the missing link intra country evidence on the relationship between high and uncertain inflation from high inflation countries the notion that high inflation breeds high uncertainty about future inflation is widely accepted this acceptance is based largely on a positive correlation between the mean and variability of inflation across countries 2 this positive relationship is taken as evidence that high inflation creates high uncertainty 3 recently though driffill mizon and ulph 10 have questioned the relevance of this cross country evidence for making inferences about welfare issues within countries they argue that it is the relationship between the time series mean and variance within a country that is important when considering the potential costs of inflation in this paper we examine the within country time series link between the level and uncertainty of inflation for ten countries that experienced a period of very high inflation we use data generated from regression based forecasts of inflation and historical data on actual forecasts our sample does not provide evidence of a general positive link within these countries the ten countries we study are argentina bolivia brazil chile colombia israel mexico peru turkey and uruguay in these countries the average annualized rate of inflation from the quarterly data in our sample was about 54 per year and the average sample standard deviation

the distribution of daily stock returns and settlement procedures the paris bourse in many countries settlements take place a fixed number of business days after the transaction u s japan in other countries settlements take place periodically on a fixed date when all transactions performed before this date are settled u k france italy in both cases settlement procedures should cause returns not to be identically distributed over all days the effect is likely to be the largest on markets where all trades are settled only once a month an empirical investigation of the largest of those markets the paris bourse demonstrates the importance of the settlement procedure on the distribution of daily returns settlement procedures vary considerably across national stock markets in many countries settlements take place a fixed number of business days after the transaction these countries are referred to in this paper as countries with a fixed settlement lag in other countries settlements take place periodically on a fixed date and all transactions performed before this date are settled then these countries are referred to as countries with a fixed settlement date in both cases settlement procedures should cause returns not to be identically distributed over all days

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

weather and intraday patterns in stock returns and trading activity abstract we examine the relation between weather in new york city and intraday returns and trading patterns of nyse stocks while stock returns are found to be generally lower on cloudier days cloud cover has a significant influence on stock returns only at the market open there are significantly more seller initiated trades when there is more cloud cover at the market open which is consistent with the return results cloudy skies are associated with higher volatility and less market depth over the entire trading day finally cloud cover is not significantly correlated with spread measures and turnover ratios the findings overall suggest that weather has a significant influence on investors intraday trading behavior

price instability and inflation some tests based on rational expectations models abstract we test for a group of fourteen latin american countries the hypothesis that as inflation accelerates it also becomes more volatile our analysis uses time series data a less arbitrary measure of inflation volatility rational expectations models and seemingly unrelated regressions the empirical evidence supports the above hypothesis and strengthens the case against inflationary policies in latin america

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

first party content and coordination in two sided markets the strategic use of first party content by two sided platforms is driven by two key factors the nature of buyer and seller expectations favorable versus unfavorable and the nature of the relationship between first party content and third party content complements or substitutes platforms facing unfavorable expectations face an additional constraint their prices and first party content investment need to be such that low zero participation equilibria are eliminated this additional constraint typically leads them to invest more less in first party content relative to platforms facing favorable expectations when first and third party content are substitutes complements these results hold with both simultaneous and sequential entry of the two sides with two competing platforms incumbent facing favorable expectations and entrant facing unfavorable expectations and multi homing on one side of the market the incumbent always invests weakly more in first party content relative to the case in which it is a monopolist this paper was accepted by bruno cassiman business strategy

the relationship between the inflation rate and its variability the issues reconsidered this paper empirically reexamines the hypothesis of a positive relationship between the inflation rate and its variability the sample consists of 66 countries for the 1955 85 sample period using pooled cross section time series data empirical tests are performed for nine different country groupings ranging from the g 7 developed countries to a group of 10 developing asian countries several important conclusions can be derived first irrespective of the variability measure employed the results indicate the presence of a significant positive relationship between the inflation rate and its variability this provides strong support to okun s hypothesis second this relationship is stronger during the flexible rather than the fixed exchange rate period third there appears to be an optimum zone of inflation rate within which the predictability of inflation is at its highest and hence uncertainty cost is at its lowest for the 1955 85 sample period this optimum zone of average inflation rate lies in th

weekend effects on stock returns a reply the main contribution of our paper in this journal 2 was to point out that realized daily rates of return cannot be computed from only two consecutive closing prices the reason is institutional and has to do with settlement clearing procedures in general the payment for a stock purchased on any day except on friday will occur eight calendar days after the trade five business days for settlement one day for check clearing and two weekend days the situation is different for purchases made on friday payments cannot be made on saturday eight calendar days after the trade resulting in a delay of two more days therefore in computing realized daily rates of return the two day delay in payment cannot be ignored the rate of return computed from closing to closing prices has to be adjusted for two days of risk free interest a complete description of the adjustment procedure for each of the days of the week and for weeks with and without holidays is provided in table i of our paper 2 our main contribution in 2 is completely ignored by dyl and martin 1 there can be no argument that the realized rates of return have to be adjusted because of the settlement clearing procedures as we noted in our paper by performing the institutionally required adjustment part of the weekend effect is explained recognizing that adjustments of the sort presented should be made in computing realized returns an interesting question is whether the market indeed makes these adjustments it is precisely this question that dyl and martin seem to address and in this sense their work can be viewed as an extension rather than a criticism of our work while we can compare two days interest with the average magnitude of the weekend effect to see how much of the effect it might explain we cannot apply the tests dyl and martin propose because of the nature of the data our argument involves adjusting mondays and fridays for two days of risk free interest the average risk free rate for the period 1968 81 was around 8 per year the settlement clearing procedure was different before 1968 therefore two days interest is around 0 043 a magnitude that is so small relative to the large daily standard deviations that we cannot judge the significance for example based on dyl and martin s table i the difference on friday between the returns for the period before and after 1968 is 0 03 and it is associated with a t statistic of 0 68 hence a difference of 0 043 would be associated with a t statistic of less than one therefore the existing data do not enable us to test whether the market indeed makes appropriate adjustments

