exploring the core factors and its dynamic effects on oil price an application on path analysis and bvar tvp model abstract as the uncertainty of oil price increases impacts of the influential factors on oil price vary over time it is of great importance to explore the core factors and its time varying influence on oil price in view of this based on the path analysis model this paper obtains the core factors builds an oil price system var model which uses demand supply price and inventory as endogenous variables and china s net imports as well as dollar index as exogenous variables then we set up a bvar tvp time varying parameter model to analyze dynamic impacts of core factors on oil price the results show that 1 oil prices became more sensitive to oil supply changes and the influence delays became shorter 2 the impact of oil inventories on oil prices with a time lag of two quarters but has a downward trend 3 the impact of oil consumption on oil prices with a time lag of two quarters and this effect is increasingly greater 4 the us dollar index is always the important factor of oil price and its control power increases gradually and the financial crisis occurred in 2008 further strengthens the influence of us dollar

liquidity adjusted intraday value at risk modeling and risk management an application to data from deutsche borse abstract this paper develops a high frequency risk measure the liquidity adjusted intraday value at risk livar our objective is to explicitly consider the endogenous liquidity dimension associated with order size by reconstructing the open limit order book of deutsche borse changes in the tick by tick ex ante frictionless return and actual return are modeled jointly the risk related to the ex ante liquidity premium is then quantified our model can be used to identify the impact of ex ante liquidity risk on total risk and to provide an estimation of the var for the actual return at a point in time in our sample liquidity risk can account for up to 32 of total risk depending on order size

trading volume and asset liquidity since the depth and liquidity of a market depend on the entry decisions of all potential participants each trader assesses them according to conjectures about entry by others if trade is equally costly across markets this externality leads to the concentration of trade on one market if not it can produce multiple conjectural equilibria some where trade concentrates on one market and others where large traders resort to a separate market or to search for a trading partner while fragmentation is welfare reducing in the two market case no such ranking is possible if it involves off exchange search

understanding the macroeconomic impact of illiquidity shocks in the united states in this paper we empirically investigate the role of stock market illiquidity shocks stemming from amihud s illiquidity measure in explaining u s macroeconomic fluctuations from 1973 to 2018 we find that the impact of illiquidity shocks on economic activity is substantial and historical decomposition analysis shows that cumulative illiquidity shocks were an essential contributor to the prolonged economic slump of the great recession moreover our identified illiquidity shocks represent a distinct source of macroeconomic instability this suggests that illiquidity shocks measured by the stock price impacts may contain more information than other types of shocks in recent studies such as financial shocks and uncertainty shocks jel c32 e32

stock price clustering and discreteness stock prices cluster on round fractions clustering increases with price level and volatility and decreases with capitalization and transaction frequency clustering is pervasive price clustering will occur if traders use discrete price sets to simplify their negotiations exchange regulations require that most stocks be traded on eighths clustering on larger fractions will occur if traders choose to use discrete price sets based on quarters halves or whole numbers an econometric model of clustering is derived and estimated projections from the results suggest that traders would frequently use odd sixteenths when trading low price stocks if exchange regulations permitted trading on sixteenths article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

variations in market liquidity and the intraday interest rate most central banks offer banks participating in large value real time gross settlement rtgs systems a free intraday overdraft facility to discourage banks from actively managing their daylight liquidity in this paper we ask whether this facility has kept the intraday interest rate at zero using a unique transaction level data set on collateralized interbank loans for 2006 12 we find that during periods of financial distress rates for morning transactions are higher than those in the afternoon moreover this intraday rate correlates with market liquidity suggesting that rates contain a liquidity premium this intraday pattern is reduced but not eliminated by the eurosystem s accommodative liquidity provision

consistent testing for stochastic dominance under general sampling schemes we propose a procedure for estimating the critical values of the extended kolmogorov smirnov tests of stochastic dominance of arbitrary order in the general k prospect case we allow for the observations to be serially dependent and for the first time we can accommodate general dependence amongst the prospects which are to be ranked also the prospects may be the residuals from certain conditional models opening the way for conditional ranking we also propose a test of prospect stochastic dominance our method is based on subsampling and we show that the resulting tests are consistent and powerful against some n 1 2 local alternatives we also propose some heuristic methods for selecting subsample size and demonstrate in simulations that they perform reasonably we describe an alternative method for obtaining critical values based on recentring the test statistic and using full sample bootstrap methods we compare the two methods in theory and in practice

