mean reversion in short horizon expected returns this article develops and estimates a simple model for monthly expected stock returns that relies on the rapidly decaying structure of shorter horizon weekly expected returns the most striking aspect of our findings is that the rapid mean reversion in short horizon expected returns implies much greater variation through time in monthly expected returns than has been documented in earlier studies for instance during the 1962 to 1985 period over 25 percent of the return variance of small firms can be explained by time variation in expected returns article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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

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

the effects of inflation news on high frequency stock returns previous research using daily returns finds conflicting evidence about the relationship between unanticipated inflation news and stock returns we explore the relationship by looking at the response in minutes and trades of size based stock portfolios to unexpected changes in the regularly scheduled producer price index and consumer price index announcements in particular we answer the following three questions 1 do stocks respond to inflation news 2 what is the speed and path of that response 3 is the response stable or does it vary with the economy the direction of the news or time

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

a market microstructure explanation for predictable variations in stock returns following large price changes prior empirical evidence of predictable variations in stock returns following large price changes is found to be at least in part driven by the sample selection bias arising from the systematic movement of closing transaction prices within the bid ask spread by using the average of the bid ask prices in the sample selection process the price reversal on the day following the events day 1 disappears for a short run period after day 1 however systematic abnormal return patterns are still observed these short run price reversals persist even after controlling for the influence of systematic trading patterns around the events however investigation of contrarian investment profits from these short run price reversals shows that the average abnormal returns are not large enough to cover the transaction price movement between the bid and ask prices

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

intraday price reversals for index futures in the us and hong kong abstract we observe intraday price reversals following large price changes at the opening of the s p 500 futures market and the hsi futures market we note that the magnitude of subsequent price reversals is positively related to the initial price changes and that the price reversals are not caused by a bid ask spread or by panic among investors we also note that such price reversals can be exploited to give rise to profitable opportunities after transaction costs even though these may not be very significant this study shows that investor overreaction may be a universal phenomenon and irrational investor behavior like overreaction may also exist among groups of sophisticated investors

private information trading volume and stock return variances new evidence is provided on the determinants of stock return variances first when the tokyo stock exchange is open on saturday the weekend variance increases weekly variance is unaffected however despite an increase in weekly volume second the listing of u s stocks in tokyo substantially increases the number of trading hours but tokyo volume is negligible for these u s stocks and their 24 hour variance is unaffected the overall results are consistent with the predictions of private information based rational trading models but inconsistent with both the irrational trading noise and public information hypotheses

intradaily price volume adjustments of nyse stocks to unexpected earnings the speed and path of adjustment in stocks to the degree of earnings surprise in their quarterly announcements are studied using price volume transactions data a differential price adjustment process was observed with stocks having large positive earnings surprises experiencing a faster adjustment compared with those stocks with negative earnings surprises volume transaction frequency and size were found to be directly related to the absolute degree of surprise but very favorable earnings surprise stocks experienced initially a large number of smaller trades while stocks with large unfavorable earnings surprises had relatively fewer transactions but higher volume per trade the stock market s microstructure has received increasing attention from researchers especially from an empirical perspective as transaction data on prices and volume have become more readily available 1 an important subset of this research has been the study of stock price adjustments to significant news events specifically publicly announced information with economic content should be quickly reflected in prices in an unbiased manner this paper contains a study of the intradaily adjustment in stocks to the informational content of earnings reports using price changes trading volume and transaction frequency and size we examine the transaction to transaction and time series stock behavior associated with different degrees of earnings surprise embedded in earnings announcements the degree of surprise is measured by a comparison of actual with forecasted earnings for 325 new york stock exchange nyse firms these firms are subdivided into five earnings surprise categories in order to determine whether the speed and path of their price volume adjustment processes are different one question of interest is whether the adjustment process for favorable versus unfavorable earnings surprises is similar or different another is whether any adjustment is distinguished by a few large trades or a large number of smaller

agricultural export dumping the case of mexican winter vegetables in the u s market this paper examines the 1978 agricultural dumping charge brought by florida winter vegetable producers against mexican growers it discusses fair value in the context of three antidumping criteria prices at home and abroad selling below cost of production and third market test the u s department of commerce found in favor of the mexican producers by using the third market test a test which leads to ambiguous results it is the authors contention that the law should be changed so that future cases can be decided on a normal business practice concept accounting for production and costing decisions unique to highly perishable products

