short selling and the price discovery process we show that stock prices are more accurate when short sellers are more active first in a large panel of nyse listed stocks intraday informational efficiency of prices improves with greater shorting flow second at monthly and annual horizons more shorting flow accelerates the incorporation of public information into prices third greater shorting flow reduces post earnings announcement drift for negative earnings surprises fourth short sellers change their trading around extreme return events in a way that aids price discovery and reduces divergence from fundamental values these results are robust to various econometric specifications and their magnitude is economically meaningful the author 2012 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please e mail journals permissions oup com oxford university press

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

an equilibrium model of asset trading with sequential information arrival in an effort to better understand the dynamic market price adjustment process this paper develops a model which describes the impact of new information on a financial market the primary emphasis is on the price change volume relationship in the presence of a margin requirement we find that the margin requirement significantly affects the relation of price change to volume furthermore this relationship is shown to be affected by the number of investors in the market the degree of information dissemination differences in interpretation of information and the implicit cost of the margin requirement

nonmonetary effects of the financial crisis in propagation of the great depression this paper examines the effects of the financial crisis of the 1930s onthe path of aggregate output during that period our approach is complementary to that of friedman and schwartz who emphasized the monetary impact of the bank failures we focus on non monetary primarily credit related aspects of the financial sector output link and consider the problems of debtors as well as those of the banking system we argue that the financial disruptions of 1930 33 reduced the efficiency of the credit allocation process and that the resulting higher cost and reduced availability of credit acted to depress aggregate demand evidence suggests that effects of this type can help explain the unusual length and depth of the great depression this abstract was borrowed from another version of this item

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 effects of collective bargaining rights on public employee compensation evidence from teachers firefighters and police widespread public sector unionism emerged only in the 1960s as individual states opened the door to collective bargaining for state and municipal workers in this study the author exploits differences in timing of legislative reforms across states to construct estimates of the causal effects of public sector collective bargaining rights on pay benefits and employment for teachers firefighters and police perhaps surprisingly estimates that allow for state fixed effects and state specific trends show little effect on teachers pay benefits or employment despite significantly increasing union presence among teachers for firefighters the results show a substantial positive effect on wages for police the wage effect was more modest but the workweek was significantly shortened

a new look at the monday effect it is well documented that expected stock returns vary with the day of the week the monday or weekend effect in this article we show that the well known monday effect occurs primarily in the last two weeks fourth and fifth weeks of the month in addition the mean monday return of the first three weeks of the month is not significantly different from zero this result holds for most of the subperiods during the 1962 1993 sampling period and for various stock return indexes the monthly effect reported by ariel 1987 and lakonishok and smidt 1988 cannot fully explain this phenomenon

right to work laws free riders and unionization in the local public sector empirical models of local government unionization reveal substantial reductions in union membership due to right to work laws free riders rather than underlying antiunion sentiments are probably responsible because the unionization models include better measures of sentiments than right to work laws furthermore these laws reduce the probability that bargaining unions form by more than they reduce the probability that nonbargaining associations form in three of five local government functions these results also confirm the importance of free riders because union security clauses that prohibit free riders in states without right to work laws exist only in collective bargaining contracts

an empirical examination of information differences of opinion and trading activity abstract we investigate the relations between trading volumes and our proxies for information flows and divergences in opinions we view s p 500 index futures open interest as a useful proxy for divergences of traders opinions and find that volumes are higher on days when open interest increases than on days with declines volume in individual equities is more closely related to firm specific information flows while equity basket volume is more closely associated with market information this differential impact is greatest for small capitalization stocks where market wide news has no explanatory power

union membership in the united states 1973 1981 this paper reports estimates of union membership gathered from may current population surveys from 1973 to 1981 the authors present data by occupation industry selected states and smsas race gender and educational attainment the paper both extends and differs from that by freeman and medoff which presents unionism estimates for the private sector for 1968 75 to facilitate longitudinal analysis this paper reports three year moving averages of occupational and industry data and annual estimates of demographic classifications the data include public sector as well as private sector workers and they exclude workers not covered by the national labor relations act also the authors provide only union membership estimates not estimates on workers covered by union contracts this paper suggests that the percentage of all workers that are unionized in the united states remained fairly constant over the 1973 81 period

