variations in trading volume return volatility and trading costs evidence on recent price formation models patterns in stock market trading volume trading costs and return volatility are examined using new york stock exchange data from 1988 intraday test results indicate that for actively traded firms trading volume adverse selection costs and return volatility are higher in the first half hour of the day this evidence is inconsistent with the admati and pfleiderer 1988 model which predicts that trading costs are low when volume and return volatility are high interday test results show that for actively traded firms trading volume is low and adverse selection costs are high on monday which is consistent with the predictions of the foster and viswanathan 1990 model academics investors and regulators alike are now intensively focused upon understanding the volatility of asset returns and its relation to trading volume this interest was undoubtedly piqued by the market break of october 1987 a time during which volatility and trading volume reached unprecedented levels but even beforehand researchers observed regular differences in the return process for various hours of the day and days of the week research concerning temporal patterns in stock market volatility and volume falls in two groups studies that document observed patterns and studies that develop models to predict patterns among the studies in the first group are oldfield and rogalski 1980 french and roll 1986 stoll and whaley 1990 harris 1986 and wood mcinish and ord 1985 who report evidence on seasonalities in daily and weekly return variances among the regularities that have been documented using interday data is that volatility is higher when the market is open than when it is closed oldfield and rogalski 1980 french and roll 1986 and stoll and whaley 1990 for example point out significant differences in return volatility between trading

do formula or competitive grant funds have greater impacts on state agricultural productivity this article examines the impact of public agricultural research and extension on agricultural total factor productivity at the state level the objective is to establish whether federal formula or competitive grant funding of agricultural research has a greater impact on state agricultural productivity a pooled cross section time series model of agricultural productivity is fitted to annual data for forty eight contiguous states over 1970 1999 our results show that public agricultural research and agricultural extension have statistically significant positive impacts on state agricultural productivity in addition hatch formula funding has a larger impact on agricultural productivity than federal competitive grant funding and a reallocation of hatch formula funds to competitive grant funding would lower agricultural productivity this seems unlikely to be a socially optimal policy furthermore from a cost benefit perspective our study shows that the social marginal annualized real rate of return to public resources invested in agricultural research is 49 62 and to public agricultural extension the rate is even larger

demand elasticities for food products in brazil a two stage budgeting system the object of this article is to estimate demand elasticities for a basket of staple food important for providing the caloric needs of brazilian households these elasticities are useful in the measurement of the impact of structural reforms on poverty a two stage demand system was constructed based on data from household expenditure surveys pof produced by ibge the brazilian bureau of statistics in 1987 88 and 1995 96 we have used panel data to estimate the model and have calculated income own price and cross price elasticities for eight groups of goods and services and in the second stage for 11 sub groups of staple food products we estimated those elasticities for the whole sample of consumers and for two income groups

decoupled farm program payments are really decoupled the theory lump sum transfers to farmers are commonly believed to affect the production choices of farmers in the presence of risk and uncertainty this paper shows that if farmers have off farm investment and employment opportunities production decisions are decoupled from lump sum subsidies in the presence of risk and uncertainty our results are reconciled with existing results by showing that previously identified production adjustments are portfolio adjustments

new measures of monetary policy surprises and jumps in interest rates abstract we propose new surprise measures to characterise two important dimensions of monetary policy our measures outperform the traditional monetary shocks in explaining variation of interest rates in the event study framework we also study the extent to which the ecb caused jumps in euro area interest rates the new surprises still prevail upon the traditional ones jumps play a great role in the variation of interest rates and the ecb induced several jumps with its decisions but its predictability has improved over time we find that although the surprise measures become somewhat distorted due to money market tensions during the financial turmoil our model still provides an interesting insight into interest rate behaviour throughout the crisis

taking stock monetary policy transmission to equity markets this paper analyses the effects of u s monetary policy on stock markets we present evidence that individual stocks react in a highly heterogeneous fashion to u s monetary policy shocks and relate this heterogeneity to financial constraints and tobin s q first we show that there are strong industry specific effects of u s monetary policy second we also find that for the 500 individual stocks comprising the s p500 the firms with low cash flows small size poor credit ratings low debt to capital ratios high price earnings ratios or a high tobin s q are affected significantly more by monetary policy