misspecification of capital asset pricing this study documents empirical anomalies which suggest that either the simple one period capital asset pricing model capm is misspecified or that capital markets are inefficient in particular portfolios based on firm size or earnings price e p ratios experience average returns systematically different from those predicted by the capm furthermore the abnormal returns persist for at least two years this persistence reduces the likelihood that these results are being generated by a market inefficiency rather the evidence seems to indicate that the equilibrium pricing model is misspecified however the data also reveals that an e p effect does not emerge after returns are controlled for the firm size effect the firm size effect largely subsumes the e p effect thus while the e p anomaly and value anomaly exist when each variable is considered separately the two anomalies seem to be related to the same set of missing factors and these factors appear to be more closely associated with firm size than e p ratios

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

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

trade diversion from tomato suspension agreements trade barriers can cause output to be diverted to other countries and into other products we study the effect of a voluntary price restraint vpr on mexican tomatoes entering the united states the diversion caused by the vpr is statistically and economically significant representing over four fifths of the direct effects of the trade barrier when the vpr was binding mexico exported more tomatoes to canada the united states cut back on exports while canada increased their exports to the united states the vpr also diverted fresh tomatoes in mexico into paste production which was then exported to the united states des barrieres commerciales peuvent entrainer la diversion de l output vers d autres pays ou d autres productions on etudie la diversion causee par les accords de restriction volontaire des prix arvp des tomates mexicaines entrant sur le marche americain la diversion causee par les arvp a ete statistiquement et economiquement significative representant plus des quatre cinquiemes des effets directs de la barriere tarifaire quand les arvp ont ete contraignants le mexique a exporte plus de tomates au canada les etats unis ont reduit leurs exportations alors que le canada augmentait ses exportations vers les etats unis les arvp ont aussi entraine une diversion des tomates fraiches au mexique vers la production de puree de tomate un produit qui a alors ete exporte vers les etats unis

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

information content and the speed of stock price adjustment the process by which security prices adjust to the release of new information is an area of study which has received much attention in accounting and finance in finance the main interest has been whether prices adjust in a rapid and unbiased manner to new information in accounting the focus has been more on whether different accounting disclosures have information content the study reported here combined both interests in that we investigated the speed of adjustment of releases of information which had different degrees of information content as illustrations dann mayers and rabb 1977 tested the sensitivity of a block trade trading rule to the speed of price adjustments this rule first suggested by grier and albin 1973 is based on the assumption that abnormal returns can be earned by purchasing shares at the block price and selling at that day s closing price dann mayers and rabb hereafter dmr found that unless one could purchase the stock within five minutes of the block trade the profitability of the grier and albin rule was seriously impaired they also found the market price to be an unbiased estimate of the closing price within 15 minutes of the block trade similarly hillmer and yu 1979 devised an alternative test for the speed of price adjustment based on a cumulative sum technique they illustrated the technique by testing for shifts in the parameters of the distributions of price changes and of transaction frequencies around five information events two earnings announcements and three defense

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

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

components of short horizon individual security returns abstract in this paper we present a simple model which relates security returns to three components an expected return a bid ask error and white noise the relative importance of the various components is empirically assessed and the model s ability to explain the various time series properties of individual security and portfolio returns is tested time varying expected returns and bid ask errors are found to explain substantial proportions up to 24 of the variance of security returns we also reconcile the typically negative autocorrelation in security returns with the strong positive autocorrelation in portfolio returns

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

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

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

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

discounting and underpricing in seasoned equity offers abstract expected discounting in seasoned equity offers is a cost of uncertainty about firm value marketing new shares and acquiring information that raises the offer price stockholders incorporate predictable discounting in stock prices when equity offers are first announced the surprise component of discounting reflecting the lead bank s final adjustment to the offer price releases information that often causes economically large price swings on the offer day disparities between the issuer s closing price and the price suggested in the lead bank s final order book are a primary source of information the discount surprise appears to be used by lead banks to update capital suppliers with that eleventh hour information before they commit their funds