does deposit insurance increase banking system stability an empirical investigation based on evidence of 61 countries in 1980 97 the authors find that explicit deposit insurance tends to be detrimental to bank stability the more so where bank interest rates are deregulated and the institutional environment is weak the adverse impact of deposit insurance on bank stability tends to be stronger the more extensive is the coverage offered to depositors and where the scheme is funded and run by the government rather than the private sector

high frequency trading and comovement in financial markets abstract using the staggered entry of chi x in 12 european equity markets as a source of exogenous variation in high frequency trading hft we find that hft causes significant increases in comovement in returns and in liquidity about one third of the increase in return comovement is due to faster diffusion of market wide information we attribute the remaining two thirds to correlated trading strategies of hfts the increase in liquidity comovement is consistent with hft liquidity providers being better able to monitor other stocks and adjust their liquidity provision accordingly our findings suggest a channel by which hft impacts the cost of capital

how do oil producers respond to giant oil field discoveries abstract the classical hotelling model predicts that the optimal extraction level rises immediately after an unexpected resource discovery whereas in reality there are substantial adjustment costs in petroleum production and an average lag of several years between a discovery and the start of production using a large panel of country level production data and a difference in differences identification approach i show that domestic production levels respond before a newly found oil field comes on line and that this increase is driven by non opec producers consistent with different responses of opec and non opec drilling activity offshore fields and exceptionally large super or mega giant fields are also more likely to raise country level production given that domestic petroleum consumption rises by less in response to a discovery at least part of the increase in production seems to go into net oil exports

liquidity risk in stock returns an event study perspective we examine in an event study context what factors affect the relative performance of stocks during liquidity crises we find that market risk measured by the market beta is not a good measure of expected abnormal stock returns on days with liquidity crises instead abnormal stock returns during liquidity crises are strongly negatively related to liquidity risk measured by the co movement of stock returns with market liquidity the degree of informational asymmetry and the ownership structure of the firm also help to explain abnormal stock returns on crisis days our findings have important implications for managing the liquidity risk of equity portfolios

enjoying the quiet life under deregulation evidence from adjusted lerner indices for u s banks abstract the quiet life hypothesis posits that firms with market power incur inefficiencies rather than reap monopolistic rents we propose a simple adjustment to lerner indices to account for the possibility of forgone rents to test this hypothesis for a large sample of u s commercial banks we find that adjusted lerner indices are significantly larger than conventional lerner indices and trending upward over time instrumental variable regressions reject the quiet life hypothesis for cost inefficiencies however lerner indices adjusted for profit inefficiencies reveal a quiet life among u s banks

regulatory and legal pressures and the costs of nasdaq trading the nasdaq market came under intense pressure from regulators and class action lawsuits following allegations of tacit collusion by christie and schultz 1994 this article examines the changes in transaction costs on the nasdaq from january 1993 through june 1996 using 16 million trades in 30 stocks effective spreads cannot be matched however the autocovariance spread estimator of roll 1984 works well with intraday data over this period this spread estimator reveals that trading costs declined significantly for 29 of the 30 stocks over 1993 96 article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

liquidity shocks and real gdp growth evidence from a bayesian time varying parameter var we examine the dynamic impact of liquidity shocks resonating in stock and housing markets on real gdp growth we fit a bayesian time varying parameter var model with stochastic volatility to us data from 1970 to 2014 gdp becomes highly sensitive to house market liquidity shocks as disruptions in the sector start to emerge yet more resilient to stock market liquidity shocks throughout time we provide substantial evidence in favour of asymmetric responses of gdp growth both across the business cycle and among business cycle troughs stock and house market liquidity shocks explain on average 17 and 35 of the variation in gdp during the great recession respectively

do illiquid stocks jump more frequently we study the influence of stock liquidity on the stock price jump frequency using intraday data of 175 us stocks during 2007 11 grouping these stocks according to their average liquidity we find l

