the information content of annual earnings releases a trading volume approach this paper reports the results of an empirical examination of the relations between the volume of securities traded the magnitude of surprises in annual earnings announcements and firm size although early trading volume studies e g beaver 1968 kiger 1972 and foster 1973 replicated basic information content studies with findings similar to those based on security prices we should not expect that security price and trading volume research will continue to yield identical results when more refined hypotheses are tested trading volume reflects investors activity by summing all market trades whereas security prices reflect an aggregation or averaging of investors beliefs as a result we will on occasion observe differences between price and volume reactions to earnings announcements as did morse 1981 this study extends the recent trend toward tests of more refined hypotheses by using a larger sample to examine the associations between unexpected earnings firm size and trading volume and testing whether such associations can be generalized across fiscal year end dates and stock exchange listing my results show a continuous positive relationship between trading

how does the stock market absorb shocks abstract using a comprehensive set of news stories we find a stark difference in market responses to positive and negative price shocks accompanied by new information when there is a news story about a firm positive price shocks are followed by reversal while negative ones result in drift this is interpreted as the stock market overreaction to good news and underreaction to bad news these seemingly contradictory results can be explained in a single framework considering the interaction of retail investors with attention bias and arbitrageurs with short run capital constraints consistent with this hypothesis we find that both patterns are stronger when the attention bias is stronger and when the arbitrage capital is scarce

a theory of trading volume a theory of trading volume is developed based on assumptions that market agents frequently revise their demand prices and randomly encounter potential trading partners the model describes two distinct ways informational events affect trading volume one is consistent with conjectures made by empirical researchers that investor disagreement leads to increased trading but the observation of abnormal trading volume does not necessarily imply disagreement and volume can increase even if investors interpret the information identically if they also have had divergent prior expectations simulation tests support the model and are used to contrast the random pairing environment with costless market clearing volume is lower in the costly market and volume increases caused by an informational event persist after the event period this is consistent with existing empirical evidence and suggests that markets do not immediately clear all orders or that investors have demands to recontract

stock price reactions to lifo adoptions the association between excess returns and lifo tax savings although long a topic of accounting research little is known about the motives for or effects of voluntary changes in accounting techniques among the motives which have been suggested are attempts by managers to smooth reported earnings gordon 1964 copeland 1968 cushing 1969 white 1972 and ronen and sadan 1981 to influence man agement compensation to reduce regulatory or political costs watts and zimmerman 1978 and to avoid bond covenant restrictions holthausen 1981 while some of these motives may be consistent with a market value rule they often fail to provide unambiguous accounting change predictions e g which accounting changes result in lower regulatory costs moreover empirical verification has been constrained by the unobservability of the variables to which the managers allegedly respond the stock price reaction which should be expected for a given account ing change depends not only on its implications for the valuation of securities but also on the extent to which the implications are already known or anticipated by investors 3 ultimately our ability to detect these stock price effects if any depends on the power of our tests previous studies of the effects of accounting changes have generally not found significant stock price reactions archibald 1972 ball 1972 kaplan and roll 1972 harrison 1977 and holthausen 1981 4 for the most part these studies dealt with accounting changes which had no direct cash flow effects in contrast changes in inventory costing methods especially those involving the last in first out lifo cost flow assumption can generate potentially large changes in a firm s cash flows due to their impact on taxable earnings these cash flow effects provide not only a motive for lifo changes5 which is consistent with the market value rule but also implications for associated stock price effects if investors react to lifo s cash flow implications rather than to its effects on reported earnings then positive stock price adjustments should be associated with lifo adjustments however the evidence from previous studies of stock price reactions to lifo adoptions is inconclusive ball 1972 sunder 1973 1975 abdel khalik and mckeown 1978 brown 1980 and ricks 1982 while several factors may account for these results see section 2 it can be noted that the previous studies have considered only a dichotomous variable whether or not a firm has adopted lifo yet because the cash flow consequences of a lifo adoption decision depend on a number of firm specific factors this approach ignores potentially large differences among firms in the economic consequences of lifo adoptions most firms switching to lifo now reveal in their financial statement disclosures the tax savings which have been realized this study uses these disclosures to examine the association between unsystematic re turns and the magnitudes of first year lifo tax savings for all nyse firms which adopted or extended their use of lifo during the period 1972 80 subject to data availability 6 the research design employs within group comparisons based on cumulative monthly unsystematic excess returns with appropriate controls for unexpected earnings per formance 7 this design avoids several methodological weaknesses inherent in the previous studies and allows more definitive tests of hypotheses relating investor reactions to the income and cash flow effects of lifo adoptions as reported more fully below results based on lifo adoptions made in 1974 are consistent with a positive association between cumulative excess stock returns and the magnitudes of lifo tax savings 8 the results also provide evidence that changes in systematic risk may accompany lifo adoptions however contrary to previous studies most of the sample firms exhibit downward rather than upward changes in systematic risk section 2 reviews the previous studies of stock price reactions to lifo adoptions and suggests explanations for their results section 3 discusses the alternative approach employed in this study while section 4 describes the test methodologies employed the data and data selection procedures are described in section 5 the results and a discussion are presented in section 6 section 7 offers some conclusions

