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

noise trading and takeovers a model of takeovers is investigated in which noise trading provides camouflage that makes it possible for a large corporate outsider to purchase enough shares at favorable prices so that takeovers become profitable although the model accommodates the possibility of dilution grossman and hart 1980 and a large incumbent shareholder shleifer and vishny 1986 neither dilution nor a large incumbent shareholder is necessary for costly takeovers to be profitable noise trading tends to encourage costly takeovers that otherwise would not occur and to discourage beneficial takeovers that otherwise would occur

can speculative trading explain the volume volatility relation we derive a speculative trading model with endogenous informed trading that yields a conditionally heteroscedastic time series for trading volume and the squared price changes we use half hourly price change and volume data for ibm during 1988 to test the model and estimate the structural parameters using the simulated method of moments estimation procedure although the model seems to do a reasonable job fitting the unconditional moments of the volume and the squared price change processes it fares less well in fitting the relation between current trading volume and lags of trading volume and squared volume s and its lag s relation to squared price changes

quality adjusted cost functions and policy evaluation in the nursing home industry proper evaluation of cost quality trade offs inherent in regulatory policy requires identifying the structure of production from the behavioral response of quality to the policy change however estimating the structure of production with endogenous quality is difficult because of both measurement problems and data availability we develop a simple method for identifying and estimating cost functions in the presence of endogenous and unobserved quality using this method we estimate that a quality adjusted cost function for nursing homes treating quality as exogenous yields seriously misleading estimates of marginal cost and economies of scale we then used the parameter estimates to evaluate the cost quality trade off in nursing home regulatory policy

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

non profit cost adjusting with quality as a private good nonprofit firms that produce multiple outputs may lower service intensity for one patient group in response to lower reimbursements for another group this is termed cost adjusting behaviour cost adjusting implies a serious welfare transfer the results of this analysis suggest that the potential for this welfare transfer exists however the ability of a firm to exploit this welfare transfer depends largely on the demand conditions present in the market an empirical analysis finds evidence that nonprofit hospitals in washington state do practise cost adjusting

strategic trading and unobservable information acquisition abstract we allow a strategic trader to choose when to acquire information about an asset s payoff instead of endowing her with it when the trader dynamically controls the precision of a flow of information the optimal precision evolves stochastically and increases with market liquidity because the trader exploits her information gradually the equilibrium price impact and market uncertainty are unaffected by her rate of acquisition if she pays a fixed cost to acquire lumpy information at a time of her choosing the market can break down we show that no equilibria exist with endogenous information acquisition our analysis suggests caution when applying insights from standard strategic trading models to settings with information acquisition

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

insider trading stochastic liquidity and equilibrium prices we extend kyle s 1985 model of insider trading to the case where liquidity provided by noise traders follows a general stochastic process even though the level of noise trading volatility is observable in equilibrium measured price impact is stochastic if noise trading volatility is mean reverting then the equilibrium price follows a multivariate stochastic bridge process which displays stochastic volatility this is because insiders choose to optimally wait to trade more aggressively when noise trading activity is higher in equilibrium market makers anticipate this and adjust prices accordingly more private information is revealed when volatility is higher in time series insiders trade more aggressively when measured price impact is lower therefore execution costs to uninformed traders can be higher when price impact is lower

pricing by non profit institutions the case of hospital cost shifting abstract this paper shows that a hospital whose objective function includes output as well as profits may raise price to private paying patients in response to cuts in the price it receives for madicaid or medicaid patients evidence is presented to show that hospitals in illinois cost shifted in this manner in response to substantial reductions in medicaid payments in the early 1980s as private sector pricing becomes more competitive however the ability and willingness of hospitals to cost shift will wane

payment source and the cost of hospital care evidence from a multiproduct cost function with multiple payers abstract this study investigates the capacity of hospitals to vary the intensity of their services based on patients expected sources of payment while the concept of price discrimination by hospitals based on payer generosity cost shifting has been discussed extensively the notion that hospitals can adjust payer specific marginal costs to reflect differences in reimbursement policies has not been studied in depth to examine this issue this analysis employs a multiproduct cost function with hospital outputs defined as admissions by payment source controlling for the distribution and severity of illness casemix for each payer marginal costs of casemix adjusted discharges are obtained and compared for medicare medicaid private payers and a residual category that includes uncompensated care we find that indeed payer specific marginal costs generally reflect payer generosity