estimating the open market desk s daily reaction function this paper presents the results of an empirical investigation into the proximate determinants of the federal reserve s daily open market operations using information available each morning at the fed conference call the author models the open market desk s choice of both the quantity and the type of operation using a friction model for the former and a multinomial logit framework for the latter different types of operations are shown to send different signals to the market about the underlying thrust of fed policy and open market operations in recent years are shown to have become increasingly keyed to the federal funds rate copyright 1993 by ohio state university press

the fed and the stock market an identification based on intraday futures data this article develops a new identification procedure to estimate the contemporaneous relation between monetary policy and the stock market within a vector autoregression var framework the approach combines high frequency data from the futures market with the var methodology to circumvent exclusion restrictions and achieve identification our analysis casts doubt on var models imposing a recursive structure between innovations in policy rates and stock returns we find that a tightening in policy rates has a negative impact on stock prices and that the federal reserve fed has responded significantly to movements in the stock market estimates are robust to various model specifications

cost function estimation under risk aversion standard definitions of the cost function do not admit risk standard ex post approaches to cost function estimation yield biased and inconsistent estimates when production is stochastic recently an ex ante approach to cost function estimation with stochastic production has been developed by imbedding the distance function in the cost function estimation problem we generalize the approach to consider risk aversion in decision making only two empirical studies have considered stochastic production in cost function estimation both have required constant returns to scale we demonstrate a methodology sufficiently general to consider nonconstant returns to scale

discount rate changes stock market returns volatility and trading volume evidence from intraday data and implications for market efficiency we examine the eaect of discount rate changes on stock market returns volatility and trading volume using intraday data equity returns generally respond negatively and significantly to the unexpected announcements however the eaect of expected changes on equity returns is insignificant furthermore our results indicate that equity prices respond to announcements within the trading period hour after the information release an indication of a return reversal is too small to cover the full transaction costs unexpected discount rate changes also contribute to higher market volatility although the volatility is short lived similarly unexpected changes in discount rates induce larger trading volume while expected changes do not abnormal trading volume occurs only in period t our results also support the notion that unexpected changes in the discount rates impact market returns irrespective of the federal reserve operating procedures 1999 elsevier science b v all rights reserved

quantitative easing and the uk stock market does the bank of england information dissemination strategy matter we use intraday aggregate stock market data and an event study framework to assess the uk s equity market reaction to the unexpected element of the bank of england monetary policy committee s mpc asset purchase announcements for the 2009 2017 period we assess the reactions of equity returns and their volatility over various time frames both preceding and following the mpc announcements our results show that the uk unconventional monetary policy shocks have a significant impact on domestic equity returns and volatilities the strength of this impact depends on the bank s information dissemination through inflation reports and the publication of the mpc s voting records jel g14 e44 e52

the impact of fomc statements on the volatility of asset prices this article examines the impact of federal open market committee fomc statements on asset prices statements are found to have a much more pronounced impact on the volatility of asset prices than interest rate surprises they influence primarily stock returns intermediate and long term yields whereas short term rates are driven both by statements and by interest rate surprises we also find that the regime shift of may 1999 has improved the effectiveness of monetary policy as reflected in an overall reduction in market volatility during the most recent regime in addition markets are equally well prepared for the upcoming rate decision in both regimes but the process of adjustment depends on whether a statement was issued in the old regime or not when a statement is issued price adjustments are very similar across both periods whereas if no statement is issued then the rate of adjustment towards the new value is more gradual and occurs throughout the entire intermeeting period

asymmetric effects of federal funds target rate changes on s p100 stock returns volatilities and correlations we study the effects of fomc announcements of federal funds target rate decisions on individual stock returns volatilities and correlations at the intraday level for all three characteristics we find that the stock market responds differently to positive and negative target rate surprises first the average response to positive surprises that is bad news for stocks is larger second in case of bad news the mere occurrence of a surprise matters most whereas for good news its magnitude is more important these new insights are possible due to the use of high frequency intraday data

market efficiency and the u s market for sulfur dioxide allowances focusing on the u s sulfur dioxide so2 allowance market from its inception in 1994 to 2009 we model allowance prices to determine the influence of market fundamentals on allowance price level and volatility we find evidence that the so2 market operates in ways that are not inconsistent with an efficient market prices that reflect marginal abatement costs after the first few years of the program but before a court decision that introduced significant uncertainty into the market in mid 2008 our empirical analysis finds that the so2 market similar to other emission markets studied in the literature can remain relatively inefficient for several years after launch we also find that market volatility increases in response to all types of communications from the administrator suggesting that the development of a formal communication strategy possibly similar to that used by central banks would reduce price volatility and increase the efficiency of the market