short sale restrictions and market reaction to short interest announcements according to the diamond verrecchia hypothesis if increases in short interest are correlated with information that is not yet public they should precipitate a price adjustment stocks with unexpected increases in short interest are found to generate statistically significant but small negative abnormal returns for a short period around the announcement date when the sample is divided into stocks with and without tradable options nonoptioned stocks closely mimic these results but the optioned stocks do not in a cross sectional analysis of individual firms the short term negative abnormal returns are found to be 1 more negative the higher the degree of unexpected short interest and 2 less negative if the firm has tradable options

capital asset prices with and without negative holdings prize lecture to the memory of alfred nobel december 7 1990 this abstract was borrowed from another version of this item

bargaining laws as a cause and consequence of the growth of teacher unionism this study analyzes state level data for 1959 78 to determine whether the rapid growth of teacher unionism during those years was primarily a result or a cause of the public sector bargaining laws adopted during the same period the author finds contrary to the view of some scholars that the enactment of laws requiring public sector employers to bargain with majority representatives of their employees was the single most important cause of the growth in the proportion of teachers covered by union contracts although the growth in teacher unionism in turn encouraged the adoption of some new or stronger bargaining laws this effect was relatively weak more important predictors of new bargaining laws included the extent of political patronage in a state and the bargaining laws adopted by neighboring states

short sale constraints and information driven short selling evidence on nasdaq abstractthis article examines the impact of the nasdaq s bid test rule on the information content of short sales surrounding the u s security exchange commission introduction of the pilot programme in 2005 it shows that abnormal short selling prior to analyst recommendation changes were very informative when stocks were restricted by the bid test rule such informativeness of short selling disappears when the bid test rule was temporarily suspended for pilot stocks the results are robust after controlling for various factors that may contribute to this anomaly both the shorting efficiency hypothesis and the regulatory concern hypothesis are developed to provide explanations for this anomaly additional tests show that the regulatory concern is more consistent with the data

a further investigation of the weekend effect in stock returns this study uses a longer time period and additional stocks to further investigate the weekend effect we find consistently negative monday returns 1 for the s p composite as early as 1928 2 for exchange traded stocks of firms of all sizes and 3 for actively traded over the counter otc stocks the otc results are based on bid prices and therefore appear to reject specialist related explanations for the 30 individual stocks of the dow jones industrial index the average correlation between friday and monday returns is positive and the highest of all pairs of successive days the latter finding is inconsistent with fairly general measurement error explanations some of the most puzzling empirical findings reported in recent years indicate that the distribution of common stock returns varies by day of the week most notably the average return for monday close friday to close monday is significantly negative cross 3 and french 6 find negative monday returns using the standard and poor s composite index and gibbons and hess 7 find negative monday returns for the 30 individual stocks of the dow jones industrial index 1 this negative monday return or weekend effect has yet to be explained this study undertakes a further investigation of the weekend effect in stock returns we examine additional time periods extending the total period covered to 55 years we examine additional stocks such as those of small low capitalization firms and those traded over the counter in all cases the data exhibit a weekend effect that is at least as strong as that reported in previous studies the study also readdresses potential explanations for the effect such as measurement error but concludes that none of these explanations is satisfactory the first section presents a history of the weekend effect from 1928 through 1982 based on the standard and poor s composite index we essentially double the length of the period beginning in 1953 examined by french 6 the results indicate consistently negative monday returns throughout the 55 year period during much of the 25 year period from 1928 through 1952 the new york stock exchange was open on saturdays so monday s return is then computed from saturday s close to monday s close 2 these returns for one day weekends are consistently negative and not significantly different from the two day weekend

