the environmental effects of agricultural trade liberalization in latin america an interpretation abstract the trade and environment debate has focused attention on the possible contradiction between promoting free markets while meeting domestic environmental objectives this paper takes a view from the south recent econometric models predict net effects of expanded agricultural trade to be positive for the global environment yet further pressure on degraded resources and marginal farmers and a reinforcement of sectoral policies that benefit commercial export crop growers as opposed to food producers may make increased trade more of a bane than a blessing for developing countries in the context of emerging regional trading blocks in latin america nafta and mercosur removal of trade barriers between participating nations has led to dislocation of production whose localized impacts it is hoped would be resolved through reconversion of agriculture in affected subregions it may be however that internalization of socio environmental costs of such dislocation would indicate that production despite competitive disadvantages would best have been left where it was to gain a better empirical understanding of the links between agricultural trade policy and the environment will require prediction of ecosystem stresses anticipated from alterations in how producers grow crops in specific geophysical settings rather than reliance on stylized facts

overconfident consumers in the marketplace when consumers sign contracts expectations about future usage of the product or service matter for instance the value provided by car insurance depends on how likely a consumer believes she is to file a claim the value provided by a gym membership depends on how often a consumer anticipates going to the gym and the value provided by a cellular phone contract depends on how many gigabytes of data a consumer anticipates using the standard modeling paradigm makes the expedient assumption that consumers have rational expectations imposing rational expectations drastically simplifies models and eliminates the need to directly measure beliefs as they coincide with the distribution of observed outcomes yet a large literature shows that consumer beliefs often deviate substantially from rational expectations in systematic ways this has important consequences for contract design firm profits consumer welfare and public policy the term overconfidence is used broadly in the psychology literature referring to both overoptimism and overprecision overoptimistic individuals overestimate their own abilities or prospects either in absolute terms or in comparison to others in contrast overprecise individuals place overly narrow confidence intervals around forecasts thereby underestimating uncertainty these biases can lead consumers to misforecast their future product usage or to overestimate their abilities to navigate contract terms in consequence consumer overconfidence causes consumers

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

selling to overconfident consumers consumers may overestimate the precision of their demand forecasts this overconfidence creates an incentive for both monopolists and competitive firms to offer tariffs with included quantities at zero marginal cost followed by steep marginal charges this matches observed cellphone service pricing plans in the us and elsewhere an alternative explanation with common priors can be ruled out in favor of overconfidence based on observed customer usage patterns for a major us cellular phone service provider the model can be reinterpreted to explain the use of flat rates and late fees in rental markets and teaser rates on loans nevertheless firms may benefit from consumers losing their overconfidence

imperfect information and cross autocorrelation among stock prices i develop a model to explain why stock returns are positively cross autocorrelated when market makers observe noisy signals about the value of their stocks but cannot instantaneously condition prices on the signals of other stocks which contain marketwide information the pricing error of one stock is correlated with the other signals as market makers adjust prices after observing true values or previous price changes of other stocks stock returns become positively crossautocorrelated if the signal quality differs among stocks the cross autocorrelation pattern is asymmetric i show that both own and cross autocorrelations are higher when market movements are larger

information aggregation around macroeconomic announcements revisions matter abstract i show that an empirical relation exists between stock returns on macroeconomic news announcement days and the future revisions of the released data but that this link differs across the business cycle using three major macroeconomic series that undergo significant revisions nonfarm payroll gross domestic product and industrial production i present evidence that daily returns on the standard poor s 500 index and revisions are positively related in expansions and negatively related in recessions the results suggest that revisions do matter i e that investors care about the final revised value of a macroeconomic series that they infer accurate information from the release of the preliminary inaccurate report and that the more precise information is aggregated into prices on the day of the initial announcement the results are consistent with the predictions of rational expectations trading models around public announcements combined with well established empirical results on the asymmetric interpretation of information across the business cycle

the effects of inflation news on high frequency stock returns previous research using daily returns finds conflicting evidence about the relationship between unanticipated inflation news and stock returns we explore the relationship by looking at the response in minutes and trades of size based stock portfolios to unexpected changes in the regularly scheduled producer price index and consumer price index announcements in particular we answer the following three questions 1 do stocks respond to inflation news 2 what is the speed and path of that response 3 is the response stable or does it vary with the economy the direction of the news or time