psychological factors and stock option exercise we investigate stock option exercise decisions by over 50 000 employees at seven corporations controlling for economic factors psychological factors influence exercise consistent with psychological models of beliefs employees exercise in response to stock price trends exercise is positively related to stock returns during the preceding month and negatively related to returns over longer horizons consistent with psychological models of values that include reference points employee exercise activity roughly doubles when the stock price exceeds the maximum price attained during the previous year

the inherent dangers of using computable general equilibrium models as a single integrated modelling framework for sustainability impact assessment a critical note on bohringer and loschel 2006 the search for methods of assessment that best evaluate and integrate the trade offs and interactions between the economic environmental and social components of development has been receiving a new impetus due to the requirement that sustainability concerns be incorporated into the policy formulation process a paper forthcoming in ecological economics bohringer c loschel a in press computable general equilibrium models for sustainability impact assessment status quo and prospects ecological economics claims that computable general equilibrium cge models may potentially represent the much needed back bone tool to carry out reliable integrated quantitative sustainability impact assessments sias while acknowledging the usefulness of cge models for some dimensions of sia this commentary questions the legitimacy of employing this particular economic modelling tool as a single integrating modelling framework for a comprehensive evaluation of the multi dimensional dynamic and complex interactions between policy and sustainability it discusses several inherent dangers associated with the advocated prospects for the cge modelling approach to contribute to comprehensive and reliable sustainability impact assessments the paper warns that this reductionist viewpoint may seriously infringe upon the basic values underpinning the sia process namely a transparent heterogeneous balanced inter disciplinary consultative and participatory take to policy evaluation and building of the evidence base

technical note mathematical pitfalls in the one machine multiproduct economic lot scheduling problem we consider a group of products sharing the same piece of production equipment and show that two mathematical problem formulations in the literature are ill posed in both cases the infimum of the cost function occurs at a boundary point that is not feasible

capacitated two stage multi item production inventory model with joint setup costs we analyze a continuous time two stage production inventory system in the first stage a common intermediate product is produced in batches and possibly stored in the second phase the intermediate product is fabricated into n distinct finished products several finished products may be included in a single production batch of limited capacity to exploit economies of scale we propose a planning methodology to address the combined problem of joint setup costs and capacity limits per setup we restrict ourselves to a class of replenishment strategies with the following properties a replenishment strategy specifies a collection of families subsets of items covering all end items if an item belongs to several families a specific fraction of its sales is assigned to each family each time the inventory of one item in a family is replenished the inventories of all other items in the family are replenished as well we derive a simple roughly 0n log n algorithm that results in a strategy whose long run average cost comes within a few percentage points of a lower bound for the minimum achievable cost within the above class of strategies

trading on inside information evidence from the share structure reform in china abstract we examine stock trading activities in days before chinese listed firms made public announcement to start share structure reform there is significant evidence that relative to a benchmark period institutional investors bought more event firms shares in the last two trading days prior to announcement randomization tests show significant differences in institutional trading activities between event firms and matched control firms which suggests that some institutions had inside information moreover large trades account for a significant proportion of daily stock price changes in the last 2 days the evidence is consistent with the prediction by holden and subrahmanyam 1992 that when multiple informed investors acquire the same piece of information they will trade aggressively we also find that over the reform period the median share value change of event firms is 6 higher than that of control firms our findings have important implications for enforcement of insider trading regulations in china