a bias in closing prices the case of the when issued pricing anomaly financial studies examining stock price behavior have principally relied on end of day data this paper illustrates a bias in closing prices by reexamining the when issue pricing anomaly with intraday data with intraday data major portions of the pricing anomaly can be explained by a nonsynchronous matching of trades a difference in the settlement procedures labeled time value of money in choi and strong 1983 a mismatching of market purchases with market sales first proposed by lamoureux and wansley 1989 and a higher frequency of market purchases relative to market sales in addition the small remaining portion of the anomaly cannot be arbitraged the remaining premium is attributed to a lower level of limit order competition and an order imbalance in the when issued shares

trading mechanisms and stock returns an empirical investigation this paper examines the effects of the mechanism by which securities are traded on their price behavior we compare the behavior of open to open and close to close returns on nyse stocks given the differences in execution methods applied in the opening and closing transactions opening returns are found to exhibit greater dispersion greater deviations from normality and a more negative and significant autocorrelation pattern than closing returns we study the effects of the bid ask spread and the price adjustment process on the estimated return variances and covariances and discuss the associated biases we conclude that the trading mechanism has a significant effect on stock price behavior

divided government fiscal institutions and budget deficits evidence from the states does partisan control of american state government have systematic effects on state spending and taxing levels does divided control affect the government s ability to make hard decisions do institutional rules like legal deficit carryover restrictions matter using a formal model of fiscal policy to guide empirical analysis of data covering the american states from 1968 to 1987 we conclude that 1 aggregate state budget totals are driven by different factors under democrats and republicans the net result being that democrats target spending and taxes to higher shares of state level personal income 2 divided government is less able to react to revenue shocks that lead to budget deficits particularly where different parties control each chamber of the legislature and 3 unified party governments with restricted ability to carry deficits into the next fiscal year outside the south have sharper reactions to negative revenue shocks than those without restrictions

market rationality and dividend announcements abstract we investigate stock market rationality by examining the timeliness and unbiasedness of the market s response to dividend announcements our initial findings for market timeliness show a sluggish market reaction to dividend announcements however when the ex dividend effect is controlled for we find no evidence of a sluggish market reaction we examine the unbiasedness of the market s response by testing whether the net announcement effect across a sample that is devoid of ex post selection bias sums to zero we observe a significant positive net announcement effect and examine several plausible conjectures for this puzzling phenomenon but none provides a satisfactory explanation

transactions volume and volatility we show that the positive volatility volume relation documented by numerous researchers actually reflects the positive relation between volatility and the number of transactions thus it is the occurrence of transactions per se and not their size that generates volatility trade size has no information beyond that contained in the frequency of transactions our results suggest that theoretical research needs to entertain scenarios in which 1 both the frequency and size of trades are endogenously determined yet 2 the size of trades has no information content beyond that contained in the number of transactions article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

simple but sound methods for estimating the value of changes in biodiversity for biological pest control in agriculture abstract recent meta analyses indicate that an increase in the number of natural enemy species raises the overall effectiveness of biological control of insect pests in agricultural settings although economic valuations of biological pest control in agriculture show an impressive cost savings from this ecosystem service no direct estimate of the value of biodiversity for biological control has been attempted we apply a basic microeconomic model for estimating the value of changes in the richness of arthropod natural enemies or in functional diversity for biological pest control for two sample crops using experimental results reported in the ecological literature market based outcomes were driven by changes in crop yields associated with experimental reductions in natural enemy species richness and modified by supply shifts and price elasticities we show how our simple model differs from common approaches used in the ecological literature and explain why this alternative model more accurately estimates societal well being for consumers and producers participating in these crop markets we conclude by discussing the additional research and data needed to make economic valuation of ecosystem services in agricultural settings more feasible rigorous and realistic in the future

option implied volatilities and the cost of issuing equity abstract the structure of a firm commitment seasoned equity offering seo resembles a put option underwritten by an investment bank syndicate smith 1977 employing implied volatilities from issuers stock options as a direct forward looking measure this paper examines the impact of expected price risk around seo issue dates on the direct cost of issuing equity using a comprehensive sample of 1208 seos between 1996 and 2009 we find issuers with higher option implied volatilities raise less external equity capital and pay higher investment bank fees in the stock market ceteris paribus the effect of implied volatility on the investment bank fees is stronger for larger issuers with lower pre seo abnormal realized stock volatilities and for seos with higher expected price pressures around issue dates these relationships are robust to adjustments for correlations among control variables sample selection bias and also simultaneous determination of offer size and seo fees