day of the week and intraday effects in stock returns abstract this study examines day of the week effects using hourly values of the dow jones industrial average we find that over the 1963 1983 period the weekend effect has sifted from characterizing active trading on monday to characterizing the non trading weekend over the early part of our sample period negative returns characterize each hour of trading on monday while the return from friday close to monday open is positive in the most recent subperiod monday average hourly returns after noon are all positive and the weekend effect is due to negative average returns from friday close to monday open

on the malthusian theory of long swings in the essay on population economic growth consists of alternating surges of population during which real wages fall and the rate of profit rises and capital during which the reverse occurs a series of temporary equilibria exists at which wages are maximal the rate of profit minimal and fully employed work force in technically determined relation to fixed capital stock between these equilibria occur episodes of excess labour below maximum wages above minimum profit rate and capital accumulation malthus s ratios presuppose a logarithmic production function that implies first that the full employment real wage will fall to subsistence secondly that the full employment wages fund is constant summary in fre

earnings announcements stock price adjustment and the existence of option markets this paper employs a new approach to study the effects of option trading on the behavior of underlying stock prices extant research compares distributional properties of the stock price at two points in time divided by an event in the option market that might affect price behavior as an alternative we examine the stock price adjustment to the release of quarterly earnings using samples of firms with and without listed options we find the two samples exhibit different adjustment processes with the nonoption firms requiring substantially more time to adjust since the advent of organized stock option trading the investment community

right to work laws and the extent of unionization it is a well known fact that the extent of unionization is less in states with right to work rtw laws a framework is developed for determining whether rtw laws actually cause a decrease in the extent of unionization or whether they simply mirror preexisting tastes of workers against unions a set of empirical tests is proposed that can distinguish between these explanations based on differences between rtw and non rtw states in the demand for union representation the supply of union jobs relative to that demand and the observed union nonunion wage differential these tests are implemented using disaggregated data from the quality of employment survey and the current population survey and a pattern is found that is consistent with the hypothesis that rtw laws simply mirror preexisting preferences against union representation

the impact of short selling on the price volume relationship evidence from hong kong this paper considers the relationship between traded volume and volatility allowing for the impact of short sales the evidence supports a nonlinear bidirectional relationship between volume and volatility short selling is found to have a significant impact on this relationship and our results suggest i that the hong kong market displays greater volatility following a period of short selling and ii that asymmetric responses to positive and negative innovations to returns appear to be exacerbated by short selling

the information content of short interest a natural experiment an increase in the cost of selling short should increase the bearish information content of short interest announcements by driving relatively uninformed short sellers out of the market we extend the diamond and verrecchia 1987 model to include short selling against the box and test the extended model using a natural experiment based around the taxpayer relief act of 1997 tra97 tra97 made short selling more costly for those shorting against the box consistent with the implications of our extended model this increase in short selling costs strengthens the negative relationship between short interest and subsequent stock price performance post tra97

new findings regarding day of the week returns over trading and non trading periods a note this paper decomposes daily close to close returns into trading day and non trading day returns we discover that all of the average negative returns from friday close to monday close documented in the literature for stock market indexes occurs during the non trading period from friday close to monday open in addition average trading day returns open to close are identical for all days of the week january firm size turn of the year anomalies are shown to be interrelated with day of the week returns

land technical progress and the falling rate of profit abstract the paper sets out a one sector growth model with a neoclassical production function in land and a capital labour aggregate if the elasticity of substitution between land and the capital labour aggregate is less than one and if the rate of capital augmenting technical progress is strictly positive then the rate of profit will fall to zero this result holds regardless of the rate of land augmenting technical progress no amount of technical advance in agriculture can stop the fall in the rate of profit the paper also discusses the relation of this result to the classical and marxist literature