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

the accuracy of the tick test evidence from the australian stock exchange abstract in the absence of information regarding whether a trade is buyer or seller initiated many researchers have employed the tick rule as a proxy these researchers have been supported in their endeavours by the work of lee and ready 1991 which suggests that the tick rule is 90 accurate unfortunately the difficulty of securing data on this issue has made lee and ready s paper somewhat unique in that there have been few attempts to confirm their result in us markets and no attempts in other markets the purpose of this work is to test the robustness of their result in the australian securities market using cleaner intra day data we mimic the lee and ready study to cast some doubt upon the robustness of their findings in different markets our results suggest an overall accuracy of approximately 74 as opposed to lee and ready s 90 however accuracy in excess of 90 is documented when zero ticks are excluded further analysis provides evidence that a volatile or trending market will decrease the accuracy of the tick rule it is also demonstrated that the tick rule is less likely to accurately classify seller initiated trades and small buyer initiated trades

the value of diffusing information abstract how does the speed by which information diffuses affect its value to a stock market investor in a structural model solved in closed form this speed has two opposing effects on the empirically dominant term of the value of information faster diffusing information means quicker and less noisy profits but also increases competing informed trading impounding more information into prices and eroding profits structural empirical analysis of stock market reaction to drug approvals using media coverage as a proxy for the transmission rate of information finds that the value of information is hump shaped in its future transmission rate moreover the estimated amount of noise trading is small

trading as gambling this paper offers evidence from three different samples consistent with investors substituting between playing the lottery and gambling in financial markets in the united states increases in the jackpots of the multistate lotteries powerball and mega millions are associated with significant reductions in small trade participation in the stock market california based discount brokerage clients and german discount brokerage clients are significantly less likely to trade during weeks with larger lottery prizes in the california and german lotteries respectively variation in lottery prizes affects speculative trading in more lottery like securities such as individual stocks and options but not trading in bonds and mutual funds trading that is likely associated with long term savings motives such as trading in retirement accounts does not respond to lottery jackpots either the negative relation between trading activity and jackpots is stronger for individuals who are more likely to play the lottery this paper was accepted by brad barber finance

predisclosure information firm capitalization and security price behavior around earnings announcements several studies on the relationship between earnings reports and security price behavior provide evidence suggesting that a significant portion of the information revealed through earnings reports is reflected in security prices prior to the report month e g ball and brown 1968 and brown and kennelly 1972 this has been attributed at least partly to the existence of other more timely sources of information which allow market agents to forecast earnings prior to their release the evidence above reflects an average finding across all firms one question of interest is whether there are significant systematic crosssectional differences in the security price reactions to earnings announcements of firms which are associated with specific firm characteristics that lead to differential amounts of predisclosure information this study focuses on firm size capitalization as one such characteristic a firm

the effects of energy price technology and disaster shocks on china s energy environment economy system abstract this paper constructs a dynamic stochastic general equilibrium dsge model to analyze the effects of energy price technology and disaster shocks on china s energy environment economy 3e system it also studies stylized facts as well as co integration and error correction dynamic analyses of this system the disaster shock is modeled as a two state markov switching process the results show that both technology and energy price shocks increase the ratio of environmental investment to gdp the improvement in technology and rising energy prices helps to reduce co2 pollution and improve economic restructuring among the three kinds of shocks technology shock is the most important the robustness of the model is tested through statistical methods

are trade size based inferences about traders reliable evidence from institutional earnings related trading the use of observed transaction sizes to differentiate between small and large investor trading patterns is widespread a significant concern in such studies is spurious effects attributable to misclassification of transactions particularly those originating from large investors such effects can arise unintentionally strategically or endogenously we examine comprehensive records of a sample of institutional investors i e large traders including their order sizes and overall position changes to assess the degree to which such misclassifications give rise to spurious inferences about small and large investor trading activities our analysis shows that these institutions are heavily involved in small transaction activity it also shows that they increase their order sizes substantially in announcement periods relative to nonannouncement periods presumably as an endogenous response to earnings news in the immediate earnings announcement period transaction size based inferences about directional trading are quite misleading producing spurious small trader effects and more surprisingly erroneous inferences about large trader activity

oil and the macroeconomy since world war ii all but one of the u s recessions since world war ii have been preceded typically with a lag of around three fourths of a year by a dramatic increase in the price of crude petroleum this does not mean that oil shocks caused these recessions evidence is presented however that even over the period 1948 72 this correlation is statistically significant and nonspurious supporting the proposition that oil shocks were a contributing factor in at least some of the u s recessions prior to 1972 by extension energy price increases may account for much of post opec macroeconomic performance

the earnings announcement premium around the globe abstract u s stocks have been shown to earn higher returns during earnings announcement months than during non announcement months we document that this earnings announcement premium exists across the globe moreover it is not isolated to a few countries of the 20 countries with enough data to conduct a within country analysis nine exhibit a significantly positive premium a cross country analysis finds that the premium is strongest in countries with the greatest increase in idiosyncratic volatility around the time of their firms earnings announcements suggesting that uncertainty over the earnings information to be disclosed is a primary driver of the global announcement premium

earnings news and small traders an intraday analysis abstract this study separates trading volume into buyer and seller initiated activities and examines the directional volume reaction in small and large trades to different types of earnings news good bad news triggers brief but intense buying selling in the large trades however a persistent period of unusually high buying activity is observed in the small trades irrespective of the news this anomalous proclivity of small traders to buy is robust across firm size trading volume and different earnings expectation models several explanations are discussed although the behavior does not seem fully explained by existing theories

