the shadow of death analysing the pre exit productivity of portuguese manufacturing firms the pre exiting productivity profile of mature firms relative to survivors is examined along with an evaluation of how productivity affects the probability of exit along various dimensions an empirical approach based on an unbalanced panel of portuguese manufacturing firms covering a 10 year period is used the findings confirm that market selection forces low productivity firms to exit but there is also evidence that a sizeable portion of low productivity firms do not shut down conversely there is a non negligible fraction of high productivity firms that do actually close consistent with some key theoretical predictions our analysis reveals that exiting firms have a falling productivity level over a number of years prior to exit finally the results from the survival model show that both small firms and ones with low productivity are relatively much more likely to exit the market industry and macro environment are also found to have a non negligible role on the exit of mature firms

understanding bank runs the importance of depositor bank relationships and networks we use a unique new database to examine micro depositor level data for a bank that faced a run we use minute by minute depositor withdrawal data to understand the effectiveness of deposit insurance the role of social networks and the importance of bank depositor relationships in influencing depositor propensity to run we employ methods from the epidemiology literature which examine how diseases spread to estimate transmission probabilities of depositors running and the significant underlying factors we find that deposit insurance is only partially effective in preventing bank runs further our results suggest that social network effects are important but are mitigated by other factors in particular the length and depth of the bank depositor relationship depositors with longer relationships and those who have availed of loans from a bank are less likely to run during a crisis suggesting that cross selling acts not just as a revenue generator but also as a complementary insurance mechanism for the bank finally we find there are long term effects of a solvent bank run in that depositors who run do not return back to the bank our results help understand the underlying dynamics of bank runs and hold important policy implications

do product innovation and news about the r d process produce large price changes and overreaction the case of pharmaceutical stock prices do extreme price changes of pharmaceutical stocks reflect unexpected scientific information produced during the drug rd i e food and drug administration fda approvals in 6 of these cases news of a scientific nature in

sulfur dioxide control by electric utilities what are the gains from trade title iv of the 1990 clean air act amendments caaa established a market for transferable sulfur dioxide so2 emission allowances among electric utilities this market offers firms facing high marginal abatement costs the opportunity to purchase the right to emit so2 from firms with lower costs and this is expected to yield cost savings compared to a command and control approach to environmental regulation this paper uses econometrically estimated marginal abatement cost functions for power plants affected by title iv of the caaa to evaluate the performance of the so2 allowance market specifically we investigate whether the much heralded fall in the cost of abating so2 compared to original estimates can be attributed to allowance trading we demonstrate that for plants that use low sulfur coal to reduce so2 emissions technical change and the fall in prices of low sulfur coal have lowered marginal abatement cost curves by over 50 percent since 1985 the flexibility to take advantage of these chan

size seasonality and stock market overreaction recent research finds that the prior period s worst stock return performers losers outperform the prior period s best return performers winners in the subsequent period this potential violation of the efficient markets hypothesis is labeled the overreaction phenomenon this paper shows that the tendency for losers to outperform winners is not due to investor overreaction but to the tendency for losers to be smaller sized firms than winners when losers are compared to winners of equal size there is little evidence of any return discrepancy and in periods when winners are smaller than losers winners outperform losers

financial contagion through capital connections a model of the origin and spread of bank panics financial contagion is modeled as an equilibrium phenomenon in a dynamic setting with incomplete information and multiple banks the equilibrium probability of bank failure is uniquely determined we explore how the cross holding of deposits motivated by imperfectly correlated regional liquidity shocks can lead to contagious eects conditional on the failure of a financial institution we show that contagion is possible in the unique equilibrium of the economy and characterize exactly when it may exist at the same time we identify a direction of flow for contagious eects which provides a rationale for localized financial panics simulations identify the optimal level of interbank deposit holdings in the presence of contagion risk our results suggest that when the probability of bank failure is low maximal levels of interbank holdings are optimal when cross holding of deposits is complete we demonstrate that the intensity of contagion is increasing in the size of regionally aggregate liquidity shocks