bargaining laws and unionization in the local public sector this paper analyzes the effects of bargaining law characteristics on rates of unionization in over 10 000 local government departments representing five different government services that were without bargaining units in 1977 duty to bargain laws significantly increased the probability of bargaining union formation between 1977 and 1982 the results of the analysis reject the hypotheses that this effect reflects only underlying union strength the release of pent up demand for unionization or the transformation of nonbargaining unions into bargaining unions the changes in unionization attributable to duty to bargain laws are so large that they account for nearly all of the differences in average unionization rates between states with and without these laws

turgot founder of classical economics a r j turgot s capital theory is rightly famous this paper argues that his contribution to distribution theory should also be recogniz ed as a major achievement the interest rate or profit rate is equa lized between different activities and governed by returns at the agr icultural margin intensive and extensive returns decrease as the m argin moves out with capital accumulation this implies a rent theory and a theory of accumulation substantially equivalent to that of dav id ricardo and makes turgot who wrote before adam smith the origin al inventor of the main lines of classical economics copyright 1987 by the review of economic studies limited

on corporate governance a study of proxy contests abstract this paper examines a sample of firms experiencing proxy contests for seats on their board of directors dissident shareholders usually fail to obtain a majority of board seats nevertheless they capture some seats via mechanisms such as cumulative voting in over half of the sample contests regardless of proxy contest outcome positive and statistically significant share price performance is associated with the contest that finding is predicted by the standard economic analysis of proxy contests in which the challenges benefit shareholders by improving corporate performance the finding runs counter to the claim of berle 1962 that the economists view of proxy contests is a wholly imaginary picture a portion of the positive share price changes taking place in the early stages of some proxy contests is not permanent however and as suggested by manne 1962 is at least partially attributable to temporary increases in the market value of the vote attached to corporate shares

short selling and price discovery in corporate bonds we show short selling in corporate bonds forecasts future bond returns short selling predicts bond returns where private information is more likely in high yield bonds particularly after lehman brothers collapse of 2008 short selling predicts returns following both high and low past bond returns this together with short selling increasing following past buying order imbalances suggests short sellers trade against price pressures as well as trade on information short selling predicts bond returns both in the individual bonds that are shorted and in other bonds by the same issuer past stock returns and short selling in stocks predict bond returns but do not eliminate bond short selling predicting bond returns bond short selling does not predict the issuer s stock returns these results show bond short sellers contribute to efficient bond prices and that short sellers information flows from stocks to bonds but not from bonds to stocks

high stock returns before holidays existence and evidence on possible causes on the trading day prior to holidays stocks advance with disproportionate frequency and show high mean returns averaging nine to fourteen times the mean return for the remaining days of the year over one third of the total return accruing to the market portfolio over the 1963 1982 period was earned on the eight trading days which each year fall before holiday market closings examination of hourly pre holiday stock returns reveals high returns throughout the day pre holiday stock returns in the post test 1983 1986 period are also examined this paper explores a seeming empirical regularity in the pattern of daily stock index returns surrounding holidays the trading day prior to holidays on average exhibits high positive returns over one third of the return earned by the market over the twenty year test period accrued on the eight trading days which annually fall before holidays intimations of the pre holiday strength have appeared in the academic literature in an examination of the frequency of dow jones industrial average advances on days surrounding weekends during the 1901 to 1932 period fields 1934 finds a disproportionate frequency of advances on trading days preceding long holiday weekends roll 1983a finds high returns accruing to small firms on the trading day prior to new year s day lakonishok and smidt 1984 note that prices also rise in all deciles of market capitalization on the last trading day before christmas and conclude that the high christmas returns of large companies might be considered another mystery a number of stock market advisors have also noted the pre holiday strength merrill 1966 finds a disproportionate frequency of dow jones industrial average advances on days preceding holidays during the 1897 to 1965 period and fosback 1976 has noted high preholiday returns in sp further hourly returns and closing bid ask data are examined to determine when high returns accrue on preholidays tests are also conducted showing that pre holiday strength is not