a theory of the dynamics of security returns around market closures numerous empirical studies document patterns in the means and variances of security returns measured over periods that are punctuated by market closures this article develops a multiperiod model in which closures delay the resolution of uncertainty thereby redistributing risk across time and agents since agents are risk averse in the model this redistribution affects the equilibrium price altering risk premia liquidity costs and the degree of informational asymmetry as a consequence closures alter both the means and variances of returns the article demonstrates that closures can generate a variety of mean and variance effects including those that mirror the empirical phenomena numerous empirical studies of security returns have documented patterns in both the mean and the variance of returns interestingly most of these patterns are punctuated by periods in which the market is regularly closed for example the variance of returns from the market close to the market opening is much less than the variance from open to close similarly mean returns over weekends are abnormally low in fact significantly negative relative to daily mean returns during the trading week within a trading day return variances are u shaped with peaks occurring immediately after the market opens and just before it closes 2 further french and roll 1986 examine the variance of tuesday close to thursday close returns during a period in which the market was closed on wednesdays and show that this variance is only slightly greater than half the tuesday close to thursday close variance when the market was open on wednesdays 3 one explanation for the differences in the overnight and trading day variances is that market hours mostly coincide with business hours when

the day of the week effect the international evidence abstract we re examine the day of the week effect for eleven indexes from nine countries during the 1969 1992 period the standard methodology as well as the moving average methodology are used and we find returns to be lower at the beginning of the week but not necessarily on monday for the full period as in chang et al international evidence on the robustness of the day of the week effect journal of financial and quantitative analysis 28 1993 497 514 the anomaly disappears for the most recent period in the usa however the effect is still strong for european countries hong kong and toronto

bundle size pricing as an approximation to mixed bundling multiproduct firms can set separate prices for all possible bundled combinations of its products mixed bundling however this is impractical for firms with more than a few products because the number of prices increases exponentially with the number of products we find that simple pricing strategies are often nearly optimal specifically we show that bundle size pricing setting prices that depend only on the size of bundle purchased tends to be more profitable than offering the individual products priced separately and tends to closely approximate the profits from mixed bundling jel d24 d42 l11 l13 l25

the level and uncertainty of inflation results from oecd forecasts bryce e kanago there is considerable evidence that inflation variability and the level of inflation are positively related across countries evidence of a within county relation is mixed evidence for a significant positive relation comes mostly from studies using some survey measure contrary evidence comes mostly from studies using regression errors our measure of uncertainty is the squared forecast error from organization for economic cooperation and development inflation forecasts most countries do not exhibit a positive and significant relation the greatest number of positive coefficients is for relative uncertainty regressed on contemporaneous inflation jel e310 e370 1342 1340 1323 i introduction although empirical studies have not reached a unanimous conclusion most economists believe one detriment of high inflation is the greater uncertainty it generates about future inflation affirmative evidence of a positive relation between inflation and uncertainty is most frequently found in cross country studies that regress some measure of variability or uncertainty for each country on their average inflation rate time series regressions for individual countries provide mixed results those time series studies that derive inflation uncertainty from a survey of forecasters conclude that higher inflation causes greater uncertainty time series studies that derive uncertainty from ex post regressions constructed by researchers provide most of the negative evidence 1 it is tempting to dismiss this negative evidence as the consequence of poorly or opportunistically constructed ex post forecasts in this paper we use annual inflation forecasts for organization for economic cooperation and development oecd countries that have been published in the oecd s economic outlook for about 30 years these data circumvent the problems of constructing forecasts after the fact for each date and each country a single forecast is provided by contrast survey data such as the livingston data average the forecasts of a number of respondents to the extent that the survey sample is representative of the population the surveys may provide a better approximation to the public s expectations however survey respondents have nothing to lose if their forecasts are wildly inaccurate whereas professional forecasters put their reputation on the line a distinct advantage of the published forecasts is that the oecd provides forecasts for 24 countries whereas surveys are available for only a few countries of course ex post forecasts could be constructed for the same set of countries while these ex post forecasts could utilize modern econometrics techniques such as autoregressive conditional heteroscedasticity arch and time varying parameters they cannot replicate the specialized human capital the judgment or the particular perspective of the times that were used to construct ex ante forecasts davis and kanago 1998 regressed the squared error from ex ante inflation forecasts produced and published by business international on inflation and found no significant relation for most countries this result makes it less tempting to dismiss the time series evidence of ex post inflation forecasts we extend the results of davis and kanago 1998 by computing the same regression but using squared errors from ex ante forecasts made by the oecd and published in economic outlook the 24 countries in the oecd data include canada iceland luxembourg new zealand the united states and turkey that are not included in the business international data for some countries the oecd data includes a few more years than the business international data the results from the oecd and business international data are broadly similar few countries show a significant relation between inflation and uncertainty we further test the robustness of these results by using relative uncertainty as the dependent variable

price discrimination by a many product firm determining the optimal selling strategy for a multiproduct firm facing consumers with unknown tastes is a difficult task this paper aims to show how almost optimal nonlinear tariffs can often be found when the number of products becomes large

