trading volume and information revelation in stock markets i consider a market microstructure model in which the rates of public and private informa tion arrival are probabilistic the latter depends on the availability of private information that is stochastically changing over time in equilibrium traders estimate the availability of private information using past periods trading volume and use this information to adjust their strategies the time series properties include contemporaneous correlation between price variability and volume and autocorrelation in price variability similar to garch the model explains why trading volume contains useful information for predicting volatil ity and provides predictions on the limit and market order placement strategies of traders

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

volume and skewness in international equity markets abstract we examine the relation between trading volume and skewness in 11 international stock markets using daily and monthly data from january 1980 to august 2004 we construct single equation and var models of the relation between the first three moments of market returns and trading volumes our results show hitherto unrecognised channels of influence and support the investor heterogeneity approach to explaining return asymmetries

incentive compatibility in non quasilinear environments we derive several implications of incentive compatibility in general i e not necessarily quasilinear environments building on kos and messner 2013 we provide a partial characterization of incentive compatible mechanisms

money burning in the theory of delegation abstract this paper uses a lagrangian approach to provide sufficient conditions under which money burning expenditures are used in an optimal delegation contract for comparison we also establish simple sufficient conditions for the optimality of a cap allocation under a restricted set of preferences for a benchmark setting in which money burning is not allowed we also apply our findings to a model of cooperation and to a model with quadratic preferences and families of distribution functions in addition we provide several comparative statics results

what money canʼt buy efficient mechanism design with costly signals i study the ex ante efficient allocation of a set of quality heterogeneous objects to a number of heterogeneous risk neutral agents agents have independent private values which represent the maximum cost they are willing to sustain to obtain an object of unitary quality the designer faces a trade off between allocative efficiency and cost of screening because the cost sustained is wasted the optimal mechanism ranks agents based on their marginal contribution to social surplus and distributes objects to higher ranked agents the ranking is independent of the scarcity of objects or the extent of their heterogeneity if the hazard rates of the distributions of values are increasing agents are ranked according to their expected values if hazard rates are decreasing and agents are symmetric the objects are allocated to the agents that sustain the highest costs in general optimal mechanisms combine both pooling and screening of values

worst case optimal redistribution of vcg payments in multi unit auctions abstract for allocation problems with one or more items the well known vickrey clarke groves vcg mechanism aka clarke mechanism generalized vickrey auction is efficient strategy proof individually rational and does not incur a deficit however it is not strongly budget balanced generally the agents payments will sum to more than 0 we study mechanisms that redistribute some of the vcg payments back to the agents while maintaining the desirable properties of the vcg mechanism our objective is to come as close to budget balance as possible in the worst case for auctions with multiple indistinguishable units in which marginal values are nonincreasing we derive a mechanism that is optimal in this sense we also derive an optimal mechanism for the case where we drop the non deficit requirement finally we show that if marginal values are not required to be nonincreasing then the original vcg mechanism is worst case optimal

the structure and degree of dependence a quantile regression approach abstract the copula function defines the degree of dependence and the structure of dependence this paper proposes an alternative framework to decompose the dependence using quantile regression we demonstrate that the methodology provides a detailed picture of dependence including asymmetric and non linear relationships in addition changes in the degree or structure of dependence can be modeled and tested for each quantile of the distribution the empirical part applies the framework to three different sets of financial time series and demonstrates substantial differences in dependence patterns among asset classes and through time the analysis of 54 global equity markets shows that detailed information about the structure of dependence is crucial to adequately assess the benefits of diversification in normal times and crisis times

bid costs and endogenous bid caps we study contests where several privately informed agents bid for a price all bidders bear a cost of bidding that is an increasing function of their bids and moreover bids may be capped we show that regardless of the number of bidders if agents have linear or concave cost functions then setting a bid cap is not profitable for a designer who wishes to maximize the average bid on the other hand if agents have convex cost functions i e an increasing marginal cost then affectively capping the bids is profitable for a designer facing a sufficiently large number of bidders

time and dynamic volume volatility relation abstract this paper examines volume and volatility dynamics by accounting for market activity measured by the time duration between two consecutive transactions a time consistent vector autoregressive var model is employed to test the dynamic relationship between return volatility and trades using intraday irregularly spaced transaction data the model is used to identify the informed and uninformed components of return volatility and to estimate the speed of price adjustment to new information it is found that volatility and volume are persistent and highly correlated with past volatility and volume the time duration between trades has a negative effect on the volatility response to trades and correlation between trades consistent with microstructure theory shorter time duration between trades implies higher probability of news arrival and higher volatility furthermore bid ask spreads are serially dependent and strongly affected by the informed trading and inventory costs