right to work laws new evidence from the stock market 1 introduction business organizations the national right to work committee and organized labor periodically devote enormous resources to battles over passage or repeal of individual state rightto work rtw laws all rtw laws outlaw union shop agreements clauses in collective bargaining agreements that require employees to join the union that represents them and about half also outlaw agency shop agreements clauses in collective bargaining agreements that require nonmembers to pay a fee to the union to cover the cost of representation supporters of rtw argue that employees should not be required to pay dues to a labor organization that they do not support opponents argue that because union contracts and grievance arbitration systems cover all employees members and nonmembers rtw laws encourage free riding by individuals who want to gain the benefits of unionization without bearing the costs and that this weakens labor unions are rtw laws largely symbolic or do they reduce union membership the probability of union growth and union bargaining power informed opinion is still sharply divided one view is that rtw laws reduce the probability of union organizing at least in the years immediately following their passage and that this along with lower levels of membership in previously organized units reduces the level of unionization in a state e g hirsch 1980 carroll 1983 garofalo and malhotra 1992 davis and huston 1993 1995 ellwood and fine 1987 present evidence that the effect on new organizing is most severe with new organizing diminished between 32 and 38 in the 10 years after passage of a rtw law 1 zax and ichniowski 1991 see also ichniowski and zax 1991 demonstrate that the dampening of new organizing extends to the public sector when it operates under rtw laws even when those laws are favorable to unions in other respects others however argue that rtw legislation is largely symbolic it reflects the prevailing anti union opinion climate of a particular state but has little independent impact on union organizing or membership moore and newman 1985 1975 wessels 1981 lumsden and peterson 1975 sobel 1995 presents evidence on the true number of free riders consistent with the taste hypothesis rtw legislation is passed in this perspective in states in which public opinion is anti union and the labor movement is politically weak in these states workers are less attracted to unions and it is this public opinion climate rather than the law itself that hurts union growth 2 we present a new type of evidence on this issue from two states in which public opinion had turned sharply against unions or at least in favor of rtw in the period before the passage of a rtw law we reason that if passage of the rtw law itself actually lowers the probability of unionization or reduces the bargaining power of unions operating within a particular state beyond the effect of the prior shift in attitudes then anticipated future profits of firms operating in that state will rise in response to passage of that law because unions are associated with lower firm profits 3 hence equity values of those firms will increase we use event study methodology to discover whether or not this actually happened in louisiana when it passed a rtw law in 1976 and in idaho when it passed a rtw law in 1985 1986 4 louisiana and idaho are both well suited to research based on the event study technique legislative action in both states took place in the period in which daily stock price data are available from all three sources of stock price data new york american and nasdaq 5 daily as opposed to monthly stock price data are much more likely to reveal statistically significant changes in shareholder equity brown and warner 1985 because we use daily rather than monthly data a finding of no statistically significant change in shareholder equity would be valid evidence that rtw laws are symbolic rather than substantive

a paradox of thrift or keynes s misrepresentation of saving in the classical theory of growth every year thousands of introductory economics students are made to accept as valid one of keynes s lasting inversions of classical economics namely the proposition that saving may be a private virtue but is a public vice according to keynes a community that seeks to increase its rate of saving would end up impoverishing itself and actually saving less but the community that increases its consumption at the expense of saving would end up being richer and saving more this proposition frequently stated in macroeconomics textbooks as the paradox of thrift arises mainly from keynes s definition of saving to include the hoarding of cash contrary to the classical definition and language of the marketplace but has received little recognition or criticism as such rather than emphasizing keynes s misrepresentation of the classical theory of income determination and growth in which hoarding constitutes a reduction in saving most critics have pointed out only that saving may take other forms besides hoarding 2 thus several reviewers of the general theory 22 in which keynes fully develops the argument criticized it mainly for having assigned too much importance to the hoarding of cash e g pigou 37 robertson 40 viner 51 and hawtrey 11 some modern textbook writers employ the loanable funds view of savings to show the lim

short sales and speed of price adjustment evidence from the hong kong stock market abstract we present empirical evidence that short sales contribute to market efficiency by increasing the speed of price adjustment to not only private public firm specific information but also market wide information shortable stocks are characterized by weaker trade continuity and stronger quote reversals they adjust faster to new information than non shortable counterparts these findings remain robust even in an up market condition in which short sales are not binding the amount of information incorporated in each trade is also significantly higher for shortable than non shortable stocks in both up and down market conditions after controlling for firm size trading volume liquidity price and option trading short sales stand out as one of the significant factors that speed up the price adjustment