corrections for trading frictions in multivariate returns when observed stock returns are obtained from trades subject to friction it is known that an individual stock s beta and covariance are measured with error univariate models of additive error adjustment are available and are often applied simultaneously to more than one stock unfortunately these multivariate adjustments produce nonpositive definite covariance and correlation matrices unless the return sample sizes are very large to prevent this restrictions on the adjustment matrix are developed and a correction is proposed which dominates the uncorrected estimator the estimators are illustrated with asset opportunity set estimates where daily returns have trading frictions a number of univariate nonsynchronous trading adjustments are available for beta but no multivariate adjustment has been specifically designed for a general covariance matrix for example the univariate trading friction adjustment of cohen hawawini maier schwartz and whitcomb chmsw 1983 is a generalization of scholes and williams 1977 the chmsw procedure adjusts beta to account for price adjustment delays exceeding one period where a portion of the true return is reflected in lagged returns the procedure is extended and applied in shanken 1987 to estimation of the daily multivariate covariance matrix of stocks returns observed covariances significantly understated true covariances by a factor of two suggesting that a daily covariance adjustment is necessary because of a large number of studies which employ multivariate daily stock returns it is therefore important that the adjustment results in a good estimator of the covariance matrix while no evidence is available regarding other properties it is shown in chmsw that their univariate adjusted estimator has the desirable statistical properties of consistency and unbiasedness unfortunately when the adjusted covariance estimator is applied in finite samples the resulting adjusted covariance matrix may not be a covariance matrix and the implied adjusted correlation matrix independently may not be a correlation matrix because the adjustment does not restrict the covariance and correlation matrices to be positive definite 1 when these matrices are not positive definite functions of these matrices can produce very unreliable inference results this paper provides empirical examples of the violations of the positive definite

monetary co operation and economic growth in africa comparative evidence from the cfa zone countries this article compares economic growth performance of ten african countries all members of the cfa monetary zone with that of 23 non zone sub saharan african ssa countries our descriptive results suggest that overall african economies have experienced similar growth trends which are higher in the 1970s than the 1980s however contrary to previous studies disaggregated comparison of the cfa with the ssa indicate that no significant growth differences exist between these economies moreover our empirical findings suggest that monetary expansion and capital formation have positive impacts on output growth whereas inflation and government spending show negative effects in sum although participating in a monetary union has not necessarily resulted in faster output growth it has enabled the cfa countries to better control price fluctuations and monetary expansion

an examination of the robustness of the weekend effect this paper analyzes the robustness of the day of the week dow and weekend effects to alternative estimation and testing procedures the results show that sample size can distort the interpretation of classical test statistics unless the significance level is adjusted down ward specification tests reveal widespread departures from ols assumptions hypothe sis tests results are reported using robust econometric methods and a garch model the strength of the dow and weekend effect evidence appears to depend on the estimation and testing method both effects seem to have disappeared by 1975

correlations in price changes and volatility across international stock markets the short run interdependence of prices and price volatility across three major international stock markets is studied daily opening and closing prices of major stock indexes for the tokyo london and new york stock markets are examined the analysis utilizes the autoregressive conditionally heteroskedastic arch family of statistical models to explore these pricing relationships evidence of price volatility spillovers from new york to tokyo london to tokyo and new york to london is observed but no price volatility spillover effects in other directions are found for the pre october 1987 period article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

an empirical analysis of digital music bundling strategies we use panel data on digital song and album sales coupled with a quasi random price experiment to determine own and cross price elasticities for songs and albums we then develop a structural model of consumer demand to estimate welfare under various policy relevant counterfactual scenarios this approach represents an early application of the big data management paradigm within the media industries and provides managers with detailed guidance on optimal pricing and marketing strategies for digital music our results show that tiered pricing coupled with reduced album pricing increases revenue to the labels by 18 relative to uniform pricing policies traditionally preferred by digital marketplaces while also increasing consumer surplus by 23 thus optimal tiered pricing can yield a pareto improvement over the prior status quo additionally our results indicate that even without tiered pricing unbundling albums outperforms album only pricing policies that dominated the era of physical cd cassette sales this paper was accepted by alok gupta special issue on business analytics

anomalies weekend holiday turn of the month and intraday effects abstract this feature will report successful searches for disconfirming evidence economic anomalies as suggested by thomas kuhn an economic anomaly is a result inconsistent with the economics pa

the relationship between the rate of inflation and its unpredictability in high inflation latin american countries pourgerami and maskus pm 1987 find three difficulties in our analysis of the relationship between the rate of inflation p and its unpredictability pf in latin american countries the first of these is a point very well taken namely that the positive relationship we hypothesized might well be offset by a negative one arising because higher rates of inflation could be expected to induce the relevant economic agents to invest more in generating the relevant information in utilizing it efficiently and in developing the instruments capable of hedging against inflation however since any such adjustments would be institutional in nature and take time to be carried out it is obvious that this consideratipn would not be relevant for short run analysis involving year to year or especially quarter to quarter changes in inflation rates as in our analysis the other difficulties namely that quarterly observations are more relevant than annual ones in testing such relationships and that rational expectations re models of the type employed by pm are preferable to adaptive expectations models of the type we used are criticisms more relevant to the short run relation between inflation and its predictability but as we shall presently demonstrate are not persuasive nevertheless since the results presented by pm as they have noted show the relationship between pi and p to be considerably weaker than was indicated in earlier results including our own the substantial difference in results deserves explanation since their time coverage frequent of adjustment of expectations model of esprct ltions and to some extent countr coverage were all different than ours it is not possible to learn from their results the reason for the difference by employing the same time and country coverage as in pm and also an estimation procedure hildreth lu which corrects for autocorrelation and continuing to use a modified version of our adaptive expectations model mae but varying the duration of the periods the results presented in table 1 shed light on the source of the difference as can be seen the use of quarterly instead of annual data does not have a large effect on the results thereby suggesting that pm s use of quarterly data is not the source of their weaker results indeed note that in six of the seven high inflation countries the slope coefficient is larger and more significant when quarterly data are employed than when annual data are employed the largest differences are between the results obtained from our own mae model estimated with quarterly data and those obtained by pm with their re model with the same data in all seven cases the pm estimate of is significantly lower than our own corresponding estimate which estimate is more reliable even if one were to agree in principle with pm that re models are superior to ae models of price expectations the particular re model employed by pm can hardly be considered acceptable let alone superior to our mae model with their 20 right hand side variables i e four lags of each of five different explanatory variables relative to our four right hand side variables it is not surprising that pm havq been able to increase the explained variation of p correspondingly reduc