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

portfolio return autocorrelation abstract this paper investigates whether portfolio return autocorrelation can be explained by time varying expected returns nontrading state limit orders market maker inventory policy or transaction costs evidence is consistent with the hypothesis that transaction costs cause portfolio autocorrelation by slowing price adjustment i develop a transaction cost model which predicts that prices adjust faster when changes in valuation are large in relation to the bid ask spread cross sectional tests support this prediction but time series tests do not

the effects of macroeconomic news on high frequency exchange rate behavior this paper studies the high frequency reaction of the dem usd exchange rate to publicly announced macroeconomic information emanating from germany and the u s by us ing data sampled at a five minute frequency we are able to identify significant impacts of most announcements on the exchange rate change in the 15 minutes post announcement although the significance of these effects decreases rapidly as the interval over which the post announcement change in exchange rates is increased the direction of the exchange rate response conforms in general with a reaction function interpretation whereby reac tions to macroeconomic news are driven by the likely operations of monetary authorities in domestic money markets further we detect influences of german monetary policy deci sions on the reaction of the exchange rate and also differences between u s and german announcements in the exchange rate reaction time pattern i introduction this paper studies the high frequency reaction of the dem usd exchange rate to macroeconomic information emanating from germany and the u s specif ically we utilize exchange rate data covering the period 1 1 92 to 31 12 94 sam pled at a five minute frequency to investigate how the major monthly macroe conomic releases from these two countries impact the dem usd the infor mation contained in announcements over this three year period is extracted via a set of market expectation series supplied by money market services interna tional mms 1 our analysis improves on previous work in this area in two main respects first our study is conducted using very high frequency data whereas most earlier work has used exchange rate data sampled at a frequency of a number of hours or more this allows us to construct a very precise characterization of

momentum investment strategies portfolio performance and herding a study of mutual fund behavior this study analyzes the extent to which mutual funds purchase stocks based on their past returns as well as their tendency to exhibit herding behavior i e buying and selling the same stocks at the same time the authors find that 77 percent of the mutual funds were momentum investors buying stocks that were past winners however most did not systematically sell past losers on average funds that invested on momentum realized significantly better performance than other funds the authors also find relatively weak evidence that funds tended to buy and sell the same stocks at the same time copyright 1995 by american economic association

issues relating to agricultural pricing policies and their analysis in developing countries abstract agricultural pricing policies in developing countries are often the result of complex interactions between producer consumer and merchant groups and their relative effectiveness in influencing government decision making even within governments various ministries often have opposing views in this environment one of the contributions a policy analyst can make is to attempt to quantify the effects of different policy options this permits a more informed discussion which hopefully leads to better decision making and an improved incentive environment many analyses of agricultural pricing policies have used the standard partial equilibrium analysis where no linkages between commodity markets were considered in this paper we have considered cross price effects also we have discussed issues relating to other adjustments refinements of the standard method so that a practitioner not familiar with the various methods can form an opinion of what the options are and what adjustments may be appropriate for a particular case in question the adjustments relate to overvaluation of currencies input price distortions differences in the degree of distortions between producers and consumers and variability of border prices the inclusion of cross price elasticities was important for assessing production consumption and trade effects for argentina but for the other countries it resulted in only somewhat improved accuracy the adjustment for exchange rates had a large impact in egypt and was important for other countries as well this underlines the importance of exchange rates as key variables for agricultural pricing policies in general the numbers show that the traditional taxation policies of agricultural products in the sample of developing countries is somewhat less widespread than in the past these policies however continue to favor consumers over producers with significant losses for some of the latter the large size of welfare losses especially compared to efficiency losses highlights the importance of correcting distorted prices that adversely affect the poorest sections of society also the usual government objective of taxing producers to raise revenues is frequently defeated by the large subsidies provided to consumers for the partitioner for whom time is often of the essence the assessment of welfare effects using the partial equilibrium method may provide reasonably good first cut estimates of the order of magnitude of the impact of distortions but often these base case estimates can and should be adjusted for a number of possible factors the analyst needs to determine how important accurate estimates of key variables are to the policy makers he or she then needs to compare the costs involved in generating or gathering the data and doing the calculations with the benefits of a broader and more accurate analysis of the distortionary effects of the particular case in question