empirical implications of alternative models of firm dynamics abstract this paper considers two models of firm behavior that allow for heterogeneity among firms idiosyncratic or firm specific sources of uncertainty and discrete outcomes exit and or entry both the characteristics of firm level panel data sets and the nature of the questions we characteristically ask of them imply that models with these features are likely to underlie most detailed empirical work on microdata sets the models we consider are a bayesian learning model due to jovanovic 20 and a model of research and exploration due to ericson and pakes 11 the paper provides a simple set of empirical procedures to help determine which if either of these two models might be appropriate for alternative data sets we conclude by checking for the implications of the two models on an eight year panel of wisconsin firms the results indicate that one model is consistent with the data on manufacturing firms while the other is consistent with the data on retail trade journal of economic literature classification numbers c52 l60 l80

stock market panics a test of the efficient market hypothesis 1984 stock market panics a test of the efficient market hypothesis financial analysts journal vol 40 no 3 pp 48 51

time varying risk and long term reversals a re examination of the international evidence long term reversals ltrs have been extensively documented as existing in international markets the predictability of returns opens the question whether investors should continue to diversify across international markets such predictability also has implications for the corporate decision of where and when to raise capital this paper re examines the international evidence for long term contrarian profits using a longer time horizon than all previous studies 81 years of data from 1925 to 2005 and finds that the long term contrarian anomaly disappears when time varying conditional alphas are considered this is true even without transaction costs for the marginal trader conservative transaction costs subsume ltr profits whether returns are risk adjusted or not this suggests that benefits from actual trades on ltrs do not negate a strategy based on diversification although time varying beta has been extensively documented as ineffective in describing ltrs this paper demonstrates that it is important to control for time variation in alpha a full conditional capital asset pricing model captures the ltr premium this suggests that macroeconomic factors are important for understanding ltrs and their associated risk

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

plant level employment development before collective displacements comparing mass layoffs plant closures and bankruptcies this article analyzes the development of employment levels and worker flows before bankruptcies plant closure without bankruptcies and mass layoffs utilizing administrative plant level data for g

on the contagion effect in the us banking sector by using the spatial econometrics methodology this paper investigates the contagion of the risk taking by banks in the us banking sector during 2001 to 2012 in addition the contagion signals up to the subprime crisis in 2008 are analyzed and different channels of contagion are studied in order to identify fragile groups of banks our analysis reveals that there is no significant contagion transmitted to the whole banking system however we observe that the bank contagion is significantly spread locally and for the group of banks that share similar characteristics related to size and bank regulations

risk premium and market power in credit markets abstract the use of credit risk adjusted marginal opportunity cost of funds in the computation of the lerner index for bank loans opens new directions to properly evaluate market power of banks in credit markets beyond disputed concentration measures

nonstationary expected returns abstract recent evidence reveals significant negative serial correlation in aggregate market wide stock returns we extend this result to relative market adjusted returns demonstrating negative serial correlation in five year returns we then test two competing explanations 1 market mispricing and 2 changing expected returns in an efficient market the tests are conducted using the capital asset pricing model to estimate relative returns the evidence suggests that negative serial correlation in relative returns is due almost entirely to variation in relative risks and therefore expected relative returns through time we document substantial relative risk shifts particularly for extreme performing stocks

short term reaction of stock markets in stressful circumstances abstract in this paper we document the short term stock price behaviour following a period of stock market stress we focus on price behaviour using daily market indexes from 39 stock exchanges over the period 1989 1998 our results are not consistent with the overreaction hypothesis we find positive negative abnormal price performance in the short term window up to 10 days following positive negative price shocks our analysis also highlights differences between developed and emerging markets we show that the post shock abnormal performances are significantly larger for emerging markets but that this momentum behaviour is markedly less in the late 1990s we find the size of the after shock tremors to be related to market liquidity with larger post shock price changes in less liquid markets

what s causing overreaction an experimental investigation of recency and the hot hand effect a substantial body of empirical literature provides evidence of overreaction in markets past losers outperform past winners in stock markets as well as in sports markets two hypotheses are consistent with this observation the recency hypothesis states that traders overweight recent information they are too optimistic about winners and too pessimistic about losers according to the hot hand hypothesis traders try to discover trends in the past record of a firm or a team and thereby overestimate the autocorrelation in the series an experimental design allows us to distinguish between these hypotheses the evidence is consistent with the hot hand hypothesis