output input and productivity measurement in u s agriculture 1948 79 tornqvist theil indexes of outputs and inputs are constructed these data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production constrained to constant returns to scale total factor productivity grew at an average annual rate of 1 75 compared with 1 70 per year estimated by the u s department of agriculture the similar estimates of productivity growth overshadow some important differences in measurement of individual inputs the major effort in measuring agricultural productivity is undertaken by the u s department of agriculture usda an american agricultural economics association task force on measuring productivity has examined the sources and procedures used in constructing the official statistics see loomis and barton lambert barton and durost the task force recommended that the usda adopt a series of specific improvements for constructing certain inputs and use an indexing procedure that does not impose a priori restrictions on the structure of production 1 this paper presents revised indexes of outputs and inputs the data are used to construct indexes of productivity growth over the postwar period the productivity indexes can be derived from a flexible multioutput multifactor representation of the structure of production the translog transformation function constrained to constant returns to scale 2 the indexes of outputs and inputs have the same form and their ratio coincides with the estimate of productivity growth

a class of differential demand systems abstract the rotterdam almost ideal demand system cbs and nbr models constitute a class of differential demand systems they correspond to alternative assumptions made concerning the constancy of certain parameters this paper discusses the restrictions that they impose on the evolution of demand elasticities over time

a model of production with supply management for the canadian agricultural sector the production structure of the canadian agricultural sector is modeled by an output constrained multiproduct profit function to account for the existence of supply management policies the le chatelier effects of supply constraints are illustrated and the comparative statics of supply management is shown to depend under input normality on the type of jointness convexity is tested and accepted and nonjointness is rejected by the estimated normalized quadratic profit function the results support the hypothesis of nonjointness due to allocatable fixed factors decreasing the supply of managed commodities will increase the supply of unrestricted commodities while total input use is reduced

differential consumer demand systems it is shown in this paper that several well known systems like the rotterdam model and the almost ideal demand system can be seen as different parametrizations of the budget share differential equation using a third parametrization a new system called the cbs system is developed and discussed special attention is given to the relative price version of the system and in particular to the special case of preference independence some estimates for the netherlands based on time series for 1953 1981 using various approaches are presented

cost functions and duality for stochastic technologies cost functions dual to stochastic production technologies are derived and their properties are discussed these cost functions are shown to be consistent with expected utility maximization without placing serious structural restrictions on the underlying technology

estimating ex ante cost functions for stochastic technologies this paper revisits the problem of estimating ex ante cost functions previously studied by pope and just in 1996 as well as moschini in 2001 an ex ante cost function that generalizes their ex ante cost functions is introduced and an econometric procedure for estimating a flexible approximation to it is developed that generalized cost function is economically relevant not only for the pope and just 1996 choice setting but for general producer risk preferences general stochastic technologies and general forms of price uncertainty an econometric strategy for estimating the resulting cost structure that adapts moschini s 2001 full information approach is developed followed by an econometric application to u s agriculture

do central banks react to the stock market the case of the bundesbank abstract in this paper we ask whether the bundesbank prior to the european central bank taking responsibility for monetary policy in 1999 reacted systematically to stock price movements in contrast to the results for the us our empirical findings show a generally weak relationship between german stock returns and short term interest rates at the daily and the monthly frequency the results are extremely robust to alternative model specifications the evidence is inconsistent with the hypothesis of a systematic reaction of the bundesbank to german stock prices however we do find that as in the us the bundesbank may have reacted to the stock market crash of 1987 by loosening monetary policy

a time preference measure of the social discount rate for the uk in this study the social discount rate for the uk is estimated the result compared with the treasury approved rate and the main associated policy implications considered a case is argued for reducing the official discount rate in appraisals involving all long term social projects the estimate of the elasticity of the marginal utility of consumption an important component of the discount rate is supported by plausible and statistically valid regression results the need for further work relating to other major european countries is identified so that discount rate comparisons can be made on a consistent basis

modeling supply response in a multiproduct framework the paper models multiproduct supply response in agriculture and tests key assumptions traditionally maintained in supply response studies the technology is approximated by a restricted profit function the properties of the restricted profit function are imposed during estimation the hypothesis that maintains the existence of output price and quantity indexes that satisfy the adding up property is rejected the existence of individual production functions for each output is also rejected unless joint production is permitted the estimates of responsiveness of a particular commodity to changes in own price or prices of competing outputs are likely to be considerably understated