intraday patterns in fx returns and order flow using a comprehensive high frequency foreign exchange dataset we present evidence of time of day effects in foreign exchange returns through a significant tendency for currencies to depreciate during local trading hours we confirm this pattern across a range of currencies and time zones we also find that this pattern is reflected in order flow and suggest that both patterns relate to the tendency of market participants to be net purchasers of foreign exchange in their own trading hours data from a single market maker appears to corroborate that interpretation

from t bills to common stocks investigating the generality of intra week return seasonality the authors investigate the extent to which intra week seasonality still exists and whether its pattern is uniform across three stock indices and treasury bonds with seven different maturities they find that intra week seasonality continues to be significant and that its pattern is not uniform either between the stock indices and the treasury bonds or even among the bonds alone a pattern shared by stocks and bonds is that monday returns become increasingly negative with maturity these findings suggest that neither institutional nor general equilibrium explanations by themselves can explain the pattern of intra week seasonality in securities markets

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

day of the week effect on the paris bourse abstract we present evidence on the day of the week effect on a stock market with a particular settlement procedure the paris bourse a strong and persistent negative return is found on tuesdays a similar result was previously found for japan and australia the settlement procedure is shown to have an effect on the distribution of daily returns consistent with forward pricing theory it cannot explain the negative tuesday return after adjusting for this settlement effect the mean return on mondays is the largest in the week a result at odds with the evidence in the u s a

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

effects of exchange rate variability on inflation variability abstract previous studies have postulated that there exists a positive relationship between the rate of inflation and its variability they have shown that a high inflation rate contributes to inflation variability in this paper we argue that with the current floating exchange rate system exchange rate variability is another factor contributing to inflation variability after incorporating a measure of exchange rate variability into a simple model used by previous authors we estimate our model using cross country data from 20 developed and 76 less developed countries the cross sectional regression results support our conjecture

inflation and its unpredictability theory and empirical evidence the effect of inflation on its unpredictability is theoretically ambiguous arthur m okun 1971 and milton friedman 1977 suggest that the effect is positive however a negative effect may exist if higher inflation induces the relevant economic agents to invest more in generating accurate predictions this paper provides a theoretical model to analyze these opposing arguments and specifies the conditions under which a positive effect exists new survey data regarding inflationary expectations in israel are used to empirically examine the model the data which allow single hypothesis testing of the relationship reveal a positive effect only in periods of high inflation indicating a possible threshold effect copyright 1993 by ohio state university press

intraweek and intraday seasonalities in stock market risk premia cash and futures abstract the unique nature of the settlement procedures on the london stock exchange are utilised to directly investigate intraweek and intraday seasonalities in ex post risk premia rather than total returns and compare them with the corresponding intraweek and intraday seasonalities in the index futures market seasonalities in the occurrence of extreme price changes are also examined the results reported are based on about 4 years of hourly cash and futures data the analysis is conducted using both parametric and non parametric methods the observed empirical regularities have implications for explanations of seasonality based on market microstructure timing of news and psychological behavioural patterns it is also found that the stock market has not efficiently accounted for the interest costs inherent in its own settlement procedures

bundling information goods of decreasing value consumers average value for information goods websites weather forecasts music and news declines with the number consumed this paper provides simple guidelines to optimal bundling marketing strategies in this case if consumers values do not decrease too quickly we show that bundling is approximately optimal if consumers values to subsequent goods decrease quickly we show by example that one should expect bundling to be suboptimal

daily seasonality in stock returns further international evidence abstract daily seasonality in stock markets is one of the most intriguing problems in financial economics and a true challenge to the efficiency hypothesis this paper examines daily seasonality in the new york tokyo london frankfurt paris and madrid stock markets in recent years the results obtained are quite different from the patterns described in existing literature which examines earlier periods

day of the week effects in financial futures an analysis of gnma t bond t note and t bill contracts this paper provides a comprehensive study of weekly seasonal effects in gnma t bond t note and t bill futures returns two distinct patterns are found in returns on gnma t bond and t note contracts while no seasonals are noted for t bill futures a negative monday seasonal similar to the well known monday effect in stock returns is found for gnma and t bond contracts a positive tuesday seasonal is found on gnma t bond and t note contracts our evidence indicates that the significance of weekly sea sonals depends in an important way on the time period studied the negative monday phenomenon occurs only in the data before 1982 while the positive tuesday effect is present only after 1984 in addition we find that both seasonal phenomena occur only during months prior to a delivery month this effect appears to be related to the calendar month more specifically the monday effect is apparently concentrated during february while the tuesday effect is concentrated during may