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

google search keywords that best predict energy price volatility abstract internet search activity data has been widely used as an instrument to approximate trader attention in different markets this method has proven effective in predicting market indices in the short term however little attention has been paid to demonstrating search activity for keywords that best grab investor attention in different markets this study attempts to build the best practically possible proxy for attention in the market for energy commodities using google search data specifically we confirm the utility of google search activity for energy related keywords are significant predictors of volatility by showing they have incremental predictive power beyond the conventional garch models in predicting volatility for energy commodities prices starting with a set of ninety terms used in the energy sector the study uses a multistage filtering process to create combinations of keywords that best predict the volatility of crude oil brent and west texas intermediate conventional gasoline new york harbor and us gulf coast heating oil new york harbor and natural gas prices for each commodity combinations that enhance garch most effectively are established as proxies of attention the results indicate investor attention is widely reflected in internet search activities and demonstrate search data for what keywords best reveal the direction of concern and attention in energy markets

discussion of anomalous stock returns around internet firms earnings announcements abstract trueman wong and zhang twz investigate an apparent anomaly in the pricing of internet firms around their earnings announcements which they attribute to price pressure the discussion addresses three concerns the paper is unusual in choosing an event earnings announcements that does not appear to have an obvious non information related reason for triggering unjustified changes in demand for the firm s shares relatedly there are limitations to the tests made of the price pressure hypothesis finally the discussion elaborates on twz s brief mention of the difficulties with implementing a profitable trading strategy based on the stock return pattern they document

coordination mechanisms of supply chain systems supply chain management scm has become an important management paradigm as supply chain members are often separate and independent economic entities a key issue in scm is to develop mechanisms that can align their objectives and coordinate their activities so as to optimize system performance in this paper we provide a review of coordination mechanisms of supply chain systems in a framework that is based on supply chain decision structure and nature of demand this framework highlights the behavioral aspects and information need in the coordination of a supply chain the identification of these issues points out several directions of future research in this area

the behavior of stock prices around institutional trades all trades executed by 37 large investment management firms from july 1986 to december 1988 are used to study the price impact and execution cost of the entire sequence package of trades that we interpret as an order we find that market impact and trading cost are related to firm capitalization relative package size and most importantly to the identity of the management firm behind the trade money managers with high demands for immediacy tend to be associated with larger market impact financial economists have long studied the equity trading process and its impact on stock prices much prior empirical research isolates individual trades and analyzes the behavior of the stock price around each trade see for example kraus and stoll 1972a holthausen leftwich and mayers 1987 1990 keim and madhavan 1991 petersen and umlauf 1991 hausman lo and mackinlay 1992 and chan and lakonishok 1993 evaluating the behavior of stock prices around trades provides a means of discriminating among various hypotheses as to the elasticity of the demand for stocks yields an estimate of the cost of executing trades and a measure of the liquidity of a market and permits tests of different models of the determination of quotes and transaction prices for many institutional investors however even a moderately sized position in a stock may represent a large fraction of the stock s trading volume accordingly an investment manager s order is often broken up into several trades it is often misleading therefore to consider an individual trade as the basic unit of analysis in the study of trading activity and its effects on prices this paper uses the record of trades executed by 37 large investment manage

peak oil profiles through the lens of a general equilibrium assessment abstract this paper disentangles the interactions between oil production profiles the dynamics of oil prices and growth trends we do so through a general equilibrium model in which peak oil endogenously emerges from the interplay between the geological technical macroeconomic and geopolitical determinants of supply and demand under non perfect expectations we analyze the macroeconomic effects of oil production profiles and demonstrate that peak oil dates that differ only slightly may lead to very different time profiles of oil prices exportation flows and economic activity we investigate middle east s trade off between different pricing trajectories in function of two alternative objectives maximisation of oil revenues or households welfare and assess its impact on oecd growth trajectories a sensitivity analysis highlights the respective roles of the amount of resources inertia on the deployment of non conventional oil and short term oil price dynamics on peak oil dates and long term oil prices it also examines the effects of these assumptions on oecd growth and middle east strategic tradeoffs