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

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

how does public information affect the frequency of trading in airline stocks abstract this paper examines how firm specific and macroeconomic announcements affect transaction rates in u s airline stocks using a version of the autoregressive conditional hazard framework of hamilton and jorda 2002 that incorporates market microstructure variables we show that on average trading intensity spikes prior and consequent to macroeconomic announcements but decreases around firm specific releases further when we use intraday crude oil futures returns as a proxy for industry relevant and globally important news we find that their effects are statistically significant with higher oil futures returns increasing the probability of trade

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

stock price dynamics and firm size an empirical investigation we show that after controlling for the effects of bid ask spreads and trading volume the conditional future volatility of equity returns is negatively related to the level of stock price this leverage effect is stronger for small as compared to large firms we also document that while the essential characteristics of the relations between stock price dynamics and firm size are stable the strengths of the relationships appear to change over time a number of empirical studies have documented that stock volatility tends to fall subsequent to an increase in stock prices and rise following a decline in stock prices an observation commonly attributed to the leverage effect as explained by black 1976 leverage can induce future stock volatility to vary inversely with the stock price a fall in a firm s stock value relative to the market value of its debt causes a rise in its debt equity ratio and increases its stock volatility for example black 1976 and christie 1982 use individual securities and french schwert and stambaugh 1987 gallant rossi and tauchen 1990 schwert 1990 and nelson 1991 use market indices to provide evidence consistent with the leverage effect however these papers demonstrate a leverage effect either intertemporally or cross sectionally for some assets relatively little work has examined the intertemporal behavior of individual assets by taking into account conditional heteroskedasticity and changing expected returns in this paper we examine and characterize the cross sectional and temporal relations between stock price dynamics and firm size in particular we investigate the possibility of an inverse relation between future stock volatility and stock price and whether this effect varies across time and or across firms with different market capitalization our study uses the exponential garch egarch formulation of nelson 1991 as a model for the timeseries behavior of individual security returns nonparametric methods are

market microstructure and the ex date return this article examines the role of measurement biases due to order flow effects in abnormal split ex day returns we conjecture that postsplit orders consist of numerous small buyers and fewer larger sellers this change in order flow causes closing prices to occur more frequently at the ask price consistent with maloney and mulherin 1992 and grinblatt and keim 1991 in addition this change causes specialists spreads to increase perhaps to offset larger average inventories we examine both nyse and nasdaq samples and find that order flow biases can explain approximately 80 percent 48 percent of the nyse nasdaq ex day return

issuing costs to existing shareholders in competitive and negotiated underwritten public utility equity offerings abstract this paper presents the results of an empirical investigation of whether there is any difference in the cost incurred by public utilities if they issue new equity through a negotiated or competitive underwriting we conclude that the expected cost of a competitive offer is less than the expected cost of a negotiated offer but that the variance of the cost is substantially greater with a competitive offer these results are interesting because most public utilities use negotiated underwriting unless forced by regulation to use competitive offers this paper is also an addition to the growing agency theory literature

year end tax induced sales and stock market seasonality the paper relates two phenomena in the stock market the high return during the month of january and the apparent existence of widespread sales of stocks for tax purposes towards the end of the fiscal year the findings suggest that due to the taxinduced sales the price of many stocks over the last 35 years was temporarily depressed in december but recovered in the following january this price recovery is a major contributor to the high returns observed in january the tax effect is present in firms of all sizes but much more pronounced for small firms the analysis also indicates that a more precise identification of the tax switch candidates may prove that the taxinduced sales are in fact the sole contributor to the high january s returns the issue of seasonality in the stock market has attracted the attention of researchers for some time rozeff and kinney 13 present evidence of seasonality in the market index with the months of january and july having a peak return the seasonal movements in the average return in the market could not be fully accounted for by a corresponding seasonal pattern in the market risk they offer three explanations to this phenomenon tax induced sales release of accounting information and seasonal demand for cash the first explanation has received some support from recent research dyl 4 studied the effects of capital gain taxes on trading volumes of common stocks and concluded that capital gain taxes affect investors year end portfolio decisions and that this effect is in turn reflected in the trading volumes of common stocks in december p 174 mcenally 10 and branch 2 studied the effects of the tax induced trading on securities return and found that depressed stocks at the end of the year are likely to bounce back immediately after year end the existence of a pronounced seasonal behavior in the market might suggest some form of market inefficiency a strategy under which stocks are bought towards the end of the year and sold at the beginning of the following year might yield an abnormal return despite the seasonal behavior of stock returns it would be indeed surprising if this regularity which has not gone unnoticed by the financial community could be exploited to bring a risk adjusted excess return the objective of this paper is to examine jointly the two phenomena tax