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

seasonality estimation in thin markets the greater availability of daily data in the u s has led to a number of studies of the seasonality of daily stock index returns while the studies recognized the potential impacts of nontrading and price adjustment delays in general no formal analyses of such impacts were presented in this paper analytic results are presented for the articulation between these phenomena the implications of the analysis are discussed and shown to be consistent with a sample of u k index data a modified form of the negative weekend effect is found to be present in the u k data analyzed tests for the presence of seasonality in equity returns have been carried out by a number of authors at both the monthly and daily return levels at the monthly level rozeff and kinney 18 discovered evidence of seasonality in the u s while officer 15 detected the presence of seasonality in australian data fama 7 carried out some early work on u s daily data and more recent contributions have been made by cross 5 french 9 and gibbons and hess 10 while these studies recognized the presence of thin trading and its potential impacts upon the experimental results no formal analyses were presented in this paper we derive analytic results for the articulation between seasonality and nontrading effects section i the implications of this analysis are tested using a sample described in section ii of u k daily index data2 in section iii section iv discusses the implications of the results for capital market efficiency finally

overreaction in the spanish equity market abstract this paper examines the overreaction hypothesis within the spanish capital market the hypothesis is clearly accepted even after correcting for size when estimating excess returns twelve months after portfolio formation losers win 24 5 more than winners there is also a correspondence between excess returns and changes in the earnings pattern of losers and winners firms

stock index futures mispricing profit opportunities or risk premia this paper reports empirical evidence on stock index futures pricing based on about four years of synchronous hourly data from the uk reported index values are based on firm quotes identified arbitrage opportunities are therefore actually exploitable and economically significant the analysis controls for cash market settlement procedures the results show that ex ante trading rules would have generated attractive profits after transaction costs and after the risks of dividend uncertainties marking to market and possible delays in execution are considered the far contract and the near contract tend to be mispriced in the same direction the mild tendency of futures to be overpriced in rising markets and underpriced in falling markets appears to be unimportant finally significant positive relationships are observed between the absolute magnitude of mispricing and time to maturity and between mispricing and index option implied volatility

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

mixed bundling of two independently valued goods this paper develops analytical results and insights for the mixed bundling problem of pricing a product line consisting of two component goods with valuations distributed uniformly and independently in 0 a1 and 0 a2 respectively with a1 a2 and a bundle of the two goods this setting has previously been considered analytically intractable by deriving component good prices as exact algebraic functions of the optimal bundle price i reduce the multiproduct pricing problem to a univariate nonlinear optimization problem in the bundle price when the two component goods are sufficiently asymmetric in valuations the optimal solution is partial mixed bundling one component good is not sold separately for which i derive exact conditions and optimal prices an exact analytical solution is also given for mixed bundling of two information goods component goods with zero marginal costs for the general case i derive a closed form approximation of the optimal bundle price pb 0 5724w1 0 5695w2

gaussian demand and commodity bundling in an important and widely cited essay adams and yellen 1976 examine the use of package selling as a price discrimination device they consider a monopolist producing two goods with constant unit costs and facing buyers with diverse tastes the marginal utility of a second unit of either good is assumed to be zero for all buyers the two goods are independent in demand for all buyers so that any buyer s reservation price for the first unit of either good is independent of the market price of the other thus the maximum amount any buyer would pay for a bundle consisting of one unit of each good is the sum of the two reservation prices and buyers are completely described by the values of those two prices 2 resale markets are assumed away in order to obtain comparative results for alternative pricing strategies the distribution of reservation prices in the adams yellen framework is assumed to be bivariate normal implications of gaussian demand are explored pure bundling is shown to operate by reducing buyer diversity thus facilitating the capture of consumers surplus it generally makes buyers worse off than unbundled sales it is more profitable if average reservation prices are high enough mixed bundling combines advantages of both pure bundling and unbundled sales and it is generally strictly more profitable than either bundling which treats goods symmetrically seems most attractive under symmetric reservation price distributions i am indebted to severin borenstein for superb research assistance to the ford motor company for research support through a grant to m i t and to the harvard economics department for housing me as a visiting scholar while most of this research was performed of course only i can be held responsible for this essay s shortcomings 1 the first clear recognition of this possibility seems to have been by stigler 1968 but also see burstein 1960 2 paroush and peles 1981 relax the assumption that consumers purchase at most one unit of each good but they consider only two types of buyers both with linear demand functions they retain the assumption that demands are independent for all buyers telser 1979 and phillips 1981 use different frameworks to analyze bundling policies spence 1980 explores the relation between bundling across commodities as here and bundling multiple units of the same

optimal bundling strategies under heavy tailed valuations we develop a framework for the optimal bundling problem of a multiproduct monopolist who provides goods to consumers with private valuations that are random draws from a distribution with heavy tails we show that in the vickrey auction setting the buyers prefer separate provision of the goods to any bundles we also provide a complete characterization of the optimal bundling strategies for a monopolist producer who provides goods for profit maximizing prices for products with low marginal costs the seller s optimal strategy is to provide goods separately when consumers valuations are heavy tailed and in a single bundle when valuations are thin tailed these conclusions are reversed for goods with high marginal costs for simplicity we use a specific class of independent and identically distributed random variables but our results can be generalized to include dependence skewness and the case of nonidentical one dimensional distributions