participation rules for pareto optimal clubs abstract this paper presents a unifying framework for the club participation problem using compensating variation measures of willingness to pay for membership with more prospective club members than the equilibrium club population pareto efficient participation rules are derived which depend upon whether or not individuals are assured of club access sale of lottery tickets offering club membership is shown to be a socially superior club participation allocation mechanism to sale of vouchers guaranteeing membership the willingness to pay format readily encompasses the buchanan case where all prospective club members are assured of club participation

competitive fair division several indivisible goods are to be divided among two or more players whose bids for the goods determine their prices an equitable assignment of the goods at competitive prices is given by a fair division procedure called the gap procedure that ensures 1 nonnegative prices that never exceed the bid of the player receiving the good 2 pareto optimality though coupled with possible envy 3 monotonicity such that higher bids never hurt in obtaining a good 4 sincere bids that preclude negative utility and 5 prices that are partially independent of the amounts bid as in a vickrey auction a variety of applications are discussed

optimal allocation with costly verification consider a principal with a good to allocate among a number of agents each of whom wants the good each agent i knows the value the principal receives if he gives the good to i but the principal does not this value need not coincide with the value to i of getting the good the principal can verify the agents private information at a cost but cannot use transfers there are a number of economic environments of interest that roughly correspond to this scenario we discuss a few below how does the principal maximize the expected gain from allocating the good less the costs of verification we characterize optimal mechanisms for such settings we construct an optimal mechanism with a particularly simple structure which we call a favored agent mechanism there is a threshold value and a favored agent say i if each agent other than i reports a value for the good below the threshold then the good goes to the favored agent and no verification is required if some agent other than i reports a value above the threshold then the agent who reports the highest value is checked this agent receives the good if and only if his claims are verified and the good goes to any other agent otherwise in addition we show that every optimal mechanism is essentially a randomization over optimal favored agent mechanisms in this sense we can characterize the

causality in quantiles and dynamic stock return volume relations abstract this paper investigates the causal relations between stock return and volume based on quantile regressions we first define granger non causality in all quantiles and propose testing non causality by a sup wald test such a test is consistent against any deviation from non causality in distribution as opposed to the existing tests that check only non causality in certain moment this test is readily extended to test non causality in different quantile ranges in the empirical studies of three major stock market indices we find that the causal effects of volume on return are usually heterogeneous across quantiles and those of return on volume are more stable in particular the quantile causal effects of volume on return exhibit a spectrum of symmetric v shape relations so that the dispersion of return distribution increases with lagged volume this is an alternative evidence that volume has a positive effect on return volatility moreover the inclusion of the squares of lagged returns in the model may weaken the quantile causal effects of volume on return but does not affect the causality per se

renewable energy oil prices and economic activity a granger causality in quantiles analysis this paper analyzes the causal relationship between renewable energy consumption oil prices and economic activity in the united states from july 1989 to july 2016 considering all quantiles of the distribution although the concept of granger causality is defined for the conditional distribution the majority of papers have tested granger causality using conditional mean regression models in which the causal relations are linear we apply a granger causality in quantiles analysis that evaluates causal relations in each quantile of the distribution under this approach we can discriminate between causality affecting the median and the tails of the conditional distribution we find evidence of bi directional causality between changes in renewable energy consumption and economic growth at the lowest tail of the distribution besides changes in renewable energy consumption lead economic growth at the highest tail of the distribution our results also support the unidirectional causality from fluctuations in oil prices to economic growth at the extreme quantiles of the distribution finally we find evidence of lower tail dependence from changes in oil prices to changes in renewable energy consumption our findings call for government policies aimed at developing renewable energy markets to increase energy efficiency in the u s

first order and second order ambiguity aversion different models of uncertainty aversion imply strikingly different economic behavior the key to understanding these differences lies in the dichotomy between first order and second order ambiguity aversion which i define here my definition and its characterization are independent of specific representations of decisions under uncertainty i show that with second order ambiguity aversion a positive exposure to ambiguity is optimal if and only if there is a subjective belief such that the act s expected outcome is positive with first order ambiguity aversion zero exposure to ambiguity can be optimal examples in finance insurance and contracting demonstrate the economic relevance of this dichotomy this paper was accepted by han bleichrodt decision analysis