the ex ante and ex post price effects of quarterly earnings announcements reflected in option and stock prices the subject of this study is the effect of investors anticipations of impending informative disclosures on the behavior of option and stock prices our approach introduced in a previous paper patell and wolfson 1979 and substantially extended here represents the following significant departure from traditional information content studies instead of analyzing security price reactions to announcements we analyze preannouncement option prices in order to discern investors beliefs about the range of possible stock price reactions expected to accompany a forthcoming disclosure whose actual content is not yet known in the tests reported here we focus on quarterly earnings announcements as disclosure events whose timing is predictable and we attempt to detect their systematic influence on the relationship between stock and option prices our operational definition of information content emphasizes changes in the variability of common stock returns in response to earnings disclosures while market efficiency precludes investors from predicting the direction of the stock price change which will accompany a future earnings announcement it is likely that investors will anticipate increased price variability at the time of disclosure and indeed several studies have documented announcement date increases in stock price volatility

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

the association between accounting earnings and security returns for large and small firms abstract the differential information hypothesis advanced by atiase 1980 states that information production and dissemination by private parties for the purpose of identifying mispriced securities is an increasing function of firm size this study examines two corollaries of that hypothesis first security prices of large firms anticipate accounting earnings earlier than security prices of small firms second for a given level of unexpected earnings the cumulative abnormal returns of small firms exceed those of large firms the results are generally consistent with atiase s hypothesis

informed trading before positive vs negative earnings surprises abstract this paper investigates whether institutional investors trade profitably around the announcements of positive or negative earnings surprises using korean data over the period of 2001 2010 we find that information asymmetry is larger before negative earnings surprises earnings shock among investors and that the trading volume decreases only before earnings shock announcements due to the severe information asymmetry we also find that institutions sell their stocks prior to earnings shock announcements whereas individual and foreign investors do not anticipate bad news finally we find that institutional trade imbalance is positively related to the post announcement abnormal returns of negative events this study complements and extends prior literature on informed trading around earnings announcements by documenting evidence that domestic institutions exploit their superior information around particularly earnings shock announcements

multi item one warehouse multi retailer distribution systems in this paper we study the problem of coordinating the purchase and shipment of i items in a one warehouse n retailer inventory system the model includes positive echelon holding costs fixed costs for ordering and shipping each item and a fixed joint item order cost at each retailer demand for each item at each retailer is assumed to occur at a constant and continuous rate a mathematical model is developed based on these assumptions and the assumption that a stationary nested policy is followed an efficient algorithm is presented based on the problem s structure that involves only sorting and runs in oni log ni time the cost of the policy computed is proven to be within 6 of the cost of an optimal nested policy an example is presented to illustrate the problem structure and the proposed algorithm

do security analysts speak in two tongues why do security analysts issue overly positive recommendations we propose a novel approach to distinguish strategic motives e g generating small investor purchases and pleasing management from nonstrategic motives genuine overoptimism we argue that nonstrategic distorters tend to issue both positive recommendations and optimistic forecasts while strategic distorters speak in two tongues issuing overly positive recommendations but less optimistic forecasts we show that the incidence of strategic distortion is large and systematically related to proxies for incentive misalignment our two tongues metric reveals strategic distortion beyond those indicators and provides a new tool for detecting incentives to distort that are hard to identify otherwise

98 effective integer ratio lot sizing for one warehouse multi retailer systems a warehouse supplies n retailers constant external demand occurs at each retailer and shortages are not allowed there are linear holding costs and fixed costs for ordering at the warehouse and at each retailer the goal is to minimize the long run average cost over an infinite time horizon we define a new class of policies for this problem whose simple structure facilitates both computation and implementation the cost of a policy that is optimal within this class is shown to be within 2 of the cost of an optimal policy for the original problem in the worst case such a policy can be computed in on log n time

the idiosyncratic volatility puzzle time trend or speculative episodes campbell lettau malkiel and xu 2001 document a positive trend in idiosyncratic volatility during the 1962 1997 period we show that by 2003 volatility falls back to pre 1990s levels furthermore we show that the increase and subsequent reversal is concentrated among firms with low stock prices and high retail ownership this evidence suggests that the increase in idiosyncratic volatility through the 1990s was not a time trend but rather an episodic phenomenon at least partially associated with retail investors results from cross sectional regressions conditional trend estimation stock split events and attention grabbing events are consistent with a retail trading effect the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