weekly patterns in japanese stock returns this study investigates the day of the week effect in the japanese stock returns low tuesday and high wednesday returns are observed most of the positive returns arise during the nontrading period the monday effect is also observed in the week whose previous week is closed by friday trading low tuesday returns appear to be related to low monday returns in the u s the weekly pattern is more pronounced for the returns of smaller firms a reverse size effect is observed during the trading period

intraday price reversals in the us stock index futures market a 15 year study this paper gives a long term assessment of intraday price reversals in the us stock index futures market following large price changes at the market open we find highly significant intraday price reversals over a 15 year period november 1987 september 2002 as well as significant intraday reversals in our yearly and day of the week investigations moreover the strength of the intraday overreaction phenomenon seems more pronounced following large positive price changes at the market open that being said the question of whether a trader can consistently profit from this information remains open as the significance of intraday price reversals is sharply reduced when gross trading results are adjusted by a bid ask proxy for transactions costs

expert mediated sequential search abstract this paper studies markets such as internet marketplaces for used cars or mortgages in which consumers engage in sequential search in particular we consider the impact of information brokers experts who can for a fee provide better information on true values of opportunities we characterize the optimal search strategy given a price and the terms of service set by the expert and show how to use this characterization to solve the monopolist expert s service pricing problem our analysis enables the investigation of three common pricing schemes pay per use unlimited subscription and package pricing that can be used by the expert we demonstrate that in settings characteristic of electronic marketplaces namely those with lower search costs for consumers and lower costs of production of expert services unlimited subscription schemes are favored finally we show that the platform that connects consumer and experts can improve social welfare by subsidizing the purchase of expert services the optimal level of subsidy forces the buyer to exactly fully internalize the marginal cost of provision of expert services in electronic markets this cost is minimal so it may be worthwhile for the platform to make the expert freely available to consumers

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

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

music for a song an empirical look at uniform song pricing and its alternatives economists have well developed pricing theories that challenge the wisdom of the common practice of uniform song pricing this paper explores the profit and welfare implications of various alternatives including song specific pricing various forms of bundling two part tariffs nonlinear pricing and third degree price discrimination using survey based data on nearly 500 students valuations of 50 popular songs in early january 2008 we find that various alternatives including simple schemes such as pure bundling and two part tariffs can raise both producer and consumer surplus revenue could be raised by nearly 10 percent relative to profit maximizing uniform pricing and by over a fifth relative to current 0 99 uniform pricing moreover revenue could be increased by a tenth while maintaining consumer surplus at the high level accompanying current 0 99 uniform song pricing while person specific uniform pricing can raise revenue by three quarters none of the non discriminatory schemes raise revenue s share of surplus above 35 percent even with sophisticated pricing much of the area under the demand curve for this product cannot be appropriated as revenue

the weekly pattern in stock index futures a further note in a recent note in this journal cornell 2 examines weekly patterns in returns in the cash and futures markets for common stock he finds a close toopen weekend effect in the cash market similar to the result previously reported by rogalski 4 however based on his results for the futures market he concludes during the close to open period the mean returns are virtually indistinguishable across days of the week in short the behavior of the future prices is consistent with the predictions of the efficient market hypothesis p 586 cornell s results contrast markedly with those reported by dyl and maberly 3 from a very similar study albeit over a slightly different time period both studies examined standard poor s 500 stock index futures in an attempt to resolve this puzzling inconsistency we replicated cornell s study for the period from may 3 1982 through july 24 1984 we were unable to duplicate his results in addition we also report results for the period from may 3 1982 through december 31 1985 that further confirm the existence of a close to open weekend effect in the market for standard poor s 500 stock index futures i differences in methodology there were several minor differences in the methodologies employed in the cornell 2 and dyl and maberly 3 studies in addition to examining a different sample i e time period as contracts approached maturity we switched to the contract that was next closest to maturity at a different time from when cornell did the results reported below use cornell s switching convention both studies used the same procedure for dealing with holidays deleting both holidays and days following holidays a more important methodological difference between the two studies is that

to bundle or not to bundle commodity bundling is studied in an environment where the dispersion of valuations unambiguously decreases when two or more goods are sold as a bundle only bundling is more likely to dominate separately selling the goods if marginal costs are low relative to the average valuation or if the distribution of valuations is very peaked around the mean

the individual investor and the weekend effect it is well known that stock returns on average are negative on mondays yet it is less well known that this finding is substantially the consequence of returns in prior trading sessions when friday s return is negative monday s return is negative nearly 80 percent of the time with a mean return of 0 61 percent when friday s return is positive the subsequent monday s mean return is positive 0 11 percent this relationship is stronger than for any other pair of trading days and is most acute in small and medium size companies the trading behavior of individual investors appears to be at least one factor contributing to this pattern individual investors are more active sellers of stock on mondays particularly following bad news in the market

multiproduct nonlinear pricing typically work on mechanism design has assumed that all private information can be captured in a single scalar variable this paper explores one way in which this assumption can be relaxed in the context of the multiproduct nonlinear pricing problem it is shown that the firm will choose to exclude some low value consumers from all markets a class of cases that allow explicit solution is derived by making use of a multivariate form of integration by parts in such cases the optimal tariff is cost based

product bundling impacts of product heterogeneity and risk considerations abstract bundling has been extensively studied in the literature and its benefits have been manifested through three perspectives of achieving better price discrimination helping to save costs and preserving the power for deterring a potential entrant in this study we examine two aspects of bundling which have not been studied before we examine the impact of product heterogeneity on bundling decisions we also address risk considerations in a bundling problem specifically we consider a retailer who has the option of selling a bundle of two products pure bundling policy or selling the products separately no bundling policy the retailer could also face a product selection problem for which we consider three scenarios of choosing two products with perfectly positively correlated perfectly negatively correlated or independent reservation prices we use a mean variance approach to include retailer s risk through her profit variability when maximizing the expected value of profit we characterize the conditions under which a policy or scenario performs better than the others under the influence of product heterogeneity and or retailer s risk aversion among other findings we show that optimal bundling price chosen by a risk averse decision maker cannot be larger than the one chosen by a risk neutral decision maker