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

short interest explanations and tests cross sectional and time series tests are performed to explain levels and changes in short interest explanatory variables and tests are chosen based on tax arbitrage and speculative reasons for going short short interest is found to follow a seasonal pattern that is weakly consistent with tax based trading stocks with high betas and the existence of convertible securities or options tend to have higher levels of short interest which is con sistent with arbitrage efforts for firms with traded options there is a positive association between the month to month changes in option open interest and short interest prior months returns and changes in short interest are positively related but there is no rela tionship between changes in short interest and returns in the subsequent month

role of speculative short sales in price formation the case of the weekend effect we argue that short sellers aiect prices in a signi cant and systematic manner in particular we contend that speculative short sales contribute to the weekend eiect the inability to trade over the weekend is likely to cause these short sellers to close their speculative positions on fridays and reestablish new short positions on mondays causing stock prices to rise on fridays and fall on mondays we nd evidence in support of this hypothesis based on a comparison of high short interest stocks and low short interest stocks stocks with and without actively traded options ipos zero short interest stocks and highly volatile stocks in this paper we empirically examine whether speculative short sales aiect prices in a systematic manner the focus is on the weekend eiect that has remained an unexplained anomaly beginning with french 1980 and gibbons and hess 1981 there is much evidence in support of higher returns on fridays and lower returns on mondays keim and stambaugh 1984 nd that friday returns are lower when there is saturday trading ariel 1990 nds that a signi cantly larger number of stocks rises preholiday than postholiday empirical evidence related to more recent periods points to an insigni cant weekend eiect for large rms but continuance of the weekend eiect for an equally weighted index as documented herein 1 many potential explanations of the weekend eiect have been proposed and investigated measurement errors gibbons and hess 1981 and keim and stambaugh 1984 delay between trading and settlement in stocks dyl and martin 1985 and lakonishok and levi 1982 specialist related biases in prices keim and stambaugh timing of corporate releases after friday s close damodaran 1989 reduced institutional trading and greater individual trading on mondays

short selling and exchange traded funds returns evidence from the london stock exchange abstractan exchange traded fund etf is a security that tracks a basket of stocks an etf investor gains immediate exposure to the basket by taking either a long or short position on this instrument both hedgers and speculators can short etfs making the informational content of increases in etf short interest difficult to interpret using high frequency daily short interest data for etfs traded on the london stock exchange between june 2006 and april 2010 we examine the price impact on etfs of increases in short interest contrary to most of the previous empirical evidence for individual stocks we find that large increases in etf short interest are associated with subsequent over performance relative to a benchmark index and this pattern is most pronounced during pre financial crisis period

the canonical classical model of political economy adam smith david ricardo thomas robert malthus and john stuart mill shared in common essentially one dynamic model of equilibrium growth and distribution when the limitation of land and natural resources is added to the model of karl marx he also ends up with this same canonical classical model in its present version the model is stripped down to its minimal essentials for brevity i employ modern mathematical tools but only to characterize in modern terms the relations that were actually common to all these writers the reader should of course be warned that any simple codification of the classical economists discursive writings must be an oversimplification in some of their passages they qualify what they have written elsewhere in some they provide negations and contradictions not a few of the stereotypes about the classical writers are to paraphrase voltaire myths agreedupon by later commentators distortions that both improve and libel the originals the relevant object of study for a modern scholar is the corpus of original texts and the commentaries on them the latter not being genuinely of less interest than the former once we have succeeded in telling them apart to the fascinating question of whether classical political economy does or can be made to offer an alternative paradigm in the sense of thomas kuhn 11 1962 to modern mainstream economics the present investigation provides an instructive answer so to speak within every classical economist there is to be discerned a modern economist trying to be born a ricardo or mill did not so much replace supply and demand by quite different mechanisms but rather sought to be able to say something significant and limiting about their properties quite in the same way that we moderns endeavor to do i describe and analyze here the basic classical model in its essential form