unexpected inflation and stock returns revisited evidence from israel this paper examines the effects of unexpected inflation on stock prices using israeli data that provide a direct market based measure of unexpected inflation the price reaction of cpi linked bonds following the cpi announcement the results show that stock prices have a strong negative relationship with unexpected inflation the israeli setting rules out a number of hypotheses advanced in the united states to explain this relationship such as nominal contracting inflationary taxation wealth transfer and money illusion this suggests that the negative effect of unexpected inflation is due to its negative association with real activity and its real economic cost copyright 1996 by ohio state university press

trading volume and cross autocorrelations in stock returns this paper finds that trading volume is a significant determinant of the lead lag patterns observed in stock returns daily and weekly returns on high volume portfolios lead returns on low volume portfolios controlling for firm size nonsynchronous trading or low volume portfolio autocorrelations cannot explain these findings these patterns arise because returns on low volume portfolios respond more slowly to information in market returns the speed of adjustment of individual stocks confirms these findings overall the results indicate that differential speed of adjustment to information is a significant source of the cross autocorrelation patterns in short horizon stock returns both academics and practitioners have long been interested in the role played by trading volume in predicting future stock returns 1 in this paper we examine the interaction between trading volume and the predictability of short horizon stock returns specifically that due to lead lag cross autocorrelations in stock returns our investigation indicates that trading volume is a significant determinant of the cross autocorrelation patterns in stock returns 2 we find that daily or weekly returns of stocks with high trading volume lead daily or weekly returns of stocks with low trading volume additional tests indicate that this effect is related to the tendency of high volume stocks to respond rapidly and low volume stocks to respond slowly to marketwide information

the response of short term interest rates to weekly money announcements each friday at 4 10 p m est the federal reserve announces its estimate of the narrowly defined money stock for the statement week ending nine days previously these money announcements have become one of the main events in financial markcts if for no other reason than the fact that significant movements in interest rates have been associated with large unanticipated changes in the money stock moreover since the late 1970s interest rate fluctuations in response to money stock announcements have dramatically increased over the 1l 2 hour intervals spanning the weekly announcements for example the variance of the change in the threemonth treasury bill yield in the three years since october 1979 is more than thirty times larger than that of the previous two year period l two factors may account for a large portion of the increased volatility of shortterm interest rates first on october 6 1979 the federal reserve adopted a reserve aggregate approach to monetary control replacing a procedure that emphasized stability of short term yields second despite the greater emphasis placed on monetary control the variance of weekly announced changes in the money stock has risen by about 70 percent since late 1979 in turn if greater volatility of announced changes makes future changes more difficult to predict the volatility of unanticipated weekly changes in money would have also increased 2 thus if financial markets are efficient and if weekly money announcements contain relevant information larger unanticipated changes in money may have caused larger fluctuations in interest rates

tests of the nominal contracting hypothesis using stocks and bonds of the same firms abstract we test the nominal contracting hypothesis by examining the price responses of stocks and long term bonds issued by the same firms to inflation surprises we fail to find evidence that unexpected inflation transfers wealth to real from nominal contract holders i e to stockholders from bondholders an alternative interpretation of previous tests that seemingly support the nominal contracting hypothesis is proposed based on firms asset rather than liability structures our test results and alternative interpretation suggest caution in ascribing to nominal contracts major intrafirm wealth redistributions due to unexpected inflation

the competitive effects of vertical agreements comment recent economic analyses of vertical restraints and integration emphasize the circumstances under which these arrangements are socially efficient efficiency claims have proven contentious however for exclusive dealing a vertical restraint that prohibits any outlet carrying a manufacturer s product from stocking substitute brands this paper analyzes the impact of exclusive dealing on competition and allocative efficiency opinions expressed on the impact of exclusive dealing range from the extreme view that it is invariably anticompetitive to the view that it is always procompetitive the u s supreme court has concluded that in hundreds if not thousands of communities where there is a single retailer for a product