optimal bundling under imperfect competition abstract this paper examines the profitability of bundling for a two product seller of differentiated products facing competition from a one product rival in the presence of imperfect competition pure bundling emerges as the optimal pricing strategy other than ensuring the monopoly product can only be purchased in a bundle pure bundling s additional advantages stand in its ability to i prevent consumers from forming their own bundle using the single product seller s product ii reduce aggressiveness in pricing and iii smooth over the variation in valuations consumers have for the two types of products however the profit maximizing strategy is not welfare maximizing consumers are best off when all products are available a la carte only the competitor maximizes profits under mixed bundling and total welfare would be highest if the two product supplier were to offer only the monopoly product a la carte

market power screens willingness to pay what is the best way to reward innovation while prizes avoid deadweight loss intellectual property selects high social surplus projects optimal innovation policy thus trades off the ex ante screening benefit and the ex post distortion it solves a multidimensional screening problem in the private information held by the innovator research cost quality and market size of the innovation the appropriate degree of market power is never full monopoly pricing and is determined by measurable market characteristics the inequality and elasticity of innovation supply making the analysis open to empirical calibration the framework has applications beyond ip policy to the optimal pricing of platforms or the optimal procurement of public infrastructure

the challenge of revenue sharing with bundled pricing an application to music bundling can increase revenue and profits relative to selling products on a standalone basis and this is an especially attractive strategy for zero marginal cost information products despite the clear benefits of bundling it has one major problem bundling produces revenue that is not readily attributable to particular pieces of intellectual property creating a revenue division problem the shapley value provides a well motivated solution to this problem and we use unique survey data to create measures of bundle value and in turn to estimate shapley values for each of 50 bundle elements we then evaluate feasible revenue sharing schemes including equal sharing proportional sharing and the modified shapley value of ginsburgh and zang 2003 2004 we first document that the shapley value is highly incentive compatible all bundle elements fare better inside the bundle than they do outside on a standalone basis we then evaluate the feasible schemes according to both their incentive compatibility and their similarity with the shapley value we find not surprisingly that the feasible schemes are less incentive compatible than the shapley value among the feasible schemes the gz scheme performs best while equal sharing performs worst

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

whose sabbath matters or when does the weekend effect occur abstract the weekend effect and other seasonal anomalies in financial markets are now familiar in many countries in searching for explanations for the weekend effect in particular it would be helpful to know when exactly it occurs whatever the it may be that produces the effect since most countries do not have weekend trading in financial assets the timing of it has not been narrowed down israel has trading in all financial assets except currency trading on sunday by examining day of the week effects for israel it appears that the weekend effect occurs on sunday late in the day and not an friday evening ar saturday other seasonal anomalies in israel seem to be similar to those elsewhere the generalizability of the findings to other countries is discussed

the week end effect in common stock returns the international evidence this paper examines the daily stock market returns for four foreign countries we find a so called week end effect in each country in addition the lowest mean returns for the japanese and australian stock markets occur on tuesday the remainder of the paper answers four questions are seasonal patterns in foreign stock markets independent of those previously reported in the u s do japan and australia exhibit a seasonal one day out of phase due to different time zones do settlement procedures across countries bias week end effects does the seasonal pattern in foreign exchange offset the week end effect in stocks for americans investing overseas some of the most anomalous empirical findings in finance are associated with the sample distributions of daily common stock returns cross 1 french 2 gibbons and hess 3 and keim and stambaugh 4 have documented that the average return on friday is abnormally high and the average return on monday is abnormally low to our knowledge this so called day of the week effect or week end effect has yet to be explained because this anomaly has been reported primarily for u s stock returns it is appropriate to investigate whether similar results occur for other countries positive findings would strongly support the proposition that the weekly seasonal effect is a general world wide phenomenon rather than the result of a special type of institutional arrangement in the u s to shed more light on this proposition our paper examines stock market returns in the u k japan canada and australia since we find a week end effect in each country we can examine a set of interesting questions for example are these seasonals independent of the previously reported seasonal in the u s due to different time zones do far eastern countries exhibit a seasonal one day out of phase do different settlement procedures across countries influence weekend effects does the seasonal in foreign exchange fluctuations see mcfarland pettit and sung 7 and levi 6 offset the week end effect in stock market returns for americans investing overseas

on the behavioral differences between professional and amateur investors after the weekend abstract this paper compares the trading patterns of amateur and professional investors during the days following the weekend the comparison is based on all the daily transactions of a large sample of both amateurs and professionally managed investors in a major brokerage house in israel from 1994 to 1998 we find that weekends influence both amateurs and professional investors however they affect them in opposite directions individuals increase both their buy and sell activities and their propensity to sell rises more than their propensity to buy professionals on the other hand tend to perform fewer buy as well as sell trades after the weekend but unlike individuals the drop in their activity is almost the same for buy trades and for sell trades the results agree with previous hypotheses raised in the literature which were not directly tested about the effects of the weekend on the predisposition to trade of individuals and institutions in other markets we also find that returns on the israeli stock market index are correlated in general with the behavioral patterns exhibited by the investors in our sample in particular the returns on the days following the weekend are lower than those in other weekdays in a manner consistent with the behavioral patterns we found