price reversals bid ask errors or market overreaction abstract we show that bid ask errors in transaction prices are the predominant source of apparent price reversals in the short run for nasdaq firms once we extract measurement errors in prices caused by the bid ask spread we find little evidence of market overreaction on the contrary we find that security returns are positively and not negatively autocorrelated we also show that bid ask errors lead to substantial spurious volatility in transaction returns about half of measured daily return variances can be induced by the bid ask effect

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

bid ask spreads in the interbank foreign exchange markets abstract this study provides evidence on quotations and bid ask spreads in the wholesale foreign exchange market and introduces a method to document variation in the placement of quotes relative to asset value i find that spreads widen with proxies for inventory carrying costs including forecasts of price risk and a measure of liquidity costs increases in spreads before nontrading periods can also be attributed to inventory costs the location of currency quotes in relation to value is not constant and the outcome of hypothesis tests regarding changes in currency value can be sensitive to allowances for variation in quote location

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

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

testing the rationality of state revenue forecasts recent revenue shortfalls in several states focus attention on the question of whether states do a good job of forecasting revenues in modem economics forecasts are eval uated on the basis of whether or not they are rational do the forecasts optimally incorporate all available information this paper develops a method for testing the rationality of state revenue forecasts and applies it to the analysis of data from new jersey massachusetts and maryland one of our main findings is that in all three states the forecasts of own revenues are systematically biased downward tn 1985 the 50 states raised 349 billion in revenues from their own sources and received 84 billion in grants from the federal government u s bureau of the census 1987 p 266 state governments are clearly important players in the u s system of public finance and the efficiency with which they conduct their financial affairs has an important impact on consumer welfare one important determinant of a state s ability to con duct reasonable fiscal policies is the quality of its revenue forecasts sensible deliberations about ex penditures cannot be made in the absence of good forecasts indeed in the presence of con stitutional or statutory provisions for balanced budgets unanticipated changes in revenues can wreak havoc not only on proposals that are sched uled for funding but on plans that have already been put into effect as well in recent months two powerful governors michael dukakis of massachusetts and mario cuomo of new york have suffered major politi cal embarrassments because actual revenues fell substantially short of the predictions in their re spective states such episodes focus attention on the question of whether states do a good job of forecasting revenues in modem economics fore casts are evaluated on the basis of whether or not they are rational do the forecasts optimally incorporate all information that is available at the time they are made although there is a large literature on state revenue forecasting methods that literature focuses mostly on state budgetary institutions forecasts themselves are evaluated only in an informal fashion 1 although the theory and econometric methods of rational expectations have been used to evaluate forecasts made by households and businesses 2 these powerful tools have not been applied to state government fore casts this paper applies these methods to the problem of state revenue forecasting and as an example uses them to analyze data from new jersey massachusetts and maryland the results cast light not only on the question of rationality per se but on issues such as the impact of political factors on forecasts section ii presents the conceptual framework for testing rational expectations the relevant in stitutional issues and data are described in section iii the results are discussed in section iv we find that in all three states forecasts of own rev enues are systematically biased downward section v concludes with a summary

the dependence between hourly prices and trading volume this study provides evidence on joint characteristics of hourly common stock trading vol ume and returns on the new york stock exchange average volume traded shows signifi cant differences across trading hours of the day and across days of the week average returns differ across hours ofthe day and to some extent across days ofthe week there is a strong contemporaneous relation between trading volume and returns and also a rela tion between trading volume and returns lagged up to four hours furthermore the trading volume returns relation is steeper for positive returns than for nonpositive returns

tax induced trading around ex dividend days abstract this paper investigates trading volume around ex dividend days for taxable distributions cash dividends it is found that trading volume increases significantly around the ex dividend day this increase is more pronounced for high yield actively traded stocks and after brokerage commissions became negotiable the results are consistent with the hypothesis that short term traders have an impact on ex day price behavior at least for taxable distributions for non taxable distributions stock splits and stock dividends we find negative abnormal volume around ex day