stock prices and economic news this paper examines the daily response of stock prices to announcements about the money supply inflation real economic activity and the discountrate except for the discount rate survey data on market participants expectations of these announcements are used to identify the unexpected component of the announcements in order to test the efficient markets hypothesis that only the unexpected part of any announcement the surprise moves stock prices the empirical results support this hypothesis and indicate further that surprises related to monetary policy significantly affect stock prices there is only limited evidence of an impact from inflation surprises and no evidence of an impact from real activity surprises on the announcement days there is also only weak evidence of stock price responses to surprises beyond the announcement day this abstract was borrowed from another version of this item

the short run dynamics of the price adjustment to new information we examine how prices in interest rate and foreign exchange futures markets adjust to the new information contained in scheduled macroeconomic news releases in the very short run using 10 second returns and tick by tick data we find that prices adjust in a series of numerous small but rapid price changes that begin within 10 seconds of the news release and are basically completed within 40 seconds of the release there is some evidence that prices overreact in the first 40 seconds but that this is corrected in the second or third minute after the release while volatility tends to be higher than normal just before the news release there is no evidence of information leakage in our analysis we correct for the biases created by bid ask spreads and tick by tick data

response of hourly stock prices and trading volume to economic news this paper examines hourly stock returns and trading volume response to announcements about the money supply consumer price index cpi producer price index industrial production and the unemployment rate the empirical results indicate that surprises in announcements about money supply and cpi are significantly associated with stock price changes the announcements of the other three variables do not affect stock prices significantly trading volume is not affected by any of the five economic variable announcements indicating that market participants do not differ substanti ally in the interpretations of the effects of announcements the spee d of adjustment analysis indicates that the effect of information on stock prices is reflected in a short period of one hour or so copyright 1988 by the university of chicago

second mover advantage and price leadership in bertrand duopoly we consider the issue of first versus second mover advantage in differentiated product bertrand duopoly with general demand and asymmetric linear costs we generalize existing results for all possible combinations where prices are either strategic substitutes and or complements dispensing with common extraneous and restrictive assumptions we show that a firm with a sufficiently large cost lead over its rival has a first mover advantage for the linear version of the model we invoke a natural endogenous timing scheme coupled with equilibrium selection according to risk dominance the analysis yields as the unique equilibrium outcome sequential play with the low cost firm as leader

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

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

attitudes and farmer conservation behavior conservation behavior is influenced by the attitudes of farmers and by context variables like income and farm terrain important attitudes were selected by using the theory that fundamental value ranks or weights affect attitudes and that only certain values are important to the conservation decision an extension of the tobit estimation approach handling both censored observations of the dependent variable and measurement error for the nonlimit observations was used conservation behavior models can be improved with a merger of concepts and approaches from social psychology and economics

are survey forecasts of macroeconomic variables rational this article examines the rationality of forecasts of 11 macroeconomic variables among the nonstationary series only surveys of housing starts the unemployment rate and the trade balance are rational forecasts among the stationary series survey forecasts for only consumer prices and personal income are consistent with rational expectations lack of rationality in forecasts of durable goods industrial production leading indicators money supply and retail sales suggests that such forecasts do not fully exploit public information indeed survey forecasts for industrial production and retail sales can be improved significantly with past information copyright 1995 by university of chicago press

lessons for international asset allocation on the positive side and despite rumors to the contrary there is little evidence that either stock or bond markets have become more volatile worldwide second correlations between markets remain low on the negative side however correlations do appear to increase when market volatility increases that is just when the diversification potential offered by low correlations is most needed furthernore while currency risk remains a small although signifcant component of total equity risk its contribution to fixedincome risk appears to be increasing

investment analysis and the adjustment of stock prices to common information in this article we are concerned with the effect of the number of investment analysts following a firm on the speed of adjustment of the firm s stock price to new information that has common effects across firms it is found that returns on portfolios of firms that are followed by many analysts tend to lead those of firms that are followed by fewer analysts even when the firms are of approximately the same size many analyst firms also tend to respond more rapidly to market returns than do few analyst firms adjusting for firm size this relation however is nonlinear and the marginal effect of the number of analysts on the speed of price adjustment increases with the number of analysts article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