public information arrival we develop a measure of public information flow to financial markets and use it to document the patterns of information arrival with an emphasis on the intraday flows the measure is the number of news releases by reuter s news service per unit of time we find that public information arrival is nonconstant displaying seasonalities and distinct intraday patterns next we relate our measure of public information to aggregate measures of intraday market activity our results suggest a positive moderate relationship between public information and trading volume but an insignificant relationship with price volatility

the reaction of stock returns to news about fundamentals in good times stock prices react negatively to good news and positively to bad news whereas in bad times they react positively to good news and negatively to bad news to account for this stylized fact we consider an asset pricing model where the dividend growth rate switches between different values depending on the underlying state of the economy investors never observe the true dividend growth rate but learn about it through not only its realizations but also external signals such as macroeconomic indicators under plausible assumptions the differing precision of external signals across different states of the economy can change the sign of the market reaction to news from external signals in good and bad times this paper was accepted by brad barber finance

policy language and information effects in the early days of federal reserve forward guidance i show that the nature of the federal open market committee s fomc s forward guidance language shapes the private sector s responses to monetary policy statements from february 2000 to june 2003 the fomc only gave forward guidance about economic outlook risks and a decrease in the expected federal funds rate path caused stock prices to fall gdp growth forecasts to fall and the unemployment rate to rise from august 2003 to may 2006 the fomc added forward guidance about policy inclinations and a decrease in the expected federal funds rate path had the opposite effects these results suggest that forward guidance that emphasizes economic outlook risks causes stronger information effects than forward guidance that emphasizes policy inclinations

stale information shocks and volatility we propose a new approach to measuring the effect of unobservable private information on volatility using intraday data we estimate the effect of a well identified shock on the volatility of stock returns of european banks as a function of the quality of public information available about the banks we hypothesize that as publicly available information becomes stale volatility effects and its persistence increase as private information of investors becomes more important we find strong support for this idea in the data we further show that stock volatility is higher just before important announcements if information is stale

pre announcement effects news effects and volatility monetary policy and the stock market abstract i examine pre announcement and news effects on the stock market in the context of public disclosure of monetary policy decisions the results suggest that the stock market tends to be relatively quiet conditional volatility is abnormally low on days preceding regularly scheduled policy announcements although this calming effect is routinely reported in anecdotal press accounts it is statistically significant only over the past four to five years a result that i attribute to changes in the federal reserve s disclosure practices in early 1994 the paper also looks at how the actual interest rate decisions of policy makers affect stock market volatility the element of surprise in such decisions tends to boost stock market volatility significantly in the short run and positive surprises higher than expected values of the target federal funds rate tend to have a larger effect on volatility than negative surprises the implications of the results for broader issues in the finance and economics literatures are also discussed

deutsche mark dollar volatility intraday activity patterns macroeconomic announcements and longer run dependencies this paper provides a detailed characterization of the volatility in the deutsche mark dollar foreign exchange market using an annual sample of five minute returns the approach captures the intraday activity patterns the macroeconomic announcements and the volatility persistence arch known from daily returns the different features are separately quantified and shown to account for a substantial fraction of return variability both at the intraday and daily level the implications of the results for the interpretation of the fundamental driving forces behind the volatility process is also discussed the efficient market hypothesis contends that financial asset prices provide rational assessments of fundamental values and future payoffs by implication price changes should reflect the arrival and processing of all relevant new information however the proportion of return variability that can be ascribed to public news announcements is low for example cutler poterba and summers 1989 find that even the largest daily price changes in the stock market generally cannot be associated with any significant economic news 1 moreover proxies for the flow of public information e g the number of news items released by reuter s news service berry and hiowe 1994 or dow jones company mitchell and mulherin 1994 explain little of the overall variation thus if private information is ruled out proponents of rational price formation have to assert the existence of important news items

on the flexibility of the rotterdam model abstract the rotterdam model is a discrete approximation to a continuous time model and the approximation errors are known to be small unlike other approximations with fixed parameters at the point of approximation the rotterdam model s coefficients differ at each observation but are treated as constants during estimation this procedure introduces relatively large approximation errors which are a potential source of bias in this paper the performance of the rotterdam model in reproducing the characteristics of four integrable demand systems is assessed as anticipated the model s performance is directly related to the variability of the underlying coefficients and the bias in the parameter estimates is minimal if the coefficients are relatively constant the model can also discriminate well against an invalid alternative hypothesis however in the absence of a computationally feasible varying parameter methodology the conclusion has to be that tests of parameter stability are essential when using the rotterdam model