firm growth and liquidity constraints a dynamic analysis using a large unbalanced panel data set of portuguese manufacturing firms surviving over the period from 1990 to 2001 the purpose of this paper is to examine whether liquidity constraints faced by business firms affect firm growth we use a gmm system to estimate a dynamic panel data model of firm growth that incorporates cash flow as a measure of liquidity constraints and persistence of growth the model is estimated for all size classes including micro firms our findings reveal that smaller and younger firms have higher growth cash flow sensitivities than larger and more mature firms this is consistent with the suggestion that financial constraints on firm growth may be relatively more severe for small and young firms nevertheless the same finding can be interpreted in a different way if we consider the more recent literature which interpret the higher investment cash flow sensitivity of younger and smaller firm in absence of financial market imperfection as the outcome of these firms reaction to the fact that realisation of their cash flows reveals them the direction to go in presence of uncertainty of their growth prospect besides firms that were small and young at the beginning of the sample period exhibited more persistent growth than those that were large and old finally these results have significant policy implications

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

the risk and required return of common stock following major price innovations this paper presents empirical evidence demonstrating that the risk and expected returns of common stocks typically change in the aftermath of large price movements when temporary changes in uncertainty follow major financial events subsequent stock returns should be positively correlated with the shift in return volatility this prediction is strongly supported by the data on more than 9 100 daily price change events during 1962 1985 moreover the data also suggest that ex ante returns on common stocks may incorporate a premium for increases in parameter uncertainty associated with the events

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

no deep pockets some stylized empirical results on firms financial constraints this paper is a survey of recent empirical work on financial constraints faced by firms it is organized as a series of stylized results which mirror what is generally understood about the severity of financial constraints and the effects that they have upon firms the review of the literature shows that a financial constraints are a widespread key concern for firms hindering their ability to carry out their optimal investment and growth trajectories and b the severity of such constraints depends on institutional and firm specific characteristics as well as on the nature of investment projects

deregulation market power and risk behaviour in spanish banks abstract this paper provides empirical evidence on the effects of regulatory changes in the market power of spanish banks it also analyses the response of banks in terms of risk taking behaviour as a result of a reduction in economic profits we find that liberalisation measures have increased competition and eroded banks market power we observe that banks with lower charter values tend to have lower equity assets ratios lower solvency and to experience higher credit risk the last evidence is new in the literature and calls for strengthening regulatory concerns about credit risk management by banks in situations of increased competition

additional evidence on the information based contagion effects of bank failures abstract recent theoretical models addressed the question of the nature of bank runs and what triggers them two competing hypotheses emerged pure panic and information based contagion this study provides additional evidence consistent with the latter hypothesis three observable bank characteristics are examined as proxy measures for the interim private information used by rational depositors in assessing the riskiness of a bank s long lived assets that may trigger bank runs the three factors are 1 the distance of the solvent banks headquarters from the headquarters of each failed bank 2 the size of the solvent banks and 3 the capital ratio as a proxy for their solvency the analysis is conducted in the context of the five large bank failures that occurred in the southwest region of the us during the mid 1980s weekly abnormal returns of 33 southwestern bhcs in ten critical failure related event dates are regressed on the three observable bank characteristics our findings suggest that distance and capital adequacy are negatively related to the magnitude of the contagion effect whereas size is positively related

asymmetric return dynamics and technical trading strategies abstract we investigate the profitability of technical trading strategies based on an asymmetric reverting property of stock returns we identify an asymmetry in return dynamics for daily returns on the s p 500 index return dynamics evolve along a positive negative unconditional mean after a prior positive negative return the trading strategies based on this asymmetry generate a positive return for buy signals a negative return for sell signals and a positive return for the spread between buy and sell signals our results imply that the observed asymmetry in return dynamics is the main source of profitability for the implied strategies thereby corroborating arguments for the usefulness of technical trading strategies

