an investigation of market microstructure impacts on event study returns we investigate the importance of bid ask spread induced biases on event date returns as exemplified by seasoned equity offerings by nyse listed firms we document significant negative return biases on the offering day which explain a large portion of the negative event date return documented in the literature buy sell order flow imbalance is prominent around the offering and induces a relatively large spread bias if order imbalances are suspected the researcher can use returns calculated from the midpoint of the closing bid and ask quotes instead of returns calculated from closing transaction prices to avoid this return bias several studies document the impact of bid ask spreads on security return patterns which appear inconsistent with the informational efficiency of capital markets phillips and smith 1980 find spread induced bias to be important in explaining apparent arbitrage opportunities in the option markets lakonishok and smidt 1984 uncover evidence suggesting a relation between bid ask spreads and turn of the year seasonality in stock returns 1 keim 1989 and porter 1989 further document the empirical importance of

day of the week effects and asset returns the number of empirical studies using daily stock returns is rapidly increasing researchers generally assume that the distribution of stock returns is identical for all days of the week a convenient statistical assumption but not a necessary condition of market equilibrium nevertheless there are reasons to suspect that the distribution of returns may vary according to the day of the week the most obvious is the impact of weekends on monday s return since monday s return is calculated over three instead of one calender day the mean and variance may well be higher on monday compared with any other daily return perhaps three times as large previous research has examined the daily distribution of stock returns for a monday effect while fama 1965 does not compare daily mean returns he does report that monday s variance is about 20o greater than other daily returns with a traditional distributional assumption regarding the returns on a financial asset specifies that the expected returns are identical for all days of the week contrary to this plausible assumption this paper discovers that the expected returns on common stocks and treasury bills are not constant across days of the week the most notable evidence is for monday s returns where the mean is unusually low or even negative several explanations of the results are investigated but none proves satisfactory aside from documenting significant day of the week effects the implications of the results for tests of market efficiency are examined while market adjusted returns continue to exhibit day of the week effects these effects are no longer concentrated on monday during the last year we have had many conversations with our colleagues throughout the professions we are particularly thankful to the participants at sessions of the western and american finance associations where preliminary versions of this paper were presented special thanks are due to gene fama gailen hite jon ingersoll robert jarrow merton miller clifford smith and rex thompson the expert research assistance of frank rabinovitch and youngsup yun is gratefully acknowledged 1 the list of papers using daily stock returns is too long to name recent examples include charest 1978 dodd 1980 banz 1981 and reinganum 1981

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

an example of nonlinear endogenous business cycle model build in the trade union abstract this paper exemplifies that a trade union may become a causal factor of the business cycle we construct an overlapping generations og model with a monopoly trade union which bargains about the wage and the employment rate if substitution between the wage and the employment rate for the trade union is elastic then the dynamic behavior around the steady state may be oscillatory

a day end transaction price anomaly a large mean price change is observed on the last daily nyse transaction this suggests that closing prices may not consistently represent stock values transaction prices are studied to further characterize the day end price rise and to determine whether it is due to any limited subsample of stocks or dates the results indicate that the phenomenon is pervasive over most firms and days some evidence suggests that it is caused by a change in the frequency of ask prices at day end

workers response to job loss female and male industrial workers in brazil abstract it is often assumed that when formal sector workers in the third world lose their jobs during a recession they move into the informal sector lack of state support rules out long periods of unemployment above all for breadwinners a survey of industrial workers in brazil shows that following job loss in the early 1980s resorting to the informal sector was more common for women than men and less likely for the skilled than the unskilled unemployment and a return to industrial employment were most common experiences for male breadwinners workers preferences and the structure of labor market opportunities explain much of this behavior