how markets process information news releases and volatility we examine the impact of scheduled macroeconomic news announcements on interest rate and foreign exchange futures markets we find these announcements are responsible for most of the observed time of day and day of the week volatility patterns in these markets while the bulk of the price adjustment to a major announcement occurs within the first minute volatility remains substantially higher than normal for roughly fifteen minutes and slightly elevated for several hours nonetheless these subsequent price adjustments are basically independent of the first minute s return we identify those announcements with the greatest impact on these markets we examine the impact on interest rate and foreign exchange markets of scheduled macroeconomic news releases such as the employment report the consumer price index cpi and the producer price index ppi many market participants believe that such announcements have a major impact on financial markets indeed a small industry devoted to predicting the figures to be released in upcoming releases has evolved in recent years with the exception of the weekly money supply figures however the impact of such announcements on financial markets has received scant attention 1 this is doubly surprising given the considerable research interest in market volatility since these news releases are a potential source of much of this volatility consider for instance figure 1 as shown there prices in interest rate and foreign exchange futures markets are much more volatile between 8 30 and 8 35 a m eastern time et than during any other five minute trading period including

empirical regularities in south african consumption patterns this article investigates a number of empirical regularities in the south african consumption patterns the data support the following empirical regularities 1 variability in consumption systematically exceeds the variability in prices 2 law of demand 3 income flexibility is about 0 5 4 engel s law and 5 the demand hypotheses demand homogeneity and slutsky symmetry are acceptable in contrast to the findings for a number of other countries another important empirical regularity that consumer s utility function is additive is rejected for the south african consumers based on the implied demand elasticity estimates from the preferred model it is found that food housing and medical care are necessities and clothing furniture transport and recreation are luxuries and demand for all the commodities are price inelastic

macroeconomic news announcements and stock market jump intensity dynamics abstract this paper examines the effect of macroeconomic releases on stock market volatility through a poisson gaussian garch process with time varying jump intensity which is allowed to respond to such information the day of the announcement per se is found to have little impact on jump intensities employment releases are an exception however when macroeconomic surprises are considered inflation shocks show persistent effects while monetary policy and employment shocks reveal only short lived effects also the jump intensity responds asymmetrically to macroeconomic shocks evidence on macroeconomic variables relevance in explaining jump dynamics and improving volatility forecasts on event days is provided

the effect of changes in the federal funds rate target on market interest rates in the 1970s abstract this paper examines the influence of monetary policy on interest rates by estimating the effect of changes in the federal funds rate target the federal reserve s policy instrument on market interest rates in the 1970s we find that changes in the target caused large movements in short term rates and smaller but significant movements in intermediate and long term rates we hypothesize that the similarity of the reactions of three six and twelve month rates to changes in the target offers a possible explanation for the lack of support for the expectations theory from studies that have tested the theory using these rates

the impact of public information on the stock market we study the relation between the number of news announcements reported daily by dow jones company and aggregate measures of securities market activity including trading volume and market returns we find that the number of dow jones announcements and market activity are directly related and that the results are robust to the addition of factors previously found to influence financial markets such as day of the week dummy variables news importance as proxied by large new york times headlines and major macroeconomic announcements and non information sources of market activity as measured by dividend capture and triple witching trading however the observed relation between news and market activity is not particularly strong and the patterns in news announcements do not explain the day of the week seasonalities in market activity our analysis of the dow jones database confirms the difficulty of linking volume and volatility to observed measures of information

estimation of an implied price elasticity of demand through current pricing practices researchers have long pursued better methods to estimate price elasticity of market level demand due to a plethora of empirical problems the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions as a result these estimates are of limited practical use to the firm facing a firm level demand here a non statistical methodology based on seller optimization behaviour is applied that creates an implied elasticity of firm level demand that is robust intuitively plausible and free of oppressive data requirements these elasticities are tested in an applied setting against pricing managers surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour this methodology is recommended for creating a simple plausible starting point estimate for firm level price elasticities or using this calculation as an input to stat

simple econometrics of pesticide productivity this paper develops a multioutput generalization of the lichtenberg zilberman damage control technology the dual representation of the technology is shown to be conditionally additive in the price of abatement activities and other prices an econometric procedure for estimating the dual technology is developed and applied to an aggregate u s agricultural data set the conditionally additive nature of the model allows estimation of pest damage from the dual technology our estimates of aggregate u s pest damage are much lower than previous estimates