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

predictable events and excess returns the case of dividend announcements abstract this paper hypothesizes that the risk per unit of time and the required rate of return are higher than normal during an event period whose timing can be predicted consistent with this hypothesis this paper presents empirical evidence indicating that the unconditional mean rate of return the variance of stock returns and their systematic risk are higher than usual during dividend announcement periods however the documented increases in the systematic risk are not large enough to fully explain the excess returns this finding is puzzling and hard to reconcile with existing theory

the relation between common stock returns trading activity and market value this study examines the relation between common stock returns trading activity and market value our results indicate that although firm size and trading activity are highly correlated differences in trading activity are not the underlying reason for the firm size anomaly the finding of systematic differences in risk adjusted returns across stocks of firms of different size recent empirical research has revealed systematic differences in risk adjusted returns for common stocks of firms of different sizes as measured by the market value of outstanding common stock see banz 1 and reinganum 5 roll 7 in a recent paper has suggested that the firm size anomaly may result from errors in risk measurement in particular roll suggested that because small firms trade less frequently than large firms risk measures obtained from daily or weekly returns data may seriously underestimate the risk associated with holding a portfolio of small firms in response to roll s conjecture reinganum 6 examined the risk adjusted returns of portfolios formed on the basis of firm size using both the scholes williams 8 and the dimson 2 aggregated coefficient method of estimating portfolio betas and found that regardless of the beta estimation technique employed differences in estimated betas were insufficient to account for differences observed in the returns of size ranked portfolios if reinganum s 6 finding is correct that the firm size effect is not attributable to a misassessment of risk and if smaller firms trade less frequently than do larger firms then firm size may merely proxy for trading activity 1 thus the observed firm size effect may be explained in terms of a liquidity premium associated with inactively traded shares the purpose of this paper is to determine whether or not the firm size anomaly is explicable in terms of differences in the trading activity of common stocks a liquidity premium would provide a logically appealing explanation for the firm size effect tinic 11 demsetz 3 and others have argued that transactions costs vary inversely with trading activity as measured by average number of

countercyclical policy and the speed of recovery after recessions we consider the effect of some policies intended to shorten recessions and accelerate recoveries our innovation is to analyze the duration of the recoveries of various u s states which gives us a cross section of both state and national level policies because we study multiple recessions for the same state and multiple states for the same recession we can control for differences in the economic conditions preceding recessions and the causes of the recessions when evaluating various policies we find that expansionary monetary policy at the national level helps to stimulate the exit of individual states from recession we find that exogenous measures of decreases in taxes or targeted increases in federal spending reduce recovery times for state recessions we also find ambient economic conditions can extend expected recovery times other states in the same region suffering from recession around the same time the length of the preceding recession and increases in oil prices

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

political control and public sector savings evidence from the states the right to access and ultimately spend public sector savings is determined by the party which can control the politicaloutcome this implies that anticipatedfuture changes in the state s controllingpolitical party may systematicallyadversely affect current savings extendingthe life cycle permanent income model ishow that a representative legislator willopt to forgo current saving in favor ofspending when his prospects for futurepolitical control diminish estimating apanel data model of 39 states from1973 1995 i find that an actual futurechange in the controlling party of astate s lower house significantly reducescurrent saving

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

calls of warrants timing and market reaction this paper examines the timing of and reaction to calls of callable warrants three main findings emerge first unlike convertible bonds or preferred stock callable warrants are called almost as soon as possible second there is a negative price reaction of about 3 percent when a call is announced finally at the completion of a call the stock price rebounds by an average of 7 percent the total reaction from announcement through completion of the call is a positive excess return of about 4 percent since 1980 several hundred firms have issued callable warrants typically these warrants become callable only after a predetermined date and only when the price of the underlying stock exceeds a minimum price for a prespecified number of days if the company then calls warrantholders are allotted a notice period usually 30 days to decide whether to exercise their warrants or accept a nominal call price this paper is the first to study market reaction to calls of warrants and to see if firms delay calls the results indicate that warrants are called almost as soon as exercise can be forced at the announcement of a call stock prices fall about 3 percent however they rebound by about 7 percent around the last day that warrants can be exercised because this date is known in advance this result is not expected in an efficient market the investigation of calls of warrants may provide insights into calls of convertible bonds and preferred stock both calls of warrants and calls of convertibles transfer wealth to stockholders by reducing the life of the other securityholder s options so if management tries to maximize shareholder wealth management s incentive to call warrants may resemble their incentive to call convertible securities 1 however in contrast to the results pre