the long run demand for skilled and unskilled labor in colombian manufacturing plants this note estimates the long run demand for skilled and unskilled labor using panel data for colombian manufacturing plants unobserved heterogeneity and measurement error problems that commonly arise in microdata production estimates are examined output measurement errors cause ols estimators to underestimate the output and wage response of employment demand time difference estimators exaggerate the measurement error biases instrumental variable estimates of the output elasticities are 0 89 and 0 76 and own wage elasticities are 0 42 and 0 65 for skilled and unskilled labor respectively the output elasticity is larger for skilled labor whereas the wage elasticity is larger for unskilled labor in virtually every industry

holiday trading in futures markets in this paper we find significantly higher preholiday returns in futures contracts compared to nonholiday returns the findings are consistent with the inventory adjustment hypothesis since higher preholiday returns associated with lower trading volume are most pronounced for exchange closed holidays there is evidence of positive postholiday returns associated with higher trading volume for exchangeopen holidays this is consistent with positive holiday sentiments the holiday effect is uniquely independent the magnitude of excess holiday returns is the largest among all seasonal variations in recent years a growing body of literature suggests the presence of abnormal returns for exchange holidays in the equity markets in particular ariel 1990 and lakonishok and smidt 1988 find that stock market returns for the days prior to holidays are significantly higher than returns for other days pettengill 1989 shows that while preholiday and other days returns differ significantly preholiday returns vary by holiday firm size and day of the week on which the holiday falls various theories have been proposed to explain the type of return generating process surrounding holidays since holidays are often considered another form of market closing similar to weekends it seems reasonable that an explanation for one might help explain the other 2 for example if the weekend effect could be explained by settlement procedures then this argument is relevant because holidays can delay settlement for up to two days and could have an effect on returns up to a week prior to the holiday accordingly lakonishok and levi 1982 postulate that friday and perhaps tuesday holidays would generate high thursday and monday returns the holiday effect has also been considered a result of the inventory adjustment process since the loss potential of a short position is more than that of a long position traders may be reluctant to take short positions prior to a nontrading period this would suggest a lesser selling

statistical properties of the roll serial covariance bid ask spread estimator exact small sample population moments of the standard serial covariance and variance estimators are derived under the assumptions of the roll bid ask spread model noise explains why serial covariance estimates are often positive in annual samples of daily and weekly returns small sample estimator bias partially explains why weekly estimates are more negative than daily estimates noise causes the roll spread estimator to be severely biased by jensen s inequality the french roll adjusted variance estimator is unbiased but noisy empirical tests confirm the major implications

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

penny wise dollar foolish buy sell imbalances on and around round numbers this paper provides evidence that stock traders focus on round numbers as cognitive reference points for value using a random sample of more than 100 million stock transactions we find excess buying selling by liquidity demanders at all price points one penny below above round numbers further the size of the buy sell imbalance is monotonic in the roundness of the adjacent round number i e largest adjacent to integers second largest adjacent to half dollars etc conditioning on the price path we find much stronger excess buying selling by liquidity demanders when the ask falls bid rises to reach the integer than when it crosses the integer we discuss and test three explanations for these results finally 24 hour returns also vary by price point and buy sell imbalances are a major determinant of that variation across price points buying selling by liquidity demanders below above round numbers yield losses approaching 1 billion per year this paper was accepted by brad barber teck ho and terrance odean special issue editors

the italian stock market efficiency and calendar anomalies abstract after describing the various concepts of efficiency information valuation full insurance and functional with special reference to the italian stock market the paper analyzes the impact of particular dates and periods of the civil year and stock exchange calendars on stock price changes to test the existence of information inefficiencies the analysis is based on the milan stock exchange s mib storico stock index with reference to the period 2 january 1975 22 august 1989 the events tested for systematic anomalies include weekend and public holidays the end of the calendar and stock exchange months and the end of the year the results obtained are in line with those found for the u s market with evidence of anomalous changes though not all are stable over time

opening the pandora s box trade openness and informal sector growth this article constructs a labour transition model combining the features of job loss and job creation in the formal sector of an economy the theoretical model examines the impact of trade liberalization on net job transition from formal to informal sector in the light of our model we establish certain pre conditions based on simulations under which trade liberalization is accompanied by rising informal sector the model outcome conforms to the empirical evidence of rising informality with openness which we find in 18 central eastern european and former soviet union countries