overreaction delayed reaction and contrarian profits this paper presents a decomposition of short horizon contrarian profits into various sources based on an analysis os stock price reactions to common factors an firm specific information in sharp contrast with the conclusions in the extant literature we find that the lead lag structure in stock prices contributes less than 5 of the observed contrarian profits with most of the profits being attributable to stock price overreaction

exclusion via non exclusive contracts we establish that non linear vertical contracts can allow an incumbent to exclude an upstream rival in a setting that does not rely on the exclusivity of the incumbent s contracts with downstream firms or any limits on distribution channels available to the incumbent or rival the optimal contract we describe is a three part quantity discounting contract that involves the payment of an allowance to a downstream distributor and a marginal wholesale price below the incumbent s marginal cost for sufficiently large quantities the optimal contract is robust to allowing parties to renegotiate contracts in case of entry l exclusion par le biais des contrats non exclusifs nous etablissons que des contrats verticaux non lineaires peuvent permettre a un titulaire d exclure un rival en amont dans un cadre qui ne de pend pas de l exclusivite des contrats du titulaire avec les entreprises en aval ou des limites sur les canaux de distribution disponibles pour le titulaire ou un rival le contrat optimal que nous decrivons est un contrat de rabais en trois parties base sur la quantite pre voyant le versement d une indemnite a un distributeur en aval et un prix de gros marginal inferieur au cout marginal de l operateur historique pour des quantites suffisamment importantes le contrat optimal est robuste si on permet aux parties de renegocier les contrats en cas d entree

the determinants of future u s monetary policy high frequency evidence this paper examines the determinants of future u s monetary policy by studying the relationship between a predictor of the future direction of monetary policy and a pertinent information set specifically we investigate the impact of the surprise component of an array of macro economic announcements upon federal funds futures rates this investigation is conducted using high frequency intraday data in order to examine the exact timing of rate reactions to announcements in doing this we find that non farm payrolls and civilian unemployment announcements play a dominant role in determining future monetary policy moreover we document evidence that shows that the release of such information is rapidly incorporated into rates particularly when considering federal funds futures contracts traded via an electronic trading platform as opposed to an open auction trading platform

price discovery in auction markets a look inside the black box opening mechanisms play a crucial role in information aggregation following the overnight nontrading period this article examines the process of price discovery at the new yorkstockexchange single price opening auction we develop a theoretical model to explain the determinants of the opening price and test the model using order level data we show that the presence of designated dealers facilitates price discovery relative to a fully automated call auction market this is consistent with specialists extracting information from observing the evolution of the limit order book in addition the specialist s opening trade reflects noninformational factors such as price stabilization requirements

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

creating an enabling environment policy conditions for less favored areas abstract within the rural areas those with a low productive potential usually home to poor agricultural households with limited access to assets are often the core of rural poverty and under constant threat of resource degradation there is ample evidence that neither trickle down effects in high potential areas nor structural adjustment measures have generated much poverty reduction in these less favored areas lfas often due a lack of attention to the development of factor and commodity markets sustainable and pro poor development of lfas therefore poses formidable challenges and requires special measures to achieve an enabling institutional and policy environment it needs to be based on viable sources of growth that imply considerable investments in physical and human capital and appropriate technology recognize positive externalities and add equity and natural resource management concerns in a context of heterogeneity to establish policy conditions that favor such development the role of and experience with major policy interventions incentives and institutions relevant to lfas is reviewed and an attempt is made to generalize these findings to this effect the different interventions are grouped into three broad categories viz price and market policies public services and investment and institutions and governance while countries should adopt the relevant market and trade policies the case is made for greater awareness of the adverse impact these policies can have in lfas and on their poor and complementary policies and investments need to be put in place to buffer or offset adverse outcomes key complementary interventions include public investments in infrastructure human capital and technology to enhance the competitiveness of lfas and policies to improve their market access there is also need for appropriate phasing of policy and market reforms to give people time to adjust and effective safety nets to cushion loss of livelihood options

opening prices on the new york stock exchange abstract the prices of opening transactions on the new york stock exchange are determined quite differently from prices of subsequent transactions this paper tests the null hypothesis that opening prices are as representative of contemporaneous equilibrium stock values as subsequent intra day transactions prices with one possible exception there is no basis for rejecting this hypothesis despite the very different trading mechanisms used in opening trades and intra day trades