the contrarian investment strategy does not work in canadian markets this paper tests the overreaction hypothesis using monthly data for stocks listed on the toronto stock exchange over the 1950 1988 period unlike de bondt and thaler 1985 1987 it finds statistically significant continuation behavior for the next one and two year s for winners and losers and insignificant reversal behavior for winners and losers over longer formation test periods of up to ten years while the systematic risks of the winners decrease significantly over all test periods the systematic risks of the losers increase significantly for only the 12 month formation test periods unlike chan 1988 the only significant change in variance from the formation to test periods occurs for the losers for the 12 month formation test periods the findings are robust for january versus non january and size based portfolios unlike zarowin 1989 1990 the findings are robust for various performance measures specifically market adjusted car and the jensen 1968 and sharpe 1966 portfolio performance measures

the death of firms exploring the effects of environment and birth cohort on firm survival in sweden this paper investigates the death of firms and seizes a long term perspective it investigates the life spans of nearly 2 200 firms in seven birth cohorts of swedish joint stock companies founded during seven separate years between 1899 and 1950 research has traditionally emphasized individual and micro oriented factors in explaining post entry performance or has often focused on the influence of firm specific structural factors firm age and size a less attended field recognizes environmental forces this paper focuses on the interaction between the micro and macro levels and combines structural and environmental factors employing a cohort approach it relates firm survival to firm age and size as well as to the effect of cohort affiliation and environmental change over time period effects during macroeconomic expansion the risk of death decreases cohort effects are also evident firms founded during times of economic crisis exhibit lower survival rates consequently cohort affiliation and environmental forces i e period effects can explain differences in death rates in different firm populations

measuring abnormal performance do stocks overreact abstract a highly controversial issue in financial economies is whether stocks overreact in this paper we find an economically important overreaction effect even after adjusting for size and beta in portfolios formed on the basis of prior five year returns extreme prior losers outperform extreme prior winners by 5 10 per year during the subsequent five years although we find a pronounced january seasonal our evidence suggests that the overreaction effect is distinct from tax loss selling effects interestingly the overreaction effect is substantially stronger for smaller firms than for larger firms returns consistent with the overeaction hypothesis are also observed for short windows around quarterly earnings announcements

risk aversion uncertain information and market efficiency abstract this paper develops and tests the uncertain information hypothesis as a means of explaining the response of rational risk averse investors to the arrival of unanticipated information the theory predicts that following news of a dramatic financial event both the risk and expected return of the affected companies increase systematically and that prices react more strongly to bad news than good an empirical investigation of over 9000 marketwide and firm specific events produces results consistent with these predictions we conclude that the market reacts to uncertain information in an efficient if not instantaneous manner

redefining business success distinguishing between closure and failure new firms are believed to have high closure rates and these closures are believed to be failures but two u s census bureau data sources illustrate that these assumptions may not be justified the business information tracking series bits showed that about half of new employer firms survive beyond four years and the characteristics of business owners cbo showed that about a third of closed businesses were successful at closure the cbo also made it possible to compare results of models of business survival and business success but because of non response bias logit models were used similar to previous studies firms having more resources that were larger with better financing and having employees were found to have better chances of survival factors that were characteristic of closure such as having no start up capital and having a relatively young owner were also common in businesses considered successful at closure hence few defining factors can be isolated leading to true failures the significant proportion of businesses that closed while successful calls into question the use of business closure as a meaningful measure of business outcome it appears that many owners may have executed a planned exit strategy closed a business without excess debt sold a viable business or retired from the work force it is also worth noting that such inborn factors as race and gender played negligible roles in determining survivability and success at closure

