traders prefer centralized markets while market makers prefer fragmented markets

government control or low carbon lifestyle analysis and application of a novel selective constrained energy saving and emission reduction dynamic evolution system abstract this paper explores a novel selective constrained energy saving and emission reduction eser dynamic evolution system analyzing the impact of cost of conserved energy cce government control low carbon lifestyle and investment in new technology of eser on energy intensity and economic growth based on artificial neural network the quantitative coefficients of the actual system are identified taking the real situation in china for instance an empirical study is undertaken by adjusting the parameters of the actual system the dynamic evolution behavior of energy intensity and economic growth in reality are observed with the results in perfect agreement with actual situation the research shows that the introduction of cce into eser system will have certain restrictive effect on energy intensity in the earlier period however with the further development of the actual system carbon emissions could be better controlled and energy intensity would decline in the long run the impacts of cce on economic growth are positive government control and low carbon lifestyle play a decisive role in controlling eser system and declining energy intensity but the influence of government control on economic growth should be considered at the same time and the controlling effect of low carbon lifestyle on energy intensity should be strengthened gradually while the investment in new technology of eser can be neglected two different cases of eser are proposed after a comprehensive analysis the relations between variables and constraint conditions in the eser system are harmonized remarkably a better solution to carry out eser is put forward at last with numerical simulations being carried out to demonstrate the results

real exchange rates and macroeconomics evidence and theory since the early 1980s a large body of research has thrown doubt on the relevance of macroeconomic models for understanding exchange rates the authors argue that a balanced reading of recent literature in exchange rate economics gives a more optimistic assessment many studies have established the pertinence of long run purchasing power parity ppp and the explanatory power of macroeconomic fundamentals in real exchange rate fluctuations a reasonably strong case can be made for a traditional macroeocnomic interpretation of real exchange rates which emphasizes short run price stickiness but long run ppp but a central new ingredient in this interpretation is the presence of international commodity market segmentation and persistent deviations from the law of one price an example is given of a dynamic general equilibrium model that can reproduce some of the observed features of real exchange rate fluctuations

anonymity adverse selection and the sorting of interdealer trades this article asks why london security dealers use more than one trading venue to trade with one another we argue that differences in the exclusivity liquidity anonymity and post trade transparency of each system permit a more efficient sorting of interdealer trades than if there were just one system our evidence comes from detailed data on where london dealers chose to place interdealer trades contrary to intuition we show that uninformed interdealer trades as measured by subsequent price impact tend to migrate to third party brokered systems where trade is anonymous by contrast informed interdealer trades tend to migrate to the direct nonanonymous public market additionally we show that this distribution of trades is supported by differences in the price improvement dealers receive in the direct and brokered markets our findings have implications for three strands of the market microstructure literature first they contribute to our understanding of the importance of anonymity and transparency in securities trading most theoretical models of the effects of anonymity and transparency predict that anonymous trading systems will attract more informed trades

staggered wages and output dynamics under disinflation we study the output costs of a reduction in monetary growth in a dynamic general equilibrium model with staggered wages the money wage is fixed for two periods and is chosen according to intertemporal optimisation agents have labour market monopoly power we show that the introduction of microfoundations helps to resolve the puzzle raised by directly postulated models namely that disinflation in staggered pricing models causes a boom in our model disinflation whether unanticipated or anticipated unambiguously causes a slump

inflation in open economies abstract this paper relates the time consistent inflation rate to the degree of trade openness of an economy the mechanism linking the welfare effects of monetary surprises and hence the incentives to inflate to openness does not rely on a large country terms of trade effect but rather is due to imperfect competition and nominal price rigidity in the non traded sector the empirical evidence supports the main predictions of the model 1997 elsevier science b v

the impact of household behavioral changes on ghg emission reduction in lithuania abstract it is commonly understood that households must change their behavior to reduce problems related increased energy consumption and climate change therefore in the search of cheap ghg emission reduction measures households are an important target group because they are responsible for more than 20 of total energy consumption in developed countries in addition waste management and responsible consumption of products are the key issues in ghg emission reduction the aim of the paper is to assess ghg emission reduction potential in households in terms of behavioral changes towards sustainable consumption the review of literature on analysis of households behavioral changes impact on ghg emission reduction was performed the daily survey of household agenda and energy use records were performed in lithuania for two scenarios baseline and ghg emission reduction scenario including energy saving ghg emission reduction potential in household was assessed based on daily survey data and energy consumption records by applying carbon calculator based on modified coefficients evaluated ghg emission reduction potential in households was compared with ghg emission reduction potentials in other sectors of lithuania based on analysis performed in the paper the tools to promote household behavioral changes towards sustainable consumption were proposed

the cost of institutional equity trades presented are an overview of the findings from the recent literature on the cost of u s equity trades for institutional investors and new evidence on trading costs from a large sample of institutional trades the findings discussed have important implications for policymakers and investors implicit trading costs are economically significant equity trading costs vary considerably and vary systematically with trade difficulty and order placement strategy and whether a trade price represents best execution depends on detailed data for the trade s entire order submission process especially information on pretrade decision variables such as the trading horizon