quantity discounts managerial issues and research opportunities marketing managers frequently administer pricing policies involving substantial quantity discounts however our understanding of the precise role of these discounts and their design is quite limited this paper reviews and integrates the economics and marketing literature and presents a detailed analysis of the policies of four firms in order to i specify the variety of motivations for quantity discounts ii provide guidelines to managers in designing quantity discount schedules and iii set out the most fruitful directions for future research

endogenous price leadership we consider a linear price setting duopoly game with differentiated products and determine endogenously which of the players will lead and which one will follow while the follower role is most attractive for each firm we show that waiting is more risky for the low cost firm so that consequently risk dominance considerations as in harsanyi and selten a general theory of equilibrium selection in games mit press cambridge ma 1988 allow the conclusion that only the high cost firm will choose to wait hence the low cost firm will emerge as the endogenous price leader

how does public information affect the frequency of trading in airline stocks abstract this paper examines how firm specific and macroeconomic announcements affect transaction rates in u s airline stocks using a version of the autoregressive conditional hazard framework of hamilton and jorda 2002 that incorporates market microstructure variables we show that on average trading intensity spikes prior and consequent to macroeconomic announcements but decreases around firm specific releases further when we use intraday crude oil futures returns as a proxy for industry relevant and globally important news we find that their effects are statistically significant with higher oil futures returns increasing the probability of trade

the intraday speed of stock price adjustment to major dividend changes bid ask bounce and order flow imbalances abstract this paper examines the intraday stock price reaction to substantial shifts in dividend policy the results indicate the price reaction to be slower than that previously found by patell and wolfson 1984 and closer to that found with earnings announcements by woodruff and senchack 1988 possible order flow imbalances are examined by looking at the proximity of transaction prices to contemporaneous bid and ask quotes while order flow imbalances are evident for bad news announcements this is not the case for the dividend increase sample this is interpreted as evidence that the price reaction to major dividend increases are in general anticipated fifteen minute holding period returns are computed to measure the movement of equilibrium prices during the announcement period results show a rapid adjustment of prices to positive announcements with adjustment to negative announcements taking up to 75 minutes finally fifteen minute lagged bid ask returns are calculated to determine whether an investor could respond to the announcement and earn positive returns these results are found to be dependent on the transaction cost assumptions being made

the adjustment of stock prices to information about inflation this paper analyzes the reaction of stock prices to the new information about inflation based on daily returns to the standard and poor s composite portfolio from 1953 78 it seems that the stock market reacts negatively to the announcement of unexpected inflation in the consumer price index c p i although the magnitude of the reaction is small it is interesting to note that the stock market seems to react at the time of announcement of the c p i approximately one month after the price data are collected by the bureau of labor statistics

integration of environmental concerns into agricultural policies of industrial and developing countries abstract the question which this paper addresses concerns the types of environmental and resource related agricultural policy adjustments that could properly address the costs of resource degradation and increase long term prospects for sustainable development various public policy approaches e g polluter pays principle fiscal measures regulations etc are discussed and analyzed with regard to their environmental and resource impacts the paper provides illustrative experiences from industrial and developing nations and where possible lessons and insights of relevance to policy making in developing countries are sought

agricultural trade liberalization price changes and environmental effects many analyses of agricultural trade liberalization have been undertaken but few have considered the effects on the environment for the developed countries reducing the degree of protection would result in less intensive production therefore environmental stress would be reduced a reduction of trade barriers in industrial countries would result in higher world prices and in a somewhat lower world price variability assuming initially no policy changes for developing countries the question is how the liberalization would affect the environment higher prices in developing countries increase the level of production by intensifying production particularly in the commercial sector and by an area expansion both result in negative environmental effects these could be partly offset by an increase in hired labor in the commercial sector which might reduce pressure at the frontier and on marginal lands as well as by the income effect these off setting effects may be small however the direction of the overall environmental effects cannot be determined unambiguously without empirical examination at the global level the beneficial economic effects of agricultural trade liberalization probably outweigh the expected negative environmental effects in developing countries but this cannot be unambiguously established without valuation