stock returns following large one day declines evidence on short term reversals and longer term performance we examine stock returns following large one day price declines and find that the bid ask bounce and the degree of market liquidity explain short term price reversals further we do not find evidence consistent with the overreaction hypothesis we observe that securities with large one day price declines perform poorly over an extended time horizon while the concept of market overreaction has been noted for many years its formal description and examination is a relatively recent area of study debondt and thaler 1985 define the overreaction hypothesis as the overresponse to new information this hypothesis suggests that extreme movements in stock prices are followed by movements in the opposite direction to correct the initial overreaction and that the greater the magnitude of initial price change the more extreme the offsetting reaction one manner in which the overreaction hypothesis has been studied is the analysis of stock returns following large one day stock price declines brown harlow and tinic 1988 and atkins and dyl 1990 find significant reversals for stocks that experience one day price declines focusing on extreme price movements bremer and sweeney 1991 examine returns following one day price declines of 10 percent or more for fortune 500 firms that are in the center for research in security prices crsp data files they find significant positive three day abnormal returns over the period 1962 to 1986 and note that this three day recovery is inconsistent with stock prices fully and quickly reflecting relevant information they also suggest that market illiquidity may partially explain their findings the purpose of this study is to explain security return behavior following large one day declines our primary objective is to explore the role of the bid ask bounce market liquidity and overreaction in explaining price reversals in the three day period immediately following large one day declines large one day price declines are likely to be associated with substantial selling pressure enhancing the probability that a closing transaction is at a

new firm survival new results using a hazard function a limitation of audretsch s 1991 study of new firm survival was the level of aggregation to industries this precluded linking establishment specific characteristics such as organizational structure and size to post entry performance the purpose of this paper is to relate the post entry performance of individual establishments not only to their technological and market structure environments but also to establishment specific characteristics we do this by estimating a hazard duration function for more than 12 000 individual establishments in u s manufacturing started in 1976 by tracking their subsequent performance over a ten year period we conclude that establishment specific characteristics which audretsch was not able to capture in his earlier study play an important role in shaping the exposure to risk confronting new establishments copyright 1995 by mit press

trading and liquidity on the tokyo stock exchange a bird s eye view the trading mechanism for equities on the tokyo stock exchange tse stands in sharp contrast to the primary mechanisms used to trade stocks in the united states in the united states exchange designated specialists have affirmative obligations to provide continuous liquidity to the market specialists offer simultaneous and tight quotes to both buy and sell and supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions in contradistinction the tse has no exchange designated liquidity suppliers instead liquidity is provided through a public limit order book and liquidity is organized through restrictions on maximum price changes between trades that serve to slow down trading in this article we examine the efficacy of the tse s trading mechanisms at providing liquidity our analysis is based on a complete record of transactions and best bid and best offer quotes for most stocks in the first section of the tse over a period of 26 months we study the size of the bid ask spread and its cross sectional and intertemporal stability intertemporal patterns in returns volatility volume trade size and the frequency of trades and market depth based on the response of quotes to trades and the frequency of trading halts and warning quotes the trading mechanism for equities on the tokyo stock exchange tse stands in sharp contrast to the primary mechanisms used to trade stocks in the united states in the united states exchange designated specialists have affirmative obligations to provide continuous liquidity in the market and to maintain a private limit order book with the public s limit orders on the tse exchange designated intermediaries saitori log limit orders and match them to incoming market orders but provide no market making services in the united states specialists offer simultaneous and tight quotes to both buy and sell on the tse public limit orders constitute the available bids and offers in the united states specialists supply sufficient liquidity to limit the magnitude of price changes between consecutive transactions 1 on the tse the market mechanism places limits on the magnitude of consecutive price

predictable patterns after large stock price changes on the tokyo stock exchange this paper extends to japanese stocks recent research on short term stock price adjustment to new information using standard methodologies we find that stock returns of firms included in the nikkei 300 tend to be significantly positive after large price decreases this is similar to the pattern observed for american stocks in other research the pattern remains when returns are adjusted for market movements and exists independently of the october 1987 market break we find little evidence of significant patterns following large stock price increases we also find little evidence that non transaction prices explain the persistent significant returns observed following large price decreases on the tokyo stock exchange we conjecture that broker dealers and tse member firms respond to large price decreases not by trading for their own profit but rather by selectively supplying liquidity to their preferred retail customers we conclude that ordinary investors probably cannot earn economic profits from these statistically significant patterns