behaviour of intra daily stock return on an asian emerging market hong kong this study examines the intra daily return behaviour of one of the most open asian emerging markets hong kong it is found that there is a general increase in the positive skewness and kurtosis of all the intra daily returns after the 1987 october crash and the distributions of all the returns have become non normal after the crash there seems to be more day of the week and time of the day variations in the post crash period than in the pre crash period there also exists some day end effect in both of the periods and such a day end effect seems to be related to the day of the week

information disclosure and price manipulation during the pre closing session evidence from an order driven market on 20 february 2012 the taiwan stock exchange corporation launched an order matching simulation mechanism for five minutes during the start of the pre closing session in order to increase information disclosure during this period 13 25 13 30 pre closing information disclosure significantly reduces both trading costs and closing price volatility as well as price manipulation the decrease in price manipulation found in this work is due to pre closing information disclosure not the behaviour of investors shifting to an earlier time further if a stock price rises or falls by more than 3 5 in the simulation in the last minute during the closing session trading of the stock will be suspended for two minutes from 13 31 to reduce volatility however this trading mechanism suspended closing does not seem to have achieved the intended goals of the authorities as it has not been able to significantly reduce closing price volatility and price manipulation

macroeconomic adjustment and the poor analytical issues and cross country evidence the author studies the links between macroeconomic adjustment and poverty first he summarizes some of the recent evidence on poverty in the developing world second he reviews the various channels through which macroeconomic policies affect the poor third the author emphasizes the role of the labor market he develops an analytical framework that captures some of the main features of the urban labor market in developing countries and studies the effects of fiscal adjustment on wages employment and poverty fourth he presents cross country regressions linking various macroeconomic and structural variables to poverty the author finds that output growth and real exchange rate depreciations tend to lower poverty while illiteracy income inequality and macroeconomic volatility tend to increase poverty in addition the impact of growth on poverty appears to be asymmetric and to result from a significant relationship between episodes of increasing poverty and negative growth rates

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

a characterization of the daily and intraday behavior of returns on options the daily and intraday behavior of returns on chicago board options exchange options is examined option returns contain systematic patterns even after adjusting for patterns in the means and variances of the underlying assets this is consistent with the hypothesis that informed trading in options can make the order flow in the options market informative about the value of the underlying asset making options nonredundant the intraday patterns in adjusted option return variances are further consistent with a model of strategic trading by informed and discretionary liquidity traders this paper examines the daily and intraday behavior of returns on options we have two goals our first objective is to identify systematic patterns in the means and variances of daily and intraday returns on options our second objective is to decompose option returns into patterns that are related to the means and variances of the underlying stocks and by inference those patterns that are independent of patterns in the means and variances of the underlying assets 1 our work is important for a number of reasons first options have become as important as common stocks yet there is no detailed investigation of the behavior of returns on options second it is important to identify similarities and differences in return patterns across different securities and market structures an understanding of these similarities and differences would allow us to develop better models of returns that capture these properties closely related to this it is instructive to examine option returns in light of the partial equilibrium models we use to value them specifically are the return patterns in options driven exclusively by the underlying stocks or do option returns contain patterns of their own identifying independent yet similar patterns in options returns may lead to an identification of factors that are common across two different market structures the new york

fiscal policy and the structure of production in a two sector developing economy abstract this paper develops a two sector model of a developing economy and examines the role of the informal sector in limiting the government s ability to increase tax revenues a key feature is the introduction of auditing of the informal sector and degree of tax enforcement in that sector we emphasize the interdependence between tax policy and enforcement in achieving a developing economy s fiscal objectives and show that by judicious policy choices the presence of the informal sector need not hinder its ability to raise tax revenues we supplement the formal analysis with numerical simulations highlighting the contrasting intertemporal tradeoffs implied by higher tax rates and tax enforcement levels