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

approximations of dynamic multilocation production and inventory problems consider a central depot or plant which supplies several locations experiencing random demands orders are placed or production is initiated periodically by the depot the order arrives after a fixed lead time and is then allocated among the several locations the depot itself does not hold inventory the allocations are finally received at the demand points after another lag unfilled demand at each location is backordered linear costs are incurred at each location for holding inventory and for backorders also costs are assessed for orders placed by the depot the object is to minimize the expected total cost of the system over a finite number of time periods this system gives rise to a dynamic program with a state space of very large dimension we show that this model can be systematically approximated by a single location inventory problem all the qualitative and quantitative results for such problems can then be applied

a model of capital and crises we develop a model in which the capital of the intermediary sector plays a critical role in determining asset prices the model is cast within a dynamic general equilibrium economy and the role for intermediation is derived endogenously based on optimal contracting considerations low intermediary capital reduces the risk bearing capacity of the marginal investor we show how this force helps to explain patterns during financial crises the model replicates the observed rise during crises in sharpe ratios conditional volatility correlation in price movements of assets held by the intermediary sector and fall in riskless interest rates

a neoclassical model of unemployment and the business cycle this paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role a rational expectations equilibrium with fully flexible wages and prices can exhibit unemployment in which the marginal product of employed workers exceeds the reservation wage of those who are without jobs workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve moreover seemingly small disruptions in the supplies of primary commodities such as energy could be the source of fluctuations in aggregate employment and can exert surprisingly large effects on real output

oil and the macroeconomy since the 1970s economists have long been intrigued by empirical evidence that suggests that oil price shocks may be closely related to macroeconomic performance this interest dates back to the 1970s the 1970s were a period of growing dependence on imported oil unprecedented disruptions in the global oil market and poor macroeconomic performance in the united states thus it was natural to suspect a causal relationship from oil prices to u s macroeconomic aggregates since then a large body of work has accumulated that purports to establish this link on theoretical grounds and to provide empirical evidence in its support we do not attempt a comprehensive survey of this literature but rather provide an idiosyncratic synthesis of what we view as the key issues in this debate and the insights gained over the last 30 years the timing seems right for such an account although the experience of the 1970s continues to play an important role in discussions of the link between oil and the macroeconomy there have been a number of new oil price shocks since the 1970s notably the 1986 collapse of oil prices and the 2000 boom in oil prices as well as the oil price increases associated with the 1990 1991 gulf war and the 2003 iraq war given this richer case history we are arguably in a better position than two decades ago to distinguish the idiosyncratic features of each oil crisis from the systematic effects increases in oil prices have been held responsible for recessions periods of excessive inflation reduced productivity and lower economic growth in this paper we review the arguments supporting such views first we highlight some of the conceptual difficulties in assigning a central role to oil price shocks in explaining

price and trading volume reaction surrounding earnings announcements a closer examination the process of information dissemination and interpretation in securities markets is very complex and mostly unobservable while changes in prices and the amount of trading that takes place at the market level provide evidence of information processing verrecchia 1981 demonstrated that these are not sufficient to describe completely the dissemination of information and its interpretation by investors a descriptive study of price changes and trading volume however may still provide some insights into how investors react to information this paper is an empirical investigation of price changes and trading volume during the days surrounding the announcement of quarterly and annual earnings in the wall street journal wsj in the original paper investigating trading volume and price changes surrounding earnings announcements beaver 1968 was primarily concerned with whether the annual earnings announcement had information content i e led to changes in investors assessments of the probability distribution of future returns if there were any significant price changes and or trading volume during the week of the announcement then the annual earnings announcement was assumed to have had

information value and investor wealth the case of earnings announcements this paper empirically investigates the relation between investor wealth and the value of annual and quarterly earnings announcements as implied by 1 the behavior of mean stock trade transaction sizes at announcement dates and 2 transaction size stratified trading activity in postannouncement time periods announcement period mean transaction sizes are found to exceed expected mean transactions sizes estimated from trading activity occurring in nonannouncement periods this result is attributed to a greater relative trading response to earnings announcements by wealthier investors consistent with ohlson s 1975 proposition that information value increases with investor wealth in a security market setting further evidence of a positive relation between value and wealth is found when postearnings announcement stock transactions are stratified by share size into three strata where the first stratum small stratum is transactions of 100 and 200 shares the second stratum large stratum is transactions of 300 to 900 shares and the third stratum institutional

market madness the case of mad money we use the popular television show mad money hosted by jim cramer to test theories of attention and limits to arbitrage stock recommendations on mad money constitute attention shocks to a large audience of individual traders we find that stock recommendations lead to large overnight returns that subsequently reverse over the next few months the spike reversal pattern is strongest among small illiquid stocks that are hard to arbitrage using daily nielsen ratings as a direct measure of attention we find that the overnight return is strongest when high income viewership is high we also find weak price effects among sell recommendations taken together the evidence supports the retail attention hypothesis of barber and odean barber b t odean 2008 all that glitters the effect of attention and news on the buying behavior of individual and institutional investors rev financial stud 21 2 785 818 and illustrates the potential role of media in generating mispricing this paper was accepted by brad barber teck ho and terrance odean special issue editors