incentives regulations and sustainable land use in costa rica deforestation in costa rica has proceeded at a rapid pace of the remaining 2 700 km2 of virgin forests on privately owned land over 300 km2 are being deforested each year pressure on national parks which cover about 27 percent of costa rica is likely to increase in the future preliminary information indicates that contrary to our expectations most of the deforestation at present is not being done by squatters but driven by profit and asset maximization motives of the timber industry banana companies and large cattle ranchers setting aside 27 percent of the country s land as parks and reserves was a major policy decision aside from the removal of some perverse incentives operating inside park areas the main issue there is one of sound management including protection from intruders strengthening enforcement and controlled tourism on the remaining primary and secondary forest areas on privately owned land outside the parks a key question is whether public interests connected with external costs of deforestation warrant public intervention the paper suggests that a differentiated approach to this and other questions is needed depending on the costs and benefits involved and it discusses incentives and regulations which influence land use and makes proposals for reforms

speed algorithmic trading and market quality around macroeconomic news announcements this paper documents that speed is crucially important for high frequency trading strategies based on u s macroeconomic news releases using order level data on the highly liquid s p 500 etf traded on nasdaq from january 6 2009 to december 12 2011 we find that a delay of 300 ms or more significantly reduces returns of news based trading strategies this reduction is greater for high impact news and on days with high volatility in addition we assess the effect of algorithmic trading on market quality around macroeconomic news in the minute following a macroeconomic news arrival algorithmic activity increases trading volume and depth at the best quotes but also increases volatility and leads to a drop in overall depth quoted half spreads decrease increase when we measure algorithmic trading over the full top of the order book

multilateral trade negotiations european integration and farm policy reform trade negotiations and farm policy kym anderson why was it so hard to reach an agreement in the uruguay round to reduce agricultural protection after surveying the growth of agricultural protection in the 1980s i develop arguments based on political economy that imply a systematic tendency for governments to protect farmers increasingly at least up to some threshold as economic development proceeds agricultural protection growth in industrializing countries is therefore normal not exceptional liberalizing those policies before reaching that threshold is unattractive politically unless new influences e g from abroad upset the domestic political equilibrium the uruguay round provided such a force what made the early 1990s so significant a crossroads for farm policy reform was that coincidently there were other changes taking place in europe which lowered the domestic political cost of reforming the ec s common agricultural policy the paper argues that the reforms to farm policy during the rest of this decade as a result of the uruguay round agreement will at best be slow and messy but that is far preferable to the alternative of a failed uruguay round and continued growth of agricultural protection

integration of environmental concerns into economic analyses of projects and policies in an operational context abstract the efficient use of natural resources both mineral and biological as well as man made capital and human resources is a vital prerequisite for economic and social development one key role of ecological economics is to help value environmental and natural resources more precisely and internalize the cost and benefits of using such resources into the decision making process this paper reviews current economic approaches to the analysis of projects and policies and discusses possibilities for better intergrating environmental concerns into public decision making it reviews current practices as they relate to project analysis the analysis of economic policies and national income accounting a major need at present is not for more theory or techniques but for application of existing methodology and approaches to concrete problems particularly in developing countries the major objective should not be to provide fine turned numbers but to indicate orders of magnitude some project and policy alternatives can be ruled out in this fashion also one can often identify the key estimates to which the decision is sensitive and focus more refined analyses on them cost benefit analysis should be used to the extent possible alongside one needs to consider and to the extent possible rigorously analyze consequences and risks that cannot be measured in monetary terms and use for example multi criteria analysis where possible this together with sound judgement are at present the best inputs into decision making

trade liberalization economic specialization and the environment abstract a great deal has been written and a great deal of debate has raged on the effects of international trade and trade liberalization on the environment given that it is only recently that the general agreement on tariffs and trade has begun to address the interdependence of the international economy and the international environment in a systematic way it is likely that the debate will continue for quite some time it will be argued that the economic case for there being benign environmental consequences associated with trade liberalization is flawed in important ways this is due to statistical empirical and conceptual issues which affect the estimation of such effects moreover it will be argued that despite the intensity of the debate the effects of international trade on the environment have in fact only been addressed in an incidental manner rather the debate has concentrated on factors that may coexist with trade but not on the role of trade itself this has served to obscure the more fundamental environmental effects of trade liberalization through the homogenization and specialization of ecosystems