the tradeoff of the commons we develop a model of scarce renewable resources to study the commons problem we show that contrary to conventional wisdom property rights can often be less efficient than a commons in particular we study two effects 1 waste which arises when individuals expend resources to use a resource unavailable due to congestion and 2 the risk of underutilization of the resource we provide necessary and sufficient conditions for each effect to dominate the other when the cost of determining the availability of a resource is low

rationing and rent dissipation in the presence of heterogeneous individuals this paper discusses the implications of rationing by waiting when consumers have different time costs and personal valuations the joint distribution function of time costs and personal valuations is used to characterize market equilibrium it is argued that under certain conditions an increase in the variance of time costs will reduce the dissipation of rent furthermore it is shown that introducing a secondary market for a rationed good does not necessarily improve welfare because total surplus under rationing by waiting depends more on the variance than on the level of time costs and personal valuations the model is also used to discuss other institutions that involve rent seeking activities such as the patent system and import quotas

waiting line auctions if prizes are to be awarded simultaneously at a specified time on a first come first served basis then individuals who queue for them will choose different waiting times through their arrivals at the queue this choice of arrival time at a queue is similar to the choice of a sealed tender in an auction an equilibrium for this waiting line auction is obtained here using methods for analyzing sealed tender auctions when individuals are risk neutral it is shown that several alternative waiting line allocation procedures result in the same transactions cost associated with waiting in line

risk transmission mechanism between energy markets a var for var approach abstract the global financial crisis gfc of 2007 2009 that originated in the us has revealed the need for measuring and monitoring the transmission of extreme downside market risk this paper investigates the risk transmission mechanism between the oil and natural gas markets we apply the recently introduced test statistics based on cross quantilogram function and the multivariate quantile regression model var for var to the us oil and natural gas prices which are independently formed our results show two asymmetric patterns first the shocks in the oil market substantially increase the value at risk var in the natural gas market but the reverse impact does not exist second we highlight the significant asymmetric response of gains and losses transmission in energy markets cautioning about the underlying weakness of adopting volatility to measure risk in the energy market moreover an extreme market risk is more easily transmitted across markets than moderate risks our results are in general robust in application to other regional energy markets such as europe and asia but the heterogeneities in responses are underpinned by the different role of natural gas in regions the findings in this paper have important implications for academic researchers policy makers in gas dependent economies and business practitioners in light of projected increases in the use of natural gas worldwide as well as the development of independent gas on gas competitive hub prices in asia and europe

the heterogeneity dependence between crude oil price changes and industry stock market returns in china evidence from a quantile regression approach this paper explores the dependence between real crude oil price changes and chinese real industry stock market returns based on the monthly data from 1994 03 to 2014 06 we address this issue using the quantile regression approach enabling a more detailed investigation of structure and degree of dependence empirical results reveal that the reaction of market returns to crude oil is highly heterogeneous across conditional distribution of industry stock returns furthermore there is evidence that this dependence is positive and exists only in recessions or bearish markets with low expected returns the dependence at low quantiles is not limited to one market but is a common feature across industries additionally dependence also changes since the onset of structural breaks we determine that chinese industry stock and global crude oil markets have contagion in rare situations most cases do not demonstrate contagion

how not to raise money we show that standard winner pay auctions are inept fund raising mechanisms because of the positive externality bidders forgo if they top another s high bid revenues are suppressed as a result and remain finite even when bidders value a dollar donated the same as a dollar kept this problem does not occur in lotteries and all pay auctions where bidders pay irrespective of whether they win we introduce a general class of all pay auctions rank their revenues and illustrate how they dominate lotteries and winner pay formats the optimal fund raising mechanism is an all pay auction augmented with an entry fee and reserve price

relationship between the oil price volatility and sectoral stock markets in oil exporting economies evidence from wavelet nonlinear denoised based quantile and granger causality analysis abstract this paper examines the extent of volatility between oil price and sectoral indices in the gulf cooperation council gcc countries by using quantile regression analysis qra for the return s series and denoised series over the period 2006 2017 four sectors are found to offer diversification opportunities during a high market i e 90th quantile all the sectors are found interdependent of oil price volatility however the bank and insurance sectors are insusceptible to oil price volatility during the 10th 25th and 75th quantiles in addition qra results for wavelet nonlinear denoising with a soft thresholding series indicate that all the sectors are interdependent of oil price volatility but that the aggregate market index transport and telecommunication sectors are insensitive to oil price volatility during the 75th and 90th quantiles this highlights the usefulness of denoising the financial returns series when applying regression tools moreover the contagion and interdependence between the oil price and stock returns sectors are estimated by frequency domain causality

when costly voting is beneficial abstract we present a costly voting model in which each voter has a private valuation for their preferred outcome of a vote when there is a zero cost to voting all voters vote and hence all values are counted equally regardless of how high they may be by having a cost to voting only those with high enough values would choose to incur this cost we show that by adding this cost welfare may be enhanced even when the cost of voting is wasteful such an effect occurs when there is both a large enough density of voters with low values and the expected value of voters is high enough