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

do capital gain tax rate increases affect individual investors trading decisions abstract this paper examines individual investors short and long term trading reactions to the 1986 tax reform act s tra 86 capital gain tax rate increase consistent with a tax induced trading model we document a december 1986 change in year end trading patterns tra 86 also had long term effects on individual investors trading decisions the results suggest that individual investors were less more willing to sell accrued gain loss stocks after tra 86 our ability to document predicted trading behavior is in part due to our trading metric which captures individual investors selling activity better than the volume based metrics used in prior research

intermediary asset pricing abstract we model the dynamics of risk premia during crises in asset markets where the marginal investor is a financial intermediary intermediaries face an equity capital constraint risk premia r

earnings expectations investor trade size and anomalous returns around earnings announcements abstract we provide evidence that identifiable subsets of investors use significantly different information sets investors initiating large trades respond to analysts earnings forecast errors while investors initiating small trades respond to a less sophisticated signal that underestimates the implications of current earnings innovations for future earnings levels this suggests small investors exhibit the behavior that bernard and thomas journal of accounting and economics 13 305 340 theorize causes post earnings announcement drift we also use analysts forecasts to significantly improve the predictability of returns around earnings announcements previously documented by bernard and thomas finally results attempting to link return predictability to the prevalence of small investor trading are mixed

the dartboard column second hand information and price pressure this study analyzes the effect of second hand information on the behavior of security prices and volume using analysts recommendations published in the monthly dartboard column of the wall street journal for the two days following the publication of the recommendations average positive abnormal returns of 4 percent nearly twice the level of abnormal returns documented in previous research on analyst recommendations and average volume double normal volume levels on the two days following publication of the recommendations are documented the positive abnormal return on announcement is partially reversed within 25 trading days the authors conclude that the positive abnormal return on announcement of the recommendations is a result of naive buying pressure as well as the information content of the analysts recommendations

stealth trading which traders trades move stock prices usingaudit trail data for a sample of nyse firms we show that medium size trades are associated with a disproportionately large cumulative stock price change relative to their proportion of all trades and volume this result is consistent with the predictions of barclay and warner s 1993 stealth tradinghypothesis we find that the source of this disproportionately large cumulative price impact of medium size trades is trades initiated by institutions this result is robust to various sensitivity checks our findings appear to confirm street lore that institutions are informed traders 2001 elsevier science s a all rights reserved

order imbalance liquidity and market returns traditionally volume has provided the link between trading activity and returns we focus on a hitherto unexplored but intuitive measure of trading activity the aggregate daily order imbalance on the new york stock exchange signed order imbalances increase decrease following market declines rises which reveals that investors are contrarians on aggregate order imbalances in either direction either excess buy or sell orders reduce liquidity market wide returns are strongly affected by contemporaneous and lagged order imbalances market wide returns reverse themselves after high negative imbalance large negative return days the magnitude of this reversal is partially predictable from the level of the imbalance and return even after controlling for aggregate market volume and liquidity market returns are affected by order imbalance

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

earnings acceleration and stock returns abstract we document that earnings acceleration defined as the quarter over quarter change in earnings growth has significant explanatory power for future excess returns these excess returns are robust to a wide range of previously documented anomalies and a battery of risk controls the future return predictability appears to be consistent with investors assuming a seasonal random walk model for quarterly earnings and missing predictable implications of earnings acceleration for future earnings growth finally the excess returns from the basic earnings acceleration strategy can be enhanced further by focusing on profit firms low earnings volatility firms and on specific patterns of earnings acceleration

the resilience of the indian economy to rising oil prices as a validation test for a global energy environment economy cge model this paper proposes to test the global hybrid computable general equilibrium model imaclim r against macroeconomic data to do so it compares the modeled and observed responses of the indian economy to the rise of oil price during the 2003 2006 period the objective is twofold first to disentangle the various mechanisms and policies at play in india s economy response to rising oil prices and second to validate our model as a tool capable of reproducing short run statistical data with default parametrization the model predicts a significant decrease in the indian growth rate that is not observed however this discrepancy is corrected if three additional mechanisms identified by the international monetary fund are introduced namely the rise in exports of refined oil products the imbalance of the trade balance allowed by large capital inflows and the incomplete pass through of the oil price increase to indian customers this work is a first step toward model validation and provides interesting insights on the modeling methodology relevant to represent an economy s response to a shock as well as on how short term mechanisms and policy action can smooth the negative impacts of energy price shocks or climate policies