liquidity coinsurance moral hazard and financial contagion we study the propagation of financial crises between regions characterized by moral hazard problems the source of the problem is that banks are protected by limited liability and may engage in excessive risk taking the regions are affected by negatively correlated liquidity shocks so that liquidity coinsurance is pareto improving the moral hazard problem can be solved if banks are sufficiently capitalized under autarky a limited investment is needed to achieve optimality so that a limited amount of capital is sufficient to prevent risk taking with interbank deposits the optimal investment increases and capital becomes insufficient to prevent excessive risk taking thus bankruptcy occurs with positive probability and the crises spread to other regions via the financial linkages opening the financial markets is nevertheless pareto improving consumers benefit from liquidity coinsurance although they pay the cost of excessive risk taking finally we show that in this framework a completely connected deposit structure is more conducive to financial crises than an incompletely connected structure

the reversal of large stock price decreases extremely large negative 10 day rates of return are followed on average by largerthan expected positive rates of return over following days this price adjustment lasts approximately 2 days and is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon while perhaps not representing abnormal profit opportunities these reversals present a puzzle as to the length of the price adjustment period such a slow recovery is inconsistent with the notion that market prices quickly reflect relevant information recent research on stock returns has uncovered a substantial number of empirical findings that are broadly inconsistent with popular asset pricing models for example keim and stambaugh 1985 cross 1973 french 1980 gibbons and hess 1981 and rogalski 1984 find evidence of day ofthe week and weekend effects on stock returns while banz 1981 and reinganum 1983 find evidence of a size effect this paper presents evidence of another empirical puzzle consider the behavior of a firm s rate of return on days after it has experienced a large negative one day rate of return less than say 10 observed daily stock returns after such an extreme event are significantly larger than average on following days for a 10 fall the return above average is 1 773 for the day after and rises cumulatively to 2 215 by the second day this multiple day price adjustment is observed in a sample of firms that is largely devoid of methodological problems that might explain the reversal phenomenon the major interest of this phenomenon is the long recovery period of the stock price reversal such a slow recovery is inconsistent with the notion that market prices fully and quickly reflect relevant information

return predictability following large price changes and information releases abstract we examine return behavior following large price change events unconditional post event abnormal returns are found to be unimportant as we condition on other criteria related to the quality of information like volume and public announcements the abnormal returns become large the type of news provides further refinement if the news relates to earnings or analyst recommendations then the 20 day abnormal returns become much larger ranging from 3 to 4 for positive events and about 2 25 for negative events finally an out of sample trading strategy confirms investor under reaction and generates significant abnormal annualized returns of the order of 12 18

the life history of cohorts of exits from german manufacturing an investigation of the life history of three cohorts of exits based on longitudinal data covering the population of all manufacturing firms in a german federal state reveals three empirical regularities 1 although the probability of exit tends to decline with age ceteris paribus only about a quarter of all exits is from the group of young firms aged five years or less 2 only a minor fraction of exits lived through a period of continous decline of employment for five years or more before closing down 3 the impact effect of job loss due to exits can differ sharply from the long run effect

crises and capital requirements in banking we analyze a general equilibrium model in which there is both adverse selection of and moral hazard by banks the regulator can screen banks prior to giving them a licence audit them ex post to learn the success probability of their projects and impose capital adequacy requirements capital requirements combat moral hazard when the regulator has a strong screening reputation and they otherwise substitute for screening ability crises of confidence can occur only in the latter case and contrary to conventional wisdom the appropriate policy response may be to tighten capital requirements to improve the quality of surviving banks

lingering illness or sudden death pre exit employment developments in german establishments using a large administrative data set for germany this article compares employment developments in exiting and surviving establishments applying a matching approach we find a clear shadow of death effect reflecting lingering illness in both west and east germany establishments shrink dramatically already several years before closure employment growth rates differ strongly between exiting and surviving establishments and this difference becomes stronger as exit approaches moreover we provide first evidence that prior to exit the workforce becomes on average more skilled more female and older in exiting compared to surviving establishments these effects are more clearly visible in west than in east germany