the informational role of stock and option volume this article analyzes the intraday interdependence of order flows and price movements for actively traded nyse stocks and their chicago board options exchange cboe traded options stock net trade volume buyer initiated volume minus seller initiated volume has strong predictive ability for stock and option quote revisions but option net trade volume has no incremental predictive ability this suggests that informed investors initiate trades in the stock market but not in the option market on the other hand both stock and option quote revisions have predictive ability for each other thus while information in the stock market is contained in both quote revisions and trades information in the option market is contained only in quote revisions copyright 2002 oxford university press

market sentiment and macroeconomic fluctuations under pegged exchange rates this paper models changes in market sentiment as a temporary increase in the premium faced by domestic private borrowers on world capital markets the effects of this shock are studied in an intertemporal optimizing framework of a fixed exchange rate economy where firms demand for working capital is financed by bank credit depending on the perceived length of this shock the model is capable of predicting a rise in domestic interest rates capital outflows and a drop in official reserves a reduction in bank deposits and the supply of credit a fall in private consumption a contraction in output and an increase in unemployment these predictions are consistent with observed facts associated with several recent episodes of turbulence on international financial markets

regulatory and legal pressures and the costs of nasdaq trading the nasdaq market came under intense pressure from regulators and class action lawsuits following allegations of tacit collusion by christie and schultz 1994 this article examines the changes in transaction costs on the nasdaq from january 1993 through june 1996 using 16 million trades in 30 stocks effective spreads cannot be matched however the autocovariance spread estimator of roll 1984 works well with intraday data over this period this spread estimator reveals that trading costs declined significantly for 29 of the 30 stocks over 1993 96 article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the making of the turkish financial crisis abstract at the turn of the century the turkish economy was in need of an urgent stabilization in order to halt a treacherous process of inflation unsustainable public debt accumulation and increasing financial fragility resulting from irresponsible policies and lack of fiscal discipline that had been endemic since the early 1980s the stabilization program launched with support from the imf has however failed to deliver its promises plunging the economy into an unprecedented recession largely because of serious shortcomings in its design as well as in crisis intervention which appears to have drawn no useful lessons from recent crises in emerging markets

fiscal adjustment and labor market dynamics in an open economy this paper studies the labor market effects of fiscal adjustment in a two sector three good intertemporal framework key features of the model are an informal sector minimum wages unionized labor in the formal economy imperfect labor mobility and public production of intermediate inputs bluxuryq and wait unemployment prevail in equilibrium it is shown that if unions care sufficiently about employment and if the degree of openness is high an increase in the price of government services may reduce unemployment in the steady state a similar result would hold in an efficiency wage setting if the bdisciplinary effectq of unemployment is sufficiently strong d 2004 published by elsevier b v

an investigation of transactions data for nyse stocks using transactions data the behavior of returns and characteristics of trades at the micro level is examined a minute by minute market return series is formed and tested for normality and autocorrelation evidence of differences in return distributions is found among overnight trades trades during the first 30 minutes following the market opening trades at the close and trades during the remainder of the day the latter distribution is found to be normal unusually high returns and standard deviations of returns are found at the beginning and the end of the trading day when the beginningand end of the day effects are omitted autocorrelation in the market return series is reduced substantially a number of patterns in trading are reported this paper empirically investigates the nature of the return generating process and the characteristics of trade size price changes trading frequency and trading interval at the level of individual trades for a large sample of nyse stocks previous studies of market indices have used daily weekly or monthly