survey evidence on diffusion of interest and information among investors abstract questionnaire surveys of institutional and individual investors were undertaken to learn about patterns of communications it was found that direct interpersonal communications are very important in investor decisions questions elicited what fraction of investors were unsystematic and allowed themselves to be influenced by word of mouth communications or other salient stimuli randomly sampled investors were studied as well as investors in stocks whose price had recently increased dramatically contagion or epidemic models of financial markets are proposed in which interest in individual stocks is spread by word of mouth the survey evidence is interpreted as supporting such models

presidential address asset price dynamics with slow moving capital i describe asset price dynamics caused by the slow movement of investment capital to trading opportunities the pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade such as search costs for trading counterparties or time to raise capital by intermediaries i discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions which subsided afterward after presenting examples of price reactions to supply shocks in normal market settings i offer a simple illustrative model of price dynamics associated with slow moving capital due to the presence of inattentive investors i address the implications for asset price dynamics of the apparent slow movement of investment capital to trading opportunities the arrival of new capital to an investment opportunity can be delayed by fractions of a second in some markets for example an electronic limit order book market for equities or by months in other markets such as that for catastrophe risk insurance accordingly prices respond to supply or demand shocks with a sharp reaction because of the relatively small subset of capital and thus risk bearing capacity that is immediately available to absorb a shock on short notice such a price impact is substantially reversed over time as additional capital becomes available the amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect many sorts of attention costs to trade as well as institutional impediments to capital movement such as search costs for trading

wealth information acquisition and portfolio choice i solve with an approximation a grossman stiglitz economy under general preferences thus allowing for wealth effects because information generates increasing returns decreasing absolute risk aversion in conjunction with the availability of costly information is sufficient to explain why wealthier households invest a larger fraction of their wealth in risky assets one no longer needs to resort to decreasing relative risk aversion an empirically questionable assumption furthermore i show how to distinguish empirically between these two explanations finally i find that the availability of costly information exacerbates wealth inequalities copyright 2004 oxford university press

toward a macroeconomics of the medium run these days macroeconomics has become more respectable than it used to be i can remember when many economists liked to say microeconomics is not problematic but i just don t understand macroeconomics there was a definite implication that something must be wrong with macroeconomics not with the observer of course macroeconomics cannot be exact it has to work by rough analogy and empirical compromise maybe a certain raffishness is inevitable most economists work on microeconomic problems with increasing use of new microeconomic data but now it is widely understood that macroeconomics is at the heart of economics it will not do to be snooty about it this centrality will continue for the best possible reason the need to understand current events especially unfavorable ones and to formulate policies even benign neglect is a policy to

what drives the sensitivity of limit order books to company announcement arrivals abstract we provide evidence that recent losses amplify order book illiquidity shocks caused by non scheduled news moreover the faster markets reaction to scheduled and non scheduled news arrivals is in terms of order book illiquidity the more illiquid the order book becomes that is a fast reaction is a strong reaction additionally order book asymmetry observed before announcement arrivals is positively associated with the magnitude of illiquidity shocks

the productivity slowdown the oil shocks and the real cycle f ive facts stand out about economic performance in the united states since world war ii the first is that for most of the postwar period the u s has had a slower rate of economic growth than the other major developed democracies except great britain and much lower rates of growth than germany japan and italy the gap between the growth of per capita income of the united states and comparable countries has however tended to diminish over time and the united states has lately grown at about the same rate as most other developed countries the second outstanding fact is that the united states has fallen far behind in many mass production industries in which it used to lead the world whereas it is ahead of other nations in many new and especially high technology industries in automobiles steel tires household appliances and earth moving and farm equipment for example u s production has fallen dramatically in relation to output in most comparable countries and the country has become a net importer of most such products by contrast in newer industries such as computers jet aircraft sophisticated weaponry and high technology in general the united states is often dominant both as producer and exporter the third outstanding fact is that most of the older heartland of american industry roughly the area north and east of an arc drawn from baltimore to st louis to milwaukee has declined dramatically in comparison with the south and the west this change in regional fortunes has been due in large part to migration motivated by differences in economic prospects from the declining to the advancing