separation and hedging results with state contingent production a state contingent model of production under uncertainty is developed and compared with more traditional models of production under uncertainty producer behaviour with both production and price risk in the presence and in the absence of futures and forward markets is analysed in this state contingent framework conditions for the optimal hedge to be positive or negative are derived we also show that under plausible conditions a risk averse producer facing price uncertainty and the ability to hedge price risk will never willingly adopt a nonstochastic technology new separation results which hold in the presence of both price and production risk are then developed these separation results generalize townsend s spanning results by reducing the number of necessary forward markets by one

a cost approach to economic analysis under state contingent production uncertainty this article explores the economics of input decision under production uncertainty the article develops a methodology to specify and estimate cost minimizing input decisions under a state contingent technology the analysis is applied to time series data on u s agriculture it finds strong empirical evidence that expected output alone does not provide an appropriate representation of production uncertainty the results provide empirical support for an output cubical technology this indicates that an ex post analysis of stochastic technology appears appropriate the analysis also provides evidence that the cost of facing production risk has declined in u s agriculture over the last few decades copyright 2008 oxford university press

impact of interest rate surprises on islamic and conventional stocks and bonds abstract this paper studies the impact of interest rate news surprises on islamic and conventional stock and bond indices using a dataset which covers interest rate announcements and forecasts as well as stock and bond indices in three islamic and eight non islamic countris we find that interest rate surprises tend to have a smaller impact on the returns and volatility of islamic than conventional bonds because islamic bonds are structured to avoid explicit interest rates however interest rate surprises have about the same or bigger impact on the returns and volatility of islamic relative to conventional stocks despite the low amounts of cash and debt holdings of firms comprising islamic stock indices

the theory of reform and indian indirect taxes abstract given a set of value judgements an initial state and a model of the economy one can ask whether some feasible tax change would increase welfare we do this by defining the marginal cost in terms of welfare of raising an extra rupee from the i th good the inverse optimum problem is the calculation of non negative welfare weights on households which imply that the initial state is optimum if no such welfare weights exist then a pareto improvement is possible we illustrate the concepts and results using data from the indian economy for 1979 1980 directions of tax reform for a number of specific social welfare functions and for pareto improvements are presented

assessing the impact of the ecb s monetary policy on the stock markets a sectoral view this paper analyzes the response of the european stock markets to the monetary policy shocks by the european central bank using the heteroskedasticity based approach of rigobon 2003 we find that monetary policy tightening has a heterogeneous impact on the euro area sectors on the day the monetary policy is publicly announced furthermore we provide statistical evidence against the use of the popular event study approach when assessing the impact of monetary policy shocks on the stock market as the maintained assumptions can be rejected for the aggregate stock market and for most of the sectoral stock market indexes

is information assimilated at announcements in the european carbon market abstract we examine the high frequency new information impact on prices volatility trading volume and illiquidity at scheduled macroeconomic and verified emissions announcements for the european carbon futures market verified emissions united states non farm payroll and german new factory order macroeconomic announcements impact carbon prices swiftly within 5 min we show that a one standard deviation surprise increase in verified emission announcements is associated with an approximate ten percentage point 9 96 increase in carbon futures returns a wait and see stylized trading behavior is evident at announcements in volatility and trading volumes market illiquidity increases at announcements in relation to united states non farm payroll albeit there is no evidence of an increase in illiquidity prior to announcements the development of new information impact over time occurs mainly in the at announcement 5 minute time interval

macroeconomic news surprises volume and volatility relationship in index futures market abstractthis paper examines the role of macroeconomic news surprises on returns volatility of indian index futures market empirical literature posits that news arrivals have an influential impact

further results on aggregation of differential demand equations barnett 1979a 1981 theil s extending 1971 work aggregates differential demand equations in absolute undeflated prices this paper extends further these results by deriving aggregate macro demand equations in relative prices under stated assumptions these equations are analogous to the individual consumer s micro demand equations and the properties of the microcoefricients carry over

the impact of monetary policy announcements on the stock price of large european banks during the financial crisis abstract since 2007 the european central bank responded decisively to the challenges posed by the global financial crisis reducing key policy interest rates to unprecedented low levels and intervening with non standard policy measures i e monetary easing and liquidity provision this paper aims to assess the impact of ecb monetary policy announcements on the stock price of large european banks as a first step an event study is conducted in order to measure cumulated abnormal returns cars around the announcements over june 2007 june 2013 the second step is a regression analysis aimed at identifying the determinants of cars results show that banks were more sensitive to non conventional measures than to interest rate decisions and that the same type of intervention may have a different impact depending on the stage of the crisis in addition banks with weaker balance sheets and operating with high risk were more sensitive to monetary policy interventions