add on pricing by asymmetric firms this paper uses an analytical model to examine the consequences of add on pricing when firms are both horizontally and vertically differentiated and there is a segment of boundedly rational consumers who are unaware of the add on fees at the time of initial purchase we find that consumers who know the add on fees can be penalized and increasingly so by the existence of boundedly rational consumers our consideration of quality asymmetries on base goods and add ons plus the inclusion of boundedly rational consumers leads to several novel findings regarding firm profits when quality asymmetry is on base goods only and with boundedly rational consumers add on pricing can diminish profit for a qualitatively superior firm and increase profit for an inferior firm i e a lose win result compared to when add on pricing is prohibited or infeasible when quality asymmetries exist on both base goods and add ons and without boundedly rational consumers the opposite win lose result prevails when quality asymmetries exist on both base goods and add ons and with boundedly rational consumers the result can be win win win lose or lose win depending on the magnitude of quality differentiation on add ons this paper was accepted by j miguel villas boas marketing

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

price instability and inflation the latin american case abstract this paper provides empirical evidence substantiating the existence of an over time relationship between inflation and price variability for 23 latin american countries by employing a novel measure of price instability based on price expectations

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

an empirical analysis of alternative parametric arch models this paper presents empirical evidence on the effectiveness of eight different parametric arch models in describing daily stock returns twenty seven years of uk daily data on a broad based value weighted stock index are investigated for the period 1971 97 several interesting results are documented overall the results strongly demonstrate the utility of parametric arch models in describing time varying volatility in this market the parameters proxying for asymmetry in models that recognize the asymmetric behaviour of volatility are highly significant in each and every case however the performance of the various parameterizations is often fairly similar with the exception of the multiplicative garch model that performs qualitatively differently on several dimensions of performance the outperformance of any model s is not consistent across different sub periods of the sample suggesting that the optimal choice of a model is period specific the outperformance is also not consistent as we change from in sample inferences to out of sample inferences within the same period copyright 2000 john wiley sons ltd

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

price formation on stock exchanges the evolution of trading within the day prior analyses of prices of the nyse and other exchanges find that transitory price volatility is greater at the open of trading than at the close we extend this line of research by using 40 years of hourly dow jones 65 composite price index data to estimate transitory volatility throughout the trading day our results indicate that transitory volatility steadily declines during the trading day we find a similar intraday decline in transitory volatility for a 2 1 2 year sample of the individual firms in the dow jones 30 industrials index the results are consistent with the hypothesis that trading aids price formation and do not support the argument that particular trading mechanisms are the source of greater volatility at the open of trading article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

the weekly pattern in stock returns cash versus futures a note this paper presents tests designed to determine whether the weekly pattern in stock returns continues after the introduction of futures trading on stock indexes and whether the pattern carries over to the futures market using data for the sp500 i find that the monday effect does persist in the cash market but there is no evidence of a similar pattern in the futures market among the growing array of market anomalies one of the most widely documented but least understood is the day of the week effect detailed research by french 2 gibbons and hess 3 lakonishok and levi 6 and keim and stambaugh 5 clearly shows that the mean return on monday is less than that

mechanism design for free but no free disposal services the economics of personalization under privacy concerns online personalization services belong to a class of economic goods with a no free disposal nfd property where consumers do not always prefer more services to less because of the privacy concerns these concerns arise from the revelation of information necessary for the provision of personalization services we examine vendor strategies in a market where consumers have heterogeneous concerns about privacy in successive generalizations we allow the vendor to offer a fixed level of personalization variable levels of personalization and monetary transfers coupons to the consumers that depend on the level of personalization chosen we show that a vendor offering a fixed level of personalization does not offer a coupon unless his marginal value of information mvi is sufficiently high and even when personalization is costless the vendor does not cover the market under a fixed services offering the vendor serves the same market with or without couponing next we demonstrate that in the absence of couponing the vendor s optimal variable personalization services contract maximizes surplus for all heterogeneous consumers which is in contrast to standard results from monopolistic screening when the vendor can offer coupons that vary according to personalization levels the optimal contract is not fully revealing unless his mvi is high and he will not offer coupons when this mvi is low however a vendor with a moderate mvi between certain thresholds offers a bunched contract wherein consumers with low privacy concerns receive a variable services coupon contract those with moderate privacy concerns receive a fixed services coupon contract and those with high privacy concerns do not participate in the market the coupon value is decreasing in privacy sensitivity of consumers

tests of stability for variances and means of overnight intraday returns during bull and bear markets abstract this paper examines the behavior of overnight and intraday returns during and across bull and bear markets robust tests new to the finance literature are performed to examine the stability of both variability of returns and mean returns over time comparing bull and bear markets intraday returns are significantly more volatile during bear markets but no statistical difference in overnight returns is found variability of returns is significantly greater intraday than overnight during both bull and bear markets differences in mean returns between bull and bear markets are shown to occur primarily intraday rather than overnight implications for future studies of trading phenomena and return generating processes are presented

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

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

the effects of inflation on the predictability of price changes in latin america some estimates and policy implications abstract this paper argues that the relationship between price variability and inflation in high inflation countries should be estimated on a frequent basis and that rational expectations are the appropriate formulation for predicting inflation analysis of seven latin american countries taking these factors into account suggests that higher inflation contributes to the difficulty of predicting price changes the impact is more moderate than that found in previous studies however indicating that less concern may be warranted about the possible stagflationary effects of expansionary policies

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