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

market microstructure and securities values evidence from the tel aviv stock exchange abstract this paper examines the value effects of improvements in the trading mechanism selected stocks on the tel aviv stock exchange were transferred gradually from a daily call auction to a mechanism where the call auction was followed by iterated continuous trading sessions this event was associated with a positive and permanent price appreciation the cumulative average market adjusted return over a period that started five days prior to the announcement and ended 30 days after the stocks started trading by the new method was approximately 5 5 in addition we find positive liquidity externalities spillovers across related stocks and improvements in the value discovery process due to the improved trading method finally there was a positive association between liquidity gains and price appreciation

the competitive price of oil some results under uncertainty abstract the recent weakness of the world oil price has led to speculation concerning the forces that are acting to keep the price well above the cost of production in this paper we investigate the strength of concerns about depletion by calculating the price of oil in 1983 as it would have been in a competitive market the simplicity of our model allows the effects of uncertainty in the input variables to be explored model parameters are entered as subjective probability distributions solving the model gives a probability distribution of the competitive oil price in 1983 the competitive price is found to have an 80 chance of lying between 3 and 11 1983 bbl with an expected value of 7 bbl the difference between these prices and the actual price of oil in 1983 gives an indication of the strength of forces other than concern about depletion principally the action of the opec cartel in keeping the oil price high

how do oil producers respond to oil demand shocks abstract this paper analyzes the response of international oil producers to demand induced changes in the price of crude oil during 1975 2011 focusing on potential differences between opec and non opec countries the goal is to derive consistent estimates of the short run price elasticity of crude oil supply at the country level i find that oil producers hardly respond to demand shocks within the same month and that the corresponding impact price elasticities of supply are statistically indistinguishable from zero while there is little evidence of differences in the dynamic responses to a typical flow demand shock on average over the sample period opec members seem to curtail production in response to a speculative demand shock whereas non opec production expands significantly flow and speculative demand shocks account for a nontrivial fraction of the total variability in country level crude oil supply

do liquidity measures measure liquidity abstract given the key role of liquidity in finance research identifying high quality proxies based on daily as opposed to intraday data would permit liquidity to be studied over relatively long timeframes and across many countries using new measures and widely employed measures in the literature we run horseraces of annual and monthly estimates of each measure against liquidity benchmarks our benchmarks are effective spread realized spread and price impact based on both trade and quote taq and rule 605 data we find that the new effective realized spread measures win the majority of horseraces while the amihud 2002 illiquidity and stock returns cross section and time series effects journal of financial markets 5 31 56 measure does well measuring price impact

assessing competition with the panzar rosse model the role of scale costs and equilibrium the panzar rosse test has been widely applied to assess competitive conduct often in specifications controlling for firm scale or using a price equation we show that neither a price equation nor a scaled revenue function yields a valid measure for competitive conduct moreover even an unscaled revenue function generally requires additional information about costs and market equilibrium to infer the degree of competition our theoretical findings are confirmed by an empirical analysis of competition in banking using a sample containing more than 100 000 bank year observations on more than 17 000 banks in 63 countries during the years 1994 2004

financial opening deposit insurance and risk in a model of banking competition abstract we study the impact of competition on banks risk taking behavior under different assumptions about deposit insurance and the dissemination of information while financial opening increases banks riskiness a risk based deposit insurance or alternatively the public disclosure of financial information are likely to mitigate this effect moreover the limiting cases of uninsured but fully informed depositors and risk based full deposit insurance yield the same equilibrium risk level although the welfare consequences of increased competition depend on its impact on risk financial opening unambiguously improves welfare as we approach the limiting cases

legal institutions and fragile financial markets abstract this study investigates equity liquidity variation with a funding constraint across 38 countries and examines whether the effectiveness of a country s legal institutions is systematically related to cross country differences in fragile equity liquidity our results show that firms from countries with more extensive disclosure requirements tend to have lower liquidity shocks due to funding constraints leading to higher firm value this effect is stronger for ex ante disclosures especially for countries with a high level of openness and market volatility our empirical results are robust to the 2sls regression model the random effect regression model the alternative measure of fragile equity liquidity and the alternative measure of disclosure and enforcement variables our study provides a better understanding of the effect of information environments amidst periods of funding constraint