market set up in advance of federal reserve policy rate decisions textabstractthis paper considers the uncertainty associated with upcoming federal open market committee fomc announcements and the extent to which participants in the fed funds futures market prepare for such announcements before they actually occur we demonstrate that markets set up well in advance of known announcement days going back as far as six months prior to an fomc meeting as a result there is often less variation in fed funds futures prices in the period immediately preceding an fomc announcement despite greater volume of activity as the market has already incorpo rated anticipated signals we find that macro announcements and central bank officials speeches and congressional testimony are of comparable importance in addition while macro announcements have stronger effects when they are released during the fed s blackout period congressional testimony is more important when it coincides with days when important macro variables are released

on the volatility and comovement of u s financial markets around macroeconomic news announcements the objective of this paper is to provide a deeper insight into the links between financial markets and the real economy to that end we study the short term anticipation and response of u s stock treasury and corporate bond markets to the first release of surprise u s macroeconomic information specifically we focus on the impact of these announcements not only on the level but also on the volatility and comovement of those assets returns we do so by estimating several extensions of the parsimonious multivariate garch dcc model of engle 2002 for the excess holding period returns on seven portfolios of these asset classes we find that both the process of price formation in each of those financial markets and their interaction appear to be driven by fundamentals yet our analysis reveals a statistically and economically significant dichotomy between the reaction of the stock and bond markets to the arrival of unexpected fundamental information we also show that the conditional mean volatility and comovement among stock treasury and corporate bond returns react asymmetrically to the information content of these surprise announcements overall the above results shed new light on the mechanismsbywhichnewinformationisincorporatedintopriceswithinandacrossu s financial markets

walking on thin ice market quality around fomc announcements abstract this paper examines market quality for the e mini s p 500 futures around federal reserve announcements i document that the release of the federal open market committee fomc statement induces significantly higher than normal volatility and trading volume the bid ask spread is significantly higher in the minutes preceding the release but it returns to its normal level immediately after the release using order level data i show that market depth behind the best bid and ask quotes is much lower on event days hitting an intraday low immediately before the fomc release at values on average about 20 percent of the level observed in control days

monetary policy surprises and interest rates evidence from the fed funds futures market abstract this paper estimates the impact of monetary policy actions on bill note and bond yields using data from the futures market for federal funds to separate changes in the target funds rate into anticipated and unanticipated components interest rates response to anticipated target rate changes is small while their response to unanticipated changes is large and highly significant these responses are generally consistent with the expectations hypothesis of the term structure surprise target rate changes have little effect on expectations of future actions however which helps to explain the lack of empirical support for the expectations hypothesis at the short end of the yield curve

the reliability of ml estimators of systems of demand equations evidence from oecd countries in large demand systems when the unknown error covariance matrix is approximated by its usual maximum likelihood estimator the coefficient estimates are known to suffer from two problems 1 the asymptotic standard errors severely understate the sampling variability of the estimates and 2 the efficiency of the maximum likelihood coefficient estimates is greatly impaired in this paper the author proposes an alternative estimator for the covariance matrix and evaluates its performance using time series data for oecd countries the author finds that there is a spectacular improvement copyright 1991 by mit press

valuing agricultural insurance this paper proposes a method for estimating a farmer s stochastic discount factor that is independent of his or her risk preferences and shows that that stochastic discount factor is appropriate for calculating a farmer s willingness to pay for a crop insurance product an empirical example illustrates how production and price data might be combined with returns data to permit econometric estimation of the stochastic discount factor and the implications of those illustrative results are briefly discussed

some simple but flexible differential consumer demand systems abstract three differential consumer demand systems are proposed each of which has some particular advantages over the well known rotterdam model in each demand equation only two explanatory variables are used real income and the relative own price the features of the most preferred model are piglog working leser engel curves a limited number of parameters while no preference independence is assumed and easy estimation by iterated ols taking into account all theoretical restrictions even in case of a large number of commodities