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

auctionin entry into tournaments a research tournament model with heterogeneous contestants is presented for a large class of contests the optimal number of competitors is two this insight makes designing the tournament easier and highlights the importance of selecting highly qualified contestants while customary uniform price and discriminatory price auctions are intuitively appealing mechanisms for solving this adverse selection problem in practice they generally will not be efficient mechanism for selecting contestants instead we propose an alternative auction format that is equally simple to implement and efficiently selects the most qualified contestants to compete regardless of the form of contestant heterogeneity

stock prices and volume the authors undertake a comprehensive investigation of price and volume co movement using daily new york stock exchange data from 1928 to 1987 they adjust the data to take into account well known calendar effects and long run trends to describe the process they use a seminonparametric estimate of the joint density of current price change and volume conditional on past price changes and volume four empirical regularities are found 1 positive correlation between conditional volatility and volume 2 large price movements are followed by high volume 3 conditioning on lagged volume substantially attenuates the leverage effect and 4 after conditioning on lagged volume there is a positive risk return relation article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

optimal allocation with ex post verification and limited penalties several agents with privately known social values compete for a prize the prize is allocated based on the claims of the agents and the winner is subject to a limited penalty if he makes a false claim if the number of agents is large the optimal mechanism places all agents above a threshold onto a shortlist along with a fraction of agents below the threshold and then allocates the prize to a random agent on the shortlist when the number of agents is small the optimal mechanism allocates the prize to the agent who makes the highest claim but restricts the range of claims above and below

efficient voting with penalties abstract simple majority does not reflect the intensity of voters preferences this paper presents an efficient collective choice mechanism with two alternatives when the designer may use non transferable punishments to persuade agents to reveal their private information the designer faces a dilemma a punishment may induce a more correct choice but its cost is socially wasteful the efficient mechanism is a weighted majority weight of each individual is known ex ante and no punishments are applied if preferences are relatively homogeneous eliciting types through punishments in order to construct type specific weights should occur if preference intensity is relatively heterogeneous

testing for linear and nonlinear granger causality in the stock price volume relation linear and nonlinear granger causality tests are used to examine the dynamic relation between daily dow jones stock returns and percentage changes in new york stock exchange trading volume we find evidence of significant bidirectional nonlinear causality between returns and volume we also examine whether the nonlinear causality from volume to returns can be explained by volume serving as a proxy for information flow in the stochastic process generating stock return variance as suggested by clark s 1973 latent common factor model after controlling for volatility persistence in returns we continue to find evidence of nonlinear causality from volume to returns

causality in quantiles and dynamic relations in energy markets de tails matter abstract in this article we investigate the dynamic relations between crude oil price returns and a set of energy price returns namely diesel gasoline heating and the natural gas this is performed by means of granger non causality tests for us closing spot prices over the period from january 1997 to december 2017 in previous studies this has been done by testing for the added predictive value of including lagged returns of one energy price in predicting the conditional expectation of another in this paper we instead focus on different ranges of the full conditional distribution and thus market states within the framework of a dynamic quantile regression model and identify the quantile ranges from which causality arises the results constitute a richer set of findings than what is possible by just considering a single moment of the conditional distribution which can be useful for implementing better substitution investment strategies and effective policy interventions we find several interesting uni directional dynamic relations between the employed energy price returns especially in the tail quantiles but also bi directional causal relations between energy price returns for which the classical granger non causality test suggests otherwise our results are robust to alternative measures of the price of oil and different data frequencies

assigning resources to budget constrained agents this article studies different methods of assigning a good to budget constrained agents schemes that assign the good randomly and allow resale may outperform the competitive market in terms of utilitarian efficiency the socially optimal mechanism involves random assignment at a discount an in kind subsidy and a cash incentive to discourage low valuation individuals from claiming the good copyright oxford university press