are seasonal anomalies real a ninety year perspective in recent years there has been a proliferation of empirical studies documenting unexpected or anomalous regularities in security rates of return in addition to the widely studied relation between firm size and rate of return 1 these include seasonal regularities related to the time of the day harris 1986 the day of the week see ball and bowers 1986 cross 1973 french 1980 gibbons and hess 1981 jaffe and westerfield 1985 keim and stambaugh 1984 and lakonishok and levi 1982 the time of the month ariel 1987 and the turn of the year see haugen and lakonishok 1988 jones pearce and wilson 1987 lakonishok

full employment a classical assumption or keynes s rhetorical device following keynes s attribution of the assumption of full employment to the classics in the general theory 1936 it has become standard practice particularly in macroeconomics textbooks to identify classical economics with that assumption among the intermediate level texts that repeat the attribution are abel and bernanke 1 426 baily and friedman 6 443 44 dornbusch and fischer 14 200 201 froyen 17 55 galbraith and darity 18 44 45 gordon 19 165 mcelroy 45 41 51 and sachs and larrain 62 55 2 case and fair 10 349 50 colander 12 211 samuelson and nordhaus 63 277 and slavin 65 219 20 are among introductory level texts that state the same claim however devising appropriate policies to raise the standard of living especially for the poor and also increase employment opportunities for a growing population were the principal focus of the classical economists see for example smith 66 1 359 60 372 2 208 ricardo 58 1 386 97 malthus 40 231 40 351 60 and mill 46 2 356 58 writing in the tradition of the classics alfred marshall also was equally concerned about the fate of the poor and the need to identify policies that would promote economic growth and their welfare 3 indeed keynes recalls marshall s own explanation of his transition from mathematics to economics as being influenced by his visits to the poorest quarters of several cities and having walked one street after another looking at the faces of the poorest people on his vacations 4 pigou 53 also firmly denies having employed the full employment assumption as keynes alleges indeed such an assumption would also be inconsistent with the title of pigou s 1933 book the theory of unemployment on the other hand keynes s efforts to contrast classical arguments with his own charac

options short sales and market completeness this paper presents empirical evidence that trading in options contributes to both transactional and informational efficiency of the stock market by reducing the effect of constraints on short sales the significantly higher average level of short interest exhibited by optionable stocks supports the argument that options facilitate short selling we also find significant effects on option prices related to the short interest in the underlying stock we then present evidence that options also increase information efficiency earlier work that is replicated and extended here has suggested that short sale constraints cause stock prices to underweight negative information options appear to reduce that effect

population growth and natural resource scarcity long run development under seemingly unfavorable conditions in this paper i consider an economy that is constrained by the use of natural resources and driven by knowledge accumulation resources are essential inputs in all sectors i show that population growth and poor input substitution are not detrimental but on the contrary are even necessary to obtain a sustainable consumption level i find a general rule to define the conditions for a constant innovation rate the rule does not apply to capital but to labor growth which is the crucial input in research furthermore the rule relates to the sectoral structure of the economy and to demographic transition the results continue to hold with a backstop technology and are extended for the case of minimum resource constraints