mobility and labor market segmentation the urban labor market in el salvador there is now a large literature examining the hypothesis that there are barriers to mobility between sectors of the labor market in developing countries though there are many explanations for barriers to mobility most versions of the segmented labor market hypothesis are based on restricted access to a higher wage primary or formal sector and free access to a lower wage secondary or informal sector the testable predictions of the hypothesis are the implications of the assumption of excess supply to the primary sector most studies have found results consistent with these predictions including different structures of wages between sectors lower returns to human capital in the secondary sector and lower job tenure by sectors for some demographic groups but as several authors have recently noted it is difficult to distinguish this hypothesis from other competitive explanations for these patterns the competitive model is also consistent with the testable predictions of the segmented labor market hypothesis though the competitive model is consistent with the observed patterns the observed patterns do put restrictions on the version of the competitive model that is appropriate for developing countries for example the finding that earnings tend to be lower in the informal sector is consistent with compensating differentials but this applies only to compensating differentials that are based on formal sector employment as being less desirable such as job flexibility similarly the finding of lower returns to human capital in the informal sector is consistent with life cycle models of investment in human capital but only models in which there is lower labor market attachment of those employed in an informal sector and thus less time to recuperate investments in on the job training but most of the necessary assumptions are reasonable and as a result tests of the segmented labor market hypothesis cannot distinguish among competing explanations

on the job search in a developing country an analysis based on indian data on migrants job search by those who are employed has received increasing attention in recent years in both the theoretical and the empirical literature on labor markets in developed countries much of the interest stems from the observation that job changes often take place without an intervening period of unemployment and that there is a close relationship between searching for a job and quitting the current job also on the job search affects the rate of unemployment during the period between jobs a major preoccupation of the empirical research has been to estimate the returns to on the job search and to test the determinants of job search the bulk of this work uses data for the united states and the united kingdom 2 job search theory has not been empirically tested in the context of a developing country on the job search particularly in the so called informal sector of the urban labor market is an important feature of probabilistic models of migration in developing countries in the vein of michael p todaro and of john r harris and todaro 3 such models hypothesize that individuals migrate to urban centers with the aim of obtaining employment in the formal sector and that informal sector employment is a transitional phase during which migrants are searching for formal sector jobs recent work by gary s fields has formalized the theoretical aspects of this job search process within the framework of a multisector model 4 thus it would be of interest to find out if there are significant differences between developed and developing countries with respect to the determinants of on the job search

macroeconomic adjustment with segmented labor markets this paper analyzes the macroeconomic effects of fiscal and labor market policies in a developing economy with an informal sector and a heterogeneous work force a permanent reduction in government spending on nontraded goods leads in the long run to a deprecia tion of the real exchange rate a fall in the market clearing wage for unskilled labor an increase in output of traded goods and a lower stock of net foreign assets a permanent reduction in the minimum wage improves competitiveness and expands the formal sector the effect of changes in unemployment benefits are also analyzed q 1999 elsevier science

efficiency of experimental security markets with insider information an application of rational expectations models the study reports on the ability of competing models of market information integration and dissemination to explain the behavior of simple laboratory markets for a one priced security returns to the security depended upon a randomly drawn state of nature some agents insiders whose identity was unknown to other agents knew the state before the markets opened with replication of market conditions the predictions of a fully revealing rational expectations model are relatively accurate prices adjusted immediately to near rational expectations prices profits of insiders were virtually indistinguishable from non insiders and efficiency levels converged to near 100 percent

information trading and stock returns lessons from dually listed securities this paper compares the intra day patterns on the nyse and amex of volatility trading volume and bid ask spreads for european and japanese dually listed stocks with american stocks of comparable average trading volume and volatility it is shown that the intra day patterns for these stocks are remarkably similar even though public information flows differ markedly across these stocks during the trading day in the early morning all stocks have higher volatility than later in the day but this phenomenon is most pronounced for japanese stocks and affects american stocks the least we argue that these patterns are consistent with markets reacting to the overnight accumulation of public information but are inconsistent with the view that early morning volatility can be attributed to monopolistic specialist behavior