optimal allocation without money an engineering approach we study the allocation of heterogeneous services to agents with incomplete information and without monetary transfers agents have private multidimensional utilities over services drawn from commonly known priors the social planner s goal is to maximize a potentially complex public objective for tractability we take an engineering approach in which we solve a large market approximation and convert the solution into a feasible finite market mechanism that still yields good results we apply this framework to real data from boston to design a mechanism that assigns students to public schools in order to maximize a linear combination of utilitarian and max min welfare subject to capacity and transportation constraints we show how to optimally solve a large market formulation with more than 868 types of students and 77 schools and we translate the solution into a finite market mechanism that significantly outperforms the baseline plan chosen by the city in terms of efficiency equity and predic

optimal allocation without transfer payments abstract often an organization or government must allocate goods without collecting payment in return this may pose a difficult problem either when agents receiving those goods have private information in regards to their values or needs in this paper we find an optimal mechanism to allocate goods when the designer is benevolent while the designer cannot charge agents he can receive a costly but wasteful signal from them we find conditions for cases in which ignoring these costly signals by giving agents equal share or using lotteries if the goods are indivisible is optimal in other cases those that send the highest signal should receive the goods however we then show that there exist cases where more complicated mechanisms are superior also we show that the optimal mechanism is independent of the scarcity of the goods being allocated

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

analyzing time varying volatility spillovers between the crude oil markets using a new method abstract the spillover effect is an important factor affecting the volatility of crude oil price basing on the study of diebold and yilmaz 2009 2012 2014 we propose a new method that calculates the time varying volatility spillover indexes by the generalized forecast error variance decomposition of tvp var sv model then using the new method we study the time varying volatility spillovers between four major crude oil markets wti brent oman tapis from november 29 2002 to july 13 2018 by comparing the results of our new method and traditional rolling window method we verify the superiority of our new method the results show that the volatility spillovers calculated by the new method are clearer more stable and not outlier sensitive from the estimated results of time varying volatility spillovers we find that the volatility spillover between crude oil markets is slowly increasing but there are obvious cyclical changes and from the correlation analysis and the granger causality test we find that the volatility and volatility spillovers are positively correlated and are two way granger causality which supported for the market infection hypothesis of king and wadhwani 1990

optimal voting rules we study dominant strategy incentive compatible dic and deterministic mechanisms in a social choice setting with several alternatives the agents are privately informed about their preferences and have single crossing utility functions monetary transfers are not feasible we use an equivalence between deterministic dic mechanisms and generalized median voter schemes to construct the constrained efficient optimal mechanism for an utilitarian planner optimal schemes for other welfare criteria such as say a rawlsian maximin can be analogously obtained

a model of competitive stock trading volume a model of competitive stock trading is developed in which investors are heterogeneous in their information and private investment opportunities and rationally trade for both informational and noninformational motives i examine the link between the nature of heterogeneity among investors and the behavior of trading volume and its relation to price dynamics it is found that volume is positively correlated with absolute changes in prices and dividends i show that informational trading and noninformational trading lead to different dynamic relations between trading volume and stock returns

optimal private good allocation the case for a balanced budget abstract in an independent private value auction environment we are interested in strategy proof mechanisms that maximize the agents residual surplus that is the utility derived from the physical allocation minus transfers accruing to an external entity we find that under the assumption of an increasing hazard rate of type distributions an optimal deterministic mechanism never extracts any net payments from the agents that is it will be budget balanced specifically optimal mechanisms have a simple posted price or option form in the bilateral trade environment we obtain optimality of posted price mechanisms without any assumption on type distributions

the dynamic relationship between stock returns and trading volume domestic and cross country evidence abstract this paper examines the dynamic relations causal relations and the sign and magnitude of dynamic effects between stock market trading volume and returns and volatility for both domestic and cross country markets by using the daily data of the three largest stock markets new york tokyo and london major findings are as follows first trading volume does not granger cause stock market returns on each of three stock markets second there exists a positive feedback relationship between trading volume and return volatility in all three markets third regarding the cross country relationships us financial market variables in particular us trading volume contains an extensive predictive power for uk and japanese financial market variables fourth sub sample analyses show evidence of stronger spillover effects after the 1987 market crash and an increased importance of trading volume as an information variable after the introduction of options in the us and japan

a general characterization of interim efficient mechanisms for independent linear environments we consider the class of bayesian environments with independent types and utility functions which are both quasi linear in a private good and linear in a one dimensional private value type parameter we call these independent linear environments for these environments we fully characterize interim efficient allocation rules which satisfy interim incentive compatibility and interim individual rationality constraints we also prove that they correspond to decision rules based on virtual surplus maximization together with the appropriate incentive taxes we illustrate these techniques with applications to auction design and public good provision