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

us mexico fresh vegetable trade the effects of trade liberalization and economic growth abstract studies of us mexico vegetable trade have generally emphasized the importance of us tariffs in determining the competitive advantage of us producers even so research has identified at least four factors related primarily to the different levels of economic development in the us and mexico that also have important effects on us mexico agricultural trade in general and fresh vegetable trade in particular these include the differential growth rates of us and mexican real wages production technology yields and per capita income as well as cyclical movements in the real mexican peso us dollar exchange rate this study examines the relative contribution of nafta and the development related factors to likely future changes in us fresh vegetable imports from mexico the analysis employs an econometric simulation model of us and mexican markets for five fresh vegetables tomatoes cucumbers squash bell peppers and onions accounting for 80 of us fresh vegetable imports the results suggest that the 1994 1995 peso devaluation rather than nafta was primarily responsible for the sharp increase in us imports of mexican vegetables observed in the first years following the implementation of nafta over time however the results suggest that differences in the growth rates of us and mexican production yields and to a lesser extent of us and mexican real incomes and or real wage rates could plausibly contribute more to the future growth of us tomato squash and onion imports from mexico than the trade liberalizing effects of nafta

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

macroeconomic fundamentals price discovery and volatility dynamics in emerging bond markets abstract this study characterizes volatility dynamics in external emerging bond markets and examines how prices and volatility respond to macroeconomic news as in mature bond markets surprises about macroeconomic conditions in emerging markets are found to affect both conditional returns and volatility of external bonds with the effects on volatility being more pronounced and longer lasting than those on prices yet the process of information absorption tends to be more drawn out than in mature bond markets global and regional macroeconomic news is at least as important as local news for both price and volatility dynamics

state responses to fiscal crises the effects of budgetary institutions and politics this paper explores the dynamics of state taxes and spending during the late 1980s when regional economic downturns and increased expenditure demands led to substantial state budget deficits more restrictive state fiscal institutions such as no deficit carryover rules and tax and expenditure limitations are correlated with more rapid fiscal adjustment to unexpected deficits political factors are also important when a single party controls the state house and the governorship deficit adjustment is much faster than when party control is divided in gubernatorial election years tax increases and spending cuts are both significantly smaller than at other times

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

state budget stabilization fund adoption preparing for the next recession or circumventing fiscal constraints the high rate of budget stabilization fund adoption during the 1980s is often attributed to the 1980 1982 recession in this view states adopted funds to prevent a recurrence of the fiscal crises experienced during that recession an alternative hypothesis is that some funds adopted during this period were intended to circumvent tax and expenditure limit laws we find that states with tels in place were significantly more likely to adopt statutory funds but were significantly less likely to adopt funds with stringent deposit and withdrawal rules suggesting that some funds were adopted to circumvent existing fiscal constraints

friction in the trading process and the estimation of systematic risk abstract this paper considers how estimates of the market model beta parameter can be biased by friction in the trading process information decision and transaction costs that a leads to a distinction between observed and true returns b causes observed returns to be generated asynchronously for a set of interdependent securities and c thereby introduces serial cross correlation into security returns several propositions are derived from which consistent estimators of beta are obtained and the effect of differencing interval length on beta estimates is specified the formulation is contrasted with the related analyses of scholes williams 1977 and dimson 1979

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

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

the short run dynamics of the price adjustment to new information we examine how prices in interest rate and foreign exchange futures markets adjust to the new information contained in scheduled macroeconomic news releases in the very short run using 10 second returns and tick by tick data we find that prices adjust in a series of numerous small but rapid price changes that begin within 10 seconds of the news release and are basically completed within 40 seconds of the release there is some evidence that prices overreact in the first 40 seconds but that this is corrected in the second or third minute after the release while volatility tends to be higher than normal just before the news release there is no evidence of information leakage in our analysis we correct for the biases created by bid ask spreads and tick by tick data