the intraday speed of stock price adjustment to major dividend changes bid ask bounce and order flow imbalances abstract this paper examines the intraday stock price reaction to substantial shifts in dividend policy the results indicate the price reaction to be slower than that previously found by patell and wolfson 1984 and closer to that found with earnings announcements by woodruff and senchack 1988 possible order flow imbalances are examined by looking at the proximity of transaction prices to contemporaneous bid and ask quotes while order flow imbalances are evident for bad news announcements this is not the case for the dividend increase sample this is interpreted as evidence that the price reaction to major dividend increases are in general anticipated fifteen minute holding period returns are computed to measure the movement of equilibrium prices during the announcement period results show a rapid adjustment of prices to positive announcements with adjustment to negative announcements taking up to 75 minutes finally fifteen minute lagged bid ask returns are calculated to determine whether an investor could respond to the announcement and earn positive returns these results are found to be dependent on the transaction cost assumptions being made

rural urban migration in economic development abstract this paper provides a review of the theoretical literature on rural urban migration in contemporary ldcs the paper begins with a brief discussion of the lewis model before going on to discuss the todaro and the harris todaro models and the large literature which these models have spawned the question of job search in the context of migration and the role of family members in migration decisions are considered next the paper then takes a closer look at the informal sector and also sets out alternative migration functions to the ones usually employed in the literature the paper concludes with a brief note on some of the important implications arising from our study

stabilization policy and public sector prices abstract this paper analyzes the impact of public sector price increases combined with employment cuts in a dynamic optimizing model if the government adopts a tough layoff policy the real wage is highly flexible and the reforms are perceived to be permanent there is a strong presumption that real output will be higher and inflation lower over all time horizons problems may arise during the adjustment process however when the reforms are not credible or the real wage adjusts slowly to clear the labor market

taxation wage controls and the informal sector abstract in this paper we study the effects of taxation and wage controls in a developing economy with an informal sector for that purpose we build a model with firm heterogeneity in which a formal and an informal sector endogenously emerge in some productive branches of the economy based on the assumption that the marginal cost of tax and regulation evasion increases with the size of the firm our model offers an explanation for the observed discontinuity in the distribution of firms size the missing middle three forms of dualism scale wage and evasion consistent with market segmentation are obtained the model accounts for the presence of waiting unemployment that seems particularly pervasive in urban regions a computable general equilibrium cge model for cameroon is built incorporating these features various reforms of the tax and regulation system are simulated and their effects on the extent of the informal sector are analyzed

an analysis of transactions data for the toronto stock exchange abstract using transactions data for all stocks traded on the toronto stock exchange this study shows that returns and number of shares traded have a u shaped pattern when plotted against time of the trading day these results confirm that the findings of wood mclnish and ord 1985 harris 1986 mclnish and wood 1988 and jain and joh 1989 for the new york stock exchange nyse also hold for both another exchange and another country and are not due to peculiarities of united states securities markets further evidence is provided to support the view of harris 1989 and terry 1986 that these relatively high end of day returns are due at least in part to an increase in the proportion of trades at the ask relative to trades at the bid

migration unemployment and development a dynamic two sector analysis abstract a time minimizing problem of attaining a full employment state is solved in a dual economy model with harris todaro migration mechanism and with a positive level of urban unemployment in the starting period it appears that the optimum solution lies in the specialization of investment in the urban sector at least in the initial stage of development if the per capita capital stock in the urban sector is very small in the starting period

trade size order imbalance and the volatility volume relation abstract this paper examines the roles of the number of trades size of trades and order imbalance buyer versus seller initiated trades in explaining the volatility volume relation for a sample of nyse and nasdaq stocks our results reconfirm the significance of the size of trades beyond that of the number of trades in the volatility volume relation on both markets after controlling for the return impact of order imbalance the volatility volume relation becomes much weaker for nyse stocks the order imbalance in large trade size categories affects the return more than in smaller size categories for nasdaq stocks the largest return impact comes from the order imbalance in maximum sized small order execution system soes trades

nash in nash bargaining a microfoundation for applied work a nash equilibrium in nash bargains has become the workhorse bargaining model in applied analyses of bilateral oligopoly this paper proposes a non cooperative foundation for nash in nash bargaining that extends the rubinstein 1982 model to multiple upstream and downstream rms assuming there exists gains from trade for each rm pair we prove that there exists an equilibrium with immediate agreement and negotiated prices that correspond to rubinstein prices if and only if the marginal contribution of a set of agreements is weakly greater than the sum of the agreements marginal contributions we provide stronger conditions under which equilibrium prices are unique