uncertain demand the structure of hospital costs and the cost of empty hospital beds abstract in this paper we reformulate the theory of cost and production to take account of uncertain demand facing a firm in the reformulated theory the duality between cost and production no longer obtains and demand distribution parameters enter the cost function as well as the traditional outputs and input prices we then estimate a short run cost function for a hospital facing uncertain demand using data from a national sample of over 5000 hospitals for the years 1983 1987 the traditional cost model is strongly rejected in favor of the reformulated model this model is used to calculate the cost of empty hospital beds controlling for the effect of uncertain demand on the structure of hospital costs the cost of an empty hospital bed is calculated as 36 443 in 1987 dollars we estimate that a one percent decrease in the number of hospital beds would decrease hospital costs by slightly over one third of one percent increasing the occupancy rate from the average 1992 level 65 percent back to the average 1980 level 76 percent is estimated to save the average hospital over 2 million or 9 5 percent of costs

imperfect competition among informed traders we analyze competition among informed traders in the continuous time kyle 1985 model as foster and viswanathan 1996 do in discrete time we explicitly describe the unique linear equilibrium when signals are imperfectly correlated and confirm the conjecture of holden and subrahmanyam 1992 that there is no linear equilibrium when signals are perfectly correlated one result is that at some date and at all dates thereafter the market would have been more informationally efficient had there been a monopolist informed trader instead of competing traders the relatively large amount of private information remaining near the end of trading causes the market to approach complete illiquidity copyright the american finance association 2000

new vehicle fuel economy in the uk impact of the recession and recent policies interests in vehicle fuel economy have increased in the past few years with the implementations of more stringent cafe standard in usa and mandatory carbon emission standard in the eu we seek to understand the effects of recent policies such as restructuring of vehicle excise duties and eu standard on new vehicle fuel economy in the uk in the past few years there have been substantial fluctuations in income and fuel prices offering an interesting testing ground to understand their impact on the demand for fuel economy in vehicles we use a monthly dataset to find that the emission standard is the largest driver for fuel economy improvements in recent years also contrary to some recent findings in europe and in uk we find that income has an effect and that the recession had some role in improving the fuel economy the effects of fuel prices were relatively small restructuring of the ved also improved new vehicle fuel economy in the uk but the scrappage scheme had no significant effect results indicate that both supply and demand side policies are effective in improving fuel economy although quantitatively the emission standard appears more effective due to its stringency it is also important to consider the effects of income while devising demand side policies

scale and scope economies for drug abuse treatment costs evidence for washington state drug abuse treatment has been pervasive in the us in the recent years and the associated direct treatment costs approached 18 billion in 2001 however there have been few published studies on scale economies and none on scope economies for drug abuse treatment costs we estimate a restricted cost function for 17 hospitals in washington state that provided inpatient and or outpatient drug abuse treatment during the years 1997 2004 we find significant evidence of scale economies for hospitals that provide only outpatient drug abuse treatment services the marginal costs of outpatient services are even smaller for hospitals that produce both outpatient and inpatient drug abuse treatment services further these joint production hospitals exhibit diseconomies of scope or specialization economies these results all imply that recent trends towards additional outpatient treatment services will enhance cost efficiency

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

grants and cost shifting in outpatient clinics cost shifting for a non profit revenue maximizing healthcare provider which faces a constraint that profit must be non negative is examined focusing on fixed payment programmes like medicare in addition how grant money affects cost shifting and extend the empirical analysis of cost shifting to outpatient clinics using data from publicly funded clinics in california is explored the results are consistent with cost shifting and indicate that the cause may be that the medicare payment system cuts revenues more than costs forcing clinics to subsidize the care of medicare patients by increasing prices to other patients