the price variability volume relationship on speculative markets this paper concerns the relationship between the variability of the daily price change and the daily volume of trading on the speculative markets our work extends the theory of speculative markets in two ways first we derive from economic theory the joint probability distribution of the price change and the trading volume over any interval of time within the trading day and second we determine how this joint distribution changes as more traders enter or exit from the market the model s parameters are estimated by fiml using daily data from the 90 day t bills futures market the results of the estimation can reconcile a conflict between the price variability volume relationship for this market and the relationship obtained by previous investigators for other speculative markets this paper concerns the relationship between the variability of the daily price change and the volume of trading on speculative markets previous empirical studies 2 3 6 12 14 16 of both futures and equity markets always find a positive association between price variability as measured by the squared price change ap2 and the trading volume 2 there are two explanations for the relationship clark s 2 explanation which is secondary to his effort to explain why the probability distribution of the daily price change is leptokurtic emphasizes randomness in the number of within day transactions in clark s model the daily price change is the sum of a random number of within day price changes the variance of the daily price change is thus a random variable with a mean proportional to the mean number of daily transactions clark argues that the trading volume is related positively to the number of within day transactions and so the trading volume is related positively to the variability of the price change the second explanation is due to epps and epps 6 their model examines the mechanics of within day trading the change in the market price on each within day transaction or market clearing is the average of the changes in all of the traders reservation prices epps and epps assume there is a positive relationship between the extent to which traders disagree when they revise their reservation prices and the absolute value of the change in the market price that is an increase in the extent to which traders disagree is associated with a larger absolute price change the price variability volume relationship arises then because the volume of trading is positively related to the extent to which traders disagree when they revise their reservation prices

heteroskedasticity in stock return data volume versus garch effects this paper provides empirical support for the notion that autoregressive conditional heterqskedasticity arch in daily stock return data reflects time dependence in the process generating information flow to the market daily trading volume used as a proxy for information arrival time is shown to have significant explanatory power regarding the variance of daily returns which is an implication of the assumption that daily returns are subordinated to intraday equilibrium returns furthermore arch effects tend to disappear when volume is included in the variance equation the autoregressive conditiqnal heteroskedasticity arch process of engle 1982 has been shown to provide a good fit for many financial return time series 1 arch imposes an autoregressive structure on conditional variance allqwing volatility shocks to persist over time this persistence captures the propensity of returns of like magnitude to clu ter in time and can explain the well documented nonnormality and nonstability of empirical asset return distributions see especially fama 1965 an appealing explanation for the presence of arch is based upon the hypothesis that daily returns are generated by a maiture of distributions in which the rate of daily information arrival is the stochastic mixing variable as suggested by diebold 1986 gallant hsieh and tauchen 1988 and stock 1987 1988 arch might capture the time series properties e g serial correlation of this mixing variable hqwever this linkage has not been broadly documented with the datia the objective of this study is to examine the validity of this explanation for daily stock returns the empirical strategy exploits the implication of the mixture model that the variance of daily price increments is heteroskedastic specifically positively related to the rate of daily information arrival using daily trading volume as a proxy for the mixing variable we show that for a sample of 20 common stocks arch effects vanish when volume is included as an explanatory variable in the conditional variance equation

trading volume and serial correlation in stock returns this paper investigates the relationship between aggregate stock market trading volume and the serial correlation of daily stock returns for both stock indexes and individual large stocks the first order daily return autocorrelation tends to decline with volume the paper explains this phenomenon using a model in which risk averse market makers accommodate buying or selling pressure from liquidity or noninformational traders changing expected stock returns reward market makers for playing this role the model implies that a stock price decline on a high volume day is more likely than a stock price decline on a low volume day to be associated with an increase in the expected stock return

lottery or waiting line auction abstract this paper studies the efficiencies of the two most widely used non price allocation mechanisms lotteries and waiting line auctions as our analysis suggests in addition to the fairness of the mechanism the use of lotteries in lieu of waiting line auctions can be also justified from an efficiency point of view in particular we show that the less dispersed consumers time valuations are the more efficient is a lottery relative to a waiting line auction in addition we identify four conditions under which a lottery dominates a waiting line auction in expected social surplus preserving furthermore the numerical simulations we conduct indicate that over a predominantly wide range of circumstances a lottery is more socially efficient than a waiting line auction as an allocative mechanism in the absence of a conventional price system