stock return predictability despite low autocorrelation abstract this paper shows that short horizon stock returns can be predicted to a much greater degree by past price movements than would be anticipated given their low autocorrelation this raises doubts over the reliability of the autocorrelation statistic as a measure of stock market predictability

standard errors in event studies even if true abnormal returns are uncorrelated estimated abnormal returns are not this paper presents a simple formula for the variance of estimated cumulative abnormal re turns both returns and dummy variable procedures for estimating the standard error correctly taking account of both intertemporal and contemporaneous correlation of esti mated residuals are discussed they are then applied to an event study of post merger performance it is shown that ignoring either the intertemporal or contemporaneous correlation of residuals can result in significant underestimates of standard errors

evidence on stock market overreaction 1986 evidence on stock market overreaction financial analysts journal vol 42 no 4 pp 74 77

the survival of new plants start up conditions and post entry evolution abstract this paper examines the longevity of entrants we find size to be an important determinant of the chances of survival this being particularly relevant to de novo entrants as compared with entry by established firms current size is also found to be a better predictor of failure than initial size moreover our findings indicate that after controlling for size differences past growth matters for survival suggesting a partial adjustment process for firm size in the post entry period finally new plants are more likely to live longer if they enter growing industries or industries with little entry activity

credit risk transfer and contagion some have argued that recent increases in credit risk transfer are desirable because they improve the diversification of risk others have suggested that they may be undesirable if they increase the risk of financial crises using a model with banking and insurance sectors we show that credit risk transfer can be beneficial when banks face uniform demand for liquidity however when they face idiosyncratic liquidity risk and hedge this risk in an interbank market credit risk transfer can be detrimental to welfare it can lead to contagion between the two sectors and increase the risk of crises

overreaction in the brazilian stock market abstract the overreaction hypothesis on a new set of data for the brazilian stock market over the period 1970 1989 is investigated both market adjusted returns and the standard sharpe lintner capm adjusted returns are used price reversals in 2 year returns are detected and the results contrast with the u s evidence in that the magnitude of the effect is more pronounced than in the u s the results also suggest that differences in risk as measured by capm betas using the method suggested by chan chan k c 1988 on the contrarian investment strategy journal of business 61 147 163 cannot account for the overreaction effect i also examine the issue of asymmetry versus symmetry in the overreaction effect using the criterion proposed by dissanaike dissanaike g 1992 are stock price reversals really symmetric university of cambridge department of applied economics discussion paper af series no 4 i find evidence that the price reversals are asymmetric

sunk costs firm size and firm growth for several decades the conventional wisdom has been that expected firm growth rates are independent of firm size a property known as gibrat s law however recent empirical work has found a negative relation between firm growth and firm size this paper provides a theoretical explanation for this negative relation in a model of new firm growth where capacity and technology choices involve some degree of sunkness additional empirical implications of the theory of sunk costs are also developed these relate to profit rates tobin s q exit rates degree of sunkness of capacity costs as well as size and growth rates copyright 1995 by blackwell publishing ltd

identification of spatial durbin panel models identi cation of a spatial durbin model is a concern in the spatial econometrics literature the concern is similar to the identi cation of the endogenous eect the contextual eect and correlation eect in social interactions and networks this paper considers identi cation of spatial durbin dynamic panel models under 2sls and ml estimations we show that the parameters are generally identi ed via 2sls moment relations or expected log likelihood or quasi likelihood functions although identi cation might fail under some particular situations with the 2sls moments parameters can be generally identi ed via the quasi likelihood function of a model with intuitively appealing identi cation conditions monte carlo experiments suggest that omitting relevant durbin terms can result in signi cant biases in regression estimates while including an irrelevant durbin term causes no obvious loss of e ciency empirical illustration of the international spillover of economic growth through bilateral trade shows that inclusion of durbin terms can be important

price reversals bid ask spreads and market efficiency we examine the behavior of common stock prices after a large change in price occurs during a single trading day and find evidence that the stock market appears to have overreacted especially in the case of price declines however the magnitude of the overreaction is small compared to the bid ask spreads observed for the individual stocks in the sample we interpret this finding as being consistent with a market that is efficient after transactions costs are considered