dynamic adjustment in us agriculture under climate change we construct a stochastic dynamic dual model to investigate the structural adjustment of two aggregate output and three aggregate input categories in us agriculture under stochastic climatic change more than a century of national annual data 1910 2011 is used in the empirical analysis no constraints on asset fixity are imposed results indicate that with rational expectations both output categories as well as all input categories exhibit quasi fixity in response to market change and stochastic climate change crops adjust more than twice as fast as livestock 49 versus 20 of the way toward their long run equilibrium in one year fertilizer adjusts most rapidly toward equilibrium levels 88 in one year and capital adjusts most slowly 5 in one year labor oscillates rather than converging smoothly toward equilibrium its distance from equilibrium is the same as if it adjusted 59 of the way toward its optimal level in one year failing to anticipate climate change dramatically slows the estimated rate of adjustment for two netputs and modestly speeds the rate for two others thus likely increasing overall adjustment costs failing to account for uncertainty in anticipated climate change has little impact on adjustment rates

the reaction of asset markets to swiss national bank communication abstract in this paper we analyze high frequency movements in swiss asset markets in reaction to real time communication by the swiss national bank our analysis of central bank communication encompasses monetary policy announcements speeches and interviews we examine the reactions of the currency market the bond market and the stock exchange the evidence suggests that speeches and interviews along with monetary policy announcements engender a significant price reaction this paper sheds light on the relevance of communications other than monetary policy announcements

a nonparametric analysis of agricultural technology u s agricultural technology and technical change are analyzed nonparametrically under cost minimization and profit maximization based on annual data for 1948 83 various separability hypotheses concerning the aggregate production function for u s agriculture are investigated the proposed nonparametric approach also provides some insights into the nature of technical change

monetary policy predictability in the euro area an international comparison we evaluate the ability of market participants to anticipate monetary policy decisions in 14 countries first by looking at both the magnitude and volatility of changes in the money market rates we show that the days of policy meetings are special days for financial markets second we find that the predictability of federal reserve fed bank of england and european central bank ecb is fully comparable finally an econometric analysis of the ability of market participants to incorporate in the current short term interest rates the expected policy changes shows that in the euro area and in other countries policy decisions are anticipated well in advance

the matrix approach to evaluating demand equations as there is a plethora of demand models which one should be used to estimate income and price elasticities the paper sheds light on this important practical problem by developing a matrix approach to simulating mas demand equations to analyse their performance under idealized circumstances artificial data on the dependent variable are generated by one model and these are then used for the estimation of another model as an illustrative application using four popular models a 4 4 matrix is generated which gives all pair wise comparisons the performance of the models is then evaluated on the basis of the quality of the income and own price elasticity estimates

economic behavior under uncertainty a joint analysis of risk preferences and technology a method is developed to estimate jointly risk preferences and technology under general conditions the approach is illustrated in an application to the analysis of u s corn soybean acreage decisions over time the results provide useful information on the nature of farmers risk preferences and on the influence of price risk and production risk on acreage allocation and farmers welfare copyright 1996 by mit press

market based measures of monetary policy expectations a number of recent articles have used different financial market instruments to measure near term expectations of the federal funds rate and the high frequency changes in these instruments around federal open market committee announcements to measure monetary policy shocks this article evaluates the empirical success of a variety of financial market instruments in predicting the future path of monetary policy all of the instruments we consider provide forecasts that are clearly superior to those of standard time series models at all of the horizons considered among financial market instruments we find that federal funds futures dominate all the other securities in forecasting monetary policy at horizons out to six months for longer horizons the predictive power of many of the instruments we consider is very similar in addition we present evidence that monetary policy shocks computed using the current month federal funds futures contract are influenced by changes in the timing of policy actions tha

an even simpler differential demand system abstract keller 1984 proposed three simple variants of the well known rotterdam demand model this paper proposes an even simpler differential demand system which has some attractive properties and is easy to estimate the new model is estimated with dutch and british data

large shocks in the volatility of the dow jones industrial average index 1928 2013 we determine the events that cause large shocks in volatility of the djia index over the period 1928 2013 using a new semi parametric test based on conditional heteroscedasticity models we find that these large shocks can be associated with particular events financial crashes elections wars monetary policies etc we show that some shocks are not identified as extraordinary movements by the investors due to their occurring during high volatility episodes especially the 1929 1934 1937 1938 and 2007 2011 periods

measuring the impact of monetary policy on asset prices in turkey abstract little is known about the impact of monetary policy on asset prices in emerging markets this study applies the heteroscedasticity based gmm for financial markets in turkey the results suggest that event study estimates are biased for some asset returns