the effect of fragmentation in trading on market quality in the uk equity market summary we investigate the effects of fragmentation in equity markets on the quality of trading outcomes in a panel of ftse stocks over the period 2008 2011 this period coincided with a great deal of turbulence in the uk equity markets which had multiple causes that need to be controlled for to achieve this we use the common correlated effects estimator for large heterogeneous panels we extend this estimator to quantile regression to analyse the whole conditional distribution of market quality we find that both fragmentation in visible order books and dark trading that is offered outside the visible order book lower volatility but dark trading increases the variability of volatility while visible fragmentation has the opposite effect in particular at the upper quantiles of the conditional distribution the transition from a monopolistic to a fragmented market is non monotonic with respect to the degree of fragmentation copyright 2015 john wiley sons ltd

market in financial instruments directive mifid stock price informativeness and liquidity abstract the paper examines the impact of mifid on stock price informativeness and liquidity in 28 eu countries we find that post mifid the stock prices reflect greater firm specific information and the market becomes more liquid consistent with the catch up hypothesis our evidence shows that the impact of mifid in terms of price informativeness is greater for countries that have weaker quality of regulation we find that regulation with enforcement improves market efficiency our results are robust with respect to the choice of price informativeness and liquidity proxies as well as the control sample

investor protection and the value impact of stock liquidity this paper investigates the effect of investor protection on the value impact of stock liquidity using a sample of firms from 40 countries for the period between 1996 and 2010 we show that investor protection is positively associated with the value impact of stock liquidity this association is robust to the difference in differences approach based on a natural experiment further evidence shows that the positive effect of home country investor protection on the liquidity valuation association attenuates in countries with globally integrated capital markets

oil prices without opec a walk on the supply side abstract the rapid increases of oil prices during the 1970s are commonly regarded as prima facie evidence of monopoly power this paper applies the theory of exhaustible resources to estimate the equilibrium oil prices also known as efficiency prices which would have prevailed in the absence of monopoly profits the theory incorporates an extraction cost function wherein cost is a rising function of the cumulative amount of oil extracted the model is used to simulate efficiency price paths under a variety of assumptions about extraction costs and real interest rates which are representative of perceptions at various times in recent history these simulations show that the price increases of 1974 and 1979 1980 can be explained as a response to supply side changes espicially changes in the perceived cost of the backstop technology and the fall in real interest rates in the mid and late 1970s thus while efficiency prices were high in the 1970s relative to extraction costs it is plausible that average monopoly profits were negligible this situation appears to have changed in the early 1980s due to the return of real interest rates to their historic levels in early 1982 even spot prices already below official prices were substantially above the estimated efficiency or competitive price level on the other hand efficiency prices remain far above extraction costs thus even if the price setting power of opec were eroded by competition the real price of oil would not fall below the level established in 1974

a discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuance a discrete choice model for large heterogeneous panels with interactive fixed effects with an application to the determinants of corporate bond issuan

speculation spillovers this paper demonstrates that speculative activities can be contagious and spill over across markets specifically we test the hypothesis that during china s warrants bubble period speculative activities in the warrants market grabbed investors attention and caused them to trade more speculatively in the underlying stocks consistent with this hypothesis we find that turnover and return volatility of the underlying stocks are positively associated with the warrants unexpected turnover and price deviation from their fundamental values during the previous day controlling for information driven trading and hedging motives and that such a spillover effect is more pronounced when warrants attract more investor attention data as supplemental material are available at http dx doi org 10 1287 mnsc 2014 1914 this paper was accepted by wei xiong finance

bank competition and crises revisited new results abstract we study the relationship between bank competition and stability for 145 countries over the period 1997 2010 we use three measures of bank competition namely the boone indicator the lerner and the adjusted lerner indices and two econometric methods our results show that bank competition is detrimental to bank stability and it also shortens the survival time of banking systems