strategic effects of three part tariffs under oligopoly the distinct element of a three part tariff 3pt compared with linear pricing lp or a two part tariff is its quantity target within which the marginal price is zero this quantity target instrument enriches the firm s strategy set in dictating the competition to a specific level even in the absence of a usual price discrimination motive with general differentiated linear demands the competitive effect of a 3pt in contrast to lp depends on the degree of substitutability between products competition is intensified when two products are more differentiated yet softened when two products are more substitutable

firm characteristics unanticipated inflation and stock returns this paper re examines the effects of nominal contracts on the relationship between unanticipated inflation and an individual stock s rate of return this study differs in three main ways from previous research first announced inflation data are used to examine the effects of unanticipated inflation second a different specification is used to obtain more efficient estimates third additional nominal contracts are considered the empirical results indicate that time varying firm characteristics related to inflation predominately determine the effect of unanticipated inflation on a stock s rate of return a firm s debt equity ratio appears to be particularly important in determining the response

inefficiency in analysts earnings forecasts systematic misreaction or systematic optimism a rational analysis of analyst behavior predicts that analysts immediately and without bias incorporate information into their forecasts several studies document analysts tendency to systematically underreact to information underreaction is inconsistent with rationality other studies indicate that analysts systematically overreact to new information or that they are systematically optimistic this study discriminates between these three hypotheses by examining the interaction between the nature of information and the type of reaction by analysts the evidence indicates that analysts underreact to negative information but overreact to positive information these results are consistent with systematic optimism in response to information the literature on financial analysts defines the phrase forecast inefficiency to mean forecasts that fail to accurately incorporate new information on a timely basis and or that are biased these forecasts have also been described as irrational or suboptimal prior studies report inefficiency in analysts forecasts finding that they are upwardly biased and inaccurately reflect available information some studies conclude from this that analysts underreact to information other studies conclude that analysts overreact if markets treat analysts forecasts as both rational and statistically optimal then inefficient forecasts could have important implications for the efficiency of pricing in securities markets in this paper we reexamine the apparent tendency of analysts to misinterpret earnings information the intent of this study is to discriminate between three hypotheses 1 that analysts systematically underreact to new earnings information 2 that analysts systematically overreact to new earnings information and 3 that analysts are systematically optimistic in their reactions for hypotheses 1 and 2 the direction of the misinterpretation i e underor overreaction is independent of the nature of the information received in contrast hypothesis 3 predicts that analysts are optimistic in interpreting

agriculture in the uruguay round interests of developing countries agriculture has been favored and protected in developed countries while trade policies in developing countries frequently support industry at the expense of exportables and unprotected importables in agriculture this protection constrains expansion of temperate and subtropical agricultural exports from developing countries several studies have estimated the effects of liberalization of trade restrictions on world prices export earnings and import costs while developing countries generally would benefit from having the agricultural policies of the most powerful countries bound by international rules on trade there are differences among the developing countries as to which products should be liberalized even if such conflicts did not exist politically feasible means to obtain such compliance are elusive the potentially most feasible approaches for developing countries to obtain some measure of liberalization in the uruguay round of trade negotiations are discussed

does uncertainty matter consumer behavior under three part tariffs in communication information and other industries three part tariffs are increasingly popular a three part tariff is defined by an access price an allowance and a marginal price for any usage in excess of the allowance empirical nonlinear pricing studies have focused on consumer choice under two part tariffs we show that consumer behavior differs under three part tariffs and assess how consumer demand uncertainty impacts tariff choice we develop a discrete continuous model of choice among three part tariffs and estimate it using consumer level data on internet usage our model extends prior work in accommodating consumer switching to competitors thereby capturing behavior in competitive industries more accurately our empirical work shows that demand uncertainty is a key driver of choice among three part tariffs consumers expected bill increases with the variation in their usage steering them toward tariffs with high allowances consequently demand uncertainty decreases consumer surplus and increases provider revenue a further analysis of consumers responsiveness to the different elements of a three part tariff under the provider s current pricing structure reveals that prices affect a consumer s tariff choice more than her usage quantity and that the allowance plays a strong role in consumer tariff choice based on our results we derive implications for pricing with three part tariffs