stock reaction to dividend savings of convertible preferred calls free cash flow or price pressure effects abstract calls of in the money convertible preferred stock typically induce dividend savings for the firm since preferred dividends exceed common stock dividends prior research finds that these savings are negatively related to stock returns at call announcement and argues that the market expects managers to abuse the increased free cash flow this paper finds that dividend savings are closely related to call size suggesting other explanations larger calls experience a more negative announcement reaction consistent with temporary liquidity effects there is a price reversal during the conversion period which is greater for larger calls

intraday futures market behaviour around major scheduled macroeconomic announcements australian evidence abstract this paper examines intraday futures market behaviour around major scheduled macroeconomic information announcements on the sydney futures exchange sfe prior literature analysing intraday price behaviour around announcements is extended to trading volume and quoted bid ask spreads the analysis of price volatility trading volume and quoted bid ask spreads indicates that the majority of adjustment to new information occurs rapidly within 240 seconds of the scheduled time for major announcements with some evidence of abnormal activity prior to announcements analysis of quoted bid ask spreads suggests that they significantly widen in the 20 seconds prior to announcements and remain significantly wider for 30 seconds following announcements the increase in quoted spreads is related to both expected and unexpected volatility implying that market participants increase quoted spreads around information announcements as a consequence of adverse selection costs

the producer welfare effects of trade liberalization when goods are perishable and habit forming the case of asparagus asparagus is a perishable highly seasonal crop we find that out of season imports of asparagus caused habit formation that increased demand in the u s growing seasons we find that habit effects offset about 64 of the welfare losses to u s asparagus producers from increased mexican imports under nafta and all of the u s producer welfare losses from increased peruvian imports under the andean trade preference act we estimate that the u s producer welfare losses from nafta are less than the annualized value of market loss assistance provided them in the 2008 farm bill jel classifications d12 f130 q17 q18

intraday market effects in electronic soybean futures market during non trading and trading hour announcements abstractthis article investigates market reactions to major united states department of agriculture announcements during non trading and trading hours in the soybean futures market using microstruc

measurement effects and the variance of returns after stock splits and stock dividends this article examines the relation between two factors affecting stock returns the bid ask spread and price discreteness and the increase in return variance after ex dates of stock splits and stock dividends controlling for these effects the variance of daily returns still increases significantly the variance of weekly returns also increases significantly and the variance of returns for a control sample of nonsplitting firms shows no significant increase variance ratio tests show that bid ask errors are small for these stocks and therefore cannot explain the large increase in variance spreads and price discreteness do not explain increased variance after stock distributions article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

do idiosyncratic jumps matter abstract we show that idiosyncratic jumps are a key determinant of mean stock returns from both an ex post and ex ante perspective ex post the entire annual average return of a typical stock accrues on the four days on which its price jumps ex ante idiosyncratic jump risk earns a premium a value weighted weekly long short portfolio that buys sells stocks with high low predicted jump probabilities earns annualized mean returns of 9 4 and four factor alphas of 8 1 this strategy s returns are larger when there are greater limits to arbitrage these results are consistent with investor aversion to idiosyncratic jump risk

opening prices on the new york stock exchange abstract the prices of opening transactions on the new york stock exchange are determined quite differently from prices of subsequent transactions this paper tests the null hypothesis that opening prices are as representative of contemporaneous equilibrium stock values as subsequent intra day transactions prices with one possible exception there is no basis for rejecting this hypothesis despite the very different trading mechanisms used in opening trades and intra day trades

the political costs of tax increases and expenditure reductions evidence from state legislative turnover this paper estimates the political costs of increasing taxes and cutting expenditures for members of a legislature it is found that both costs are individually significant but that they are not significantly different this coincides with the first order condition for maximization of the probability of reelection republican legislatures have a higher political cost for taxes thus the party s relative bias toward smaller government is founded in stronger constituent preferences against taxes not for lower spending additionally by being ideologically conservative republicans lower the political costs of taxes while by being more liberal democrats lower the cost of cutting expenditures

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

volume and turn of the year behavior abstract this paper studies the trading characteristics of listed companies by size and year end behavior there were no transactions on nearly 25 of the days for the smallest decile even at the turn of year which is an active trading period for small companies as a result of low levels of trading and the regulations governing exchange specialists transaction prices and quotations of small listed companies may require several days to fully reflect equilibrium price changes the data confirm the existence of a year end seasonal pattern in rates of return for small companies and suggest that there may be a seasonal pattern for large companies as well

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