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

otc trades and liquidity in the european carbon market more than meets the eye this study investigates whether the previously reported price impact of otc trades in the eu ets can be attributed to their distinctively larger size liquidity related or to their discretionary f

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

calendar anomalies abnormal returns at calendar turning points 1988 calendar anomalies abnormal returns at calendar turning points financial analysts journal vol 44 no 6 pp 28 39

macroeconomic adjustment under alternative lending arrangements abstract this paper investigates macroeconomic adjustment for a small open economy under alternative lending arrangements the arrangements considered all have the common feature of a link between international lending rates and measures of creditworthiness by employing an intertemporal maximizing model of a small open economy the paper analyzes adjustment paths for the stock of international debt the real exchange rate and consumption in response to economic shocks the paper finds that arrangements linking interest rates on lending to the outstanding stock of debt are consistent with a stable adjustment trajectory whereas arrangements linking interest rates to performance on the trade balance are likely to be unstable

standard poor s 500 index futures volatility and price changes around the new york stock exchange close we examine the effects of the closing of the new york stock exchange nyse on volatility and price changes in the standard poor s s p futures market which trades for 15 more minutes each day when the nyse closes volatility in the futures market drops significantly only to increase at the close of the futures market thus exhibiting a u shaped pattern after the nyse closes we also find that friday s close is the period of highest volatility in the futures market also in the final minutes on friday the s p futures price anticipates the well known weekend effect found in equities copyright 1995 by university of chicago press

trading behavior and the unbiasedness of the market reaction to dividend announcements this article examines the price formation process during dividend announcement day using daily closing prices and transactions data we find that the unconditional positive excess returns first documented by kalay and loewenstein 1985 are higher for small firm and low priced stocks price volatility and trading volume also increase during this period examination of trade prices relative to the bid ask spread and volume of trades at bid and asked prices shows that the excess returns cannot be attributed to measurement errors or to spillover effects of tax related ex day trading rather the price behavior is related to the absorption of dividend information

autocorrelation of daily index returns intraday to intraday versus close to close intervals abstract first order autocorrelation coefficients of 1 daily equally weighted open to open returns 2 daily equally weighted intraday to intraday returns terminating at each of 23 successive 15 minute intervals of the trading day beginning at 10 15 a m and 3 daily equally weighted and value weighted close to close returns interval 24 are examined a number of findings concerning the behavior of these autocorrelations are reported first order autocorrelation is shown to follow a crude u shaped pattern when plotted against the time of the trading day but there is no significant difference in the behavior of autocorrelations based on open to open returns and 24 hour returns terminating at 10 15 a m evidence that intraday patterns in autocorrelation cannot be explained fully by trading delays also is presented

public sector price increases credibility and welfare abstract this paper examines the dynamics of inflation and unemployment when the government increases public sector prices and wage indexation prevents the labor market from clearing in the short run credible reforms are virtually certain to be immediately deflationary and welfare improving even when the labor market clears very slowly temporary price increases however usually produce higher inflation after a short period of time and often reduce welfare when higher inflation provokes the government to reverse the reform there exist multiple self fulfilling equilibria

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

efficiency wages disinflation and labor mobility abstract the paper analyzes the role of labor market segmentation and relative wage rigidity in the transmission process of disinflation policies in an open economy facing imperfect capital markets wages are flexible in the nontradables sector and based on efficiency factors in the tradables sector with perfect labor mobility a permanent reduction in the devaluation rate leads in the long run to a real appreciation a lower ratio of output of tradables to nontradables an increase in real wages measured in terms of tradables and a fall in the product wage in the nontradables sector under imperfect labor mobility unemployment temporarily rises