the classical classical fallacy a flagrant error dogged james steuart adam smith david ricardo john barton john stuart mill karl marx and classical writers generally modern commentators on classicism are enough tempted by the fallacy to generally overlook it as a vital flaw in the earlier writers this fallay can be called classically classical not in the sense of being the greatest error in the classical paradigm an award that would be hard even to define but in the sense that modern scholars ignorant of pre 1900 literature would be little tempted by it i do not denigrate or patronize a great writer of the past such as david ricardo when i objectively delineate his hits and misses the fallacy can be simply put fixed capitals are prejudicial to wages and the demand for labor circulating capitals wage fund items that represent wage outlays paid to workers at the beginning of a period of production which are not recouped until the end of that period of production and which of course bear an interest or profit rate during the transition are allegedly favorable to the real wage rate and to the demand for labor fixed capitals are durable produced inputs that render their services over a number of different production periods circulating capitals are produced inputs used up within one period of production they are relatable to but distinguishable from wage fund advances paid to workers at the beginning of a period of production to be recouped at its end along with an interest or profit return in the minds of heterodox economists and the lay public generally a technological change that made machinery newly viable was supposedly the kind of invention that could put people out of work temporarily reduce market clearing wage rates and in long run equilibrium at an unchanged subsistence wage rate call for a significantly reduced population by contrast therefore a new invention that displaced machinery in favor of various raw materials as inputs would supposedly raise the short run real wage and increase the demand for labor so powerful was the grip of what i shall dub the classical fallacy that it was being reminded of it in 1819 21 that appears to have enabled ricardo to recant in his famous third edition chapter on machinery his previous boner that every viable invention can be expected to raise every factor s return from today s wisdomor indeed the wisdom of 1900 that previous position of ricardo was nonsense there is no invisible hand that seeks out machines or new techniques only if they benefit everyone i

weekend effects on stock returns a comment in a recent note in this journal lakonishok and levi 3 hereafter ll offer a partial explanation for the intraweek pattern of daily stock market returns observed by french 1 gibbons and hess 2 and others their hypothesis that the weekend effect abnormally high returns to common stocks on fridays and negative returns to common stocks on mondays can be explairned by settlement procedures and check clearing delays is an intriguing conjecture however the empirical evidence presented below supports the hypothesis that settlement clearing procedures are not a major determinant of this weekly pattern of stock market returns

regulation by shaming deterrence effects of publicizing violations of workplace safety and health laws publicizing firms socially undesirable actions may enhance firms incentives to avoid such actions in 2009 the occupational safety and health administration osha began issuing press releases about facilities that violated safety and health regulations using quasi random variation arising from a cutoff rule osha followed i find that publicizing a facility s violations led other facilities to substantially improve their compliance and experience fewer occupational injuries osha would need to conduct 210 additional inspections to achieve the same improvement in compliance as achieved with a single press release evidence suggests that employers improve compliance to avoid costly responses from workers

weekend effects on stock returns a note some researchers have apparently been surprised to discover that the distribution of stock returns depends on the day of the week kenneth french 3 for example in testing whether daily stock returns are generated by a trading time or calendar time hypothesis provided convincing evidence of a negative market return on mondays as french carefully notes this finding runs counter to both hypotheses since a trading time view would have expected stock returns equal on different days and a calendar time view would have higher expected returns on monday to compensate for the longer holding period in this paper we offer a partial explanation for the apparently puzzling discovery of different daily returns we argue that the expected stock returns as measured for example from closing to closing prices should depend on the day of the week in general we argue that the expected returns on mondays should be lower than would be implied simply by a trading time or calendar time model and the returns on fridays should be higher in addition we anticipate that holidays will have complex effects on stock returns on other days of the week our argument is based on the delay between trading and settlements in stocks and in clearing checks the explanation that we offer for different measured daily returns does not contradict the efficient market hypothesis as correctly adjusted expected returns should not differ according to the day of the week

future lending income and security value i test the duffie g rleanu and pedersen hypothesis that security prices incorporate expected future securities lending income to determine whether institutional investors anticipate gains from future lending of securities i examine their trading behavior around loan fee increases the evidence suggests that institutions buy shares in response to an increase in lending fees and that this could explain the premium associated with high lending fee stocks expected future lending income affects stock prices although the effect seems to be attenuated by the negative information that arises from short selling