cross listing and pricing efficiency the informational and anchoring role played by the reference price abstract when a firm cross lists its shares in segmented markets the price of the first issued share as a reference plays both an informational and anchoring role in pricing the second issued share we develop a model illustrating the dual role empirically we examine a group of chinese firms that first issue foreign shares and then domestic a shares for which the anchoring effect adds to the a share underpricing consistent with the model predictions we find that the a share underpricing is positively related to the difference in costs of capital in the two segmented markets and that this positive association is weaker when participants are less likely to resort to the anchoring heuristic and when the a share valuation involves less uncertainty

fairness and inflation persistence we argue that peoples concern for fairness may explain an unsolved puzzle in macroeconomics the persistence of ine ation we extend a 1990 wage contracting model of bhaskar in which workers disutility from being paid less than other workers exceeds their utility from being paid more this model generates a continuum of equilibria over a range of wages and unemployment rates if workers expectations are based on the past behavior of wage growth these beliefs will be self fule lling generating ine ation persistence within but not outside of this range based on quarterly u s data over the period 1955 2000 we e nd evidence that ine ation is more persistent between unemployment rates of 4 7 and 6 5 than outside these bounds jel e31 e3 e5

inflation adjustment and labour market structures evidence from a multi country study the impact of labour market structures on the response of inflation to macroeconomic shocks is analysed empirically results based on a 20 country panel show that if labour market coordination is high the effect on inflation of movements in unemployment import prices tax rates and productivity is dampened both on impact and dynamically in contrast monopoly power in labour supply measured by the percentage unionisation of the workforce appears to amplify the response of inflation to its reduced form determinants these findings are attributed to the behaviour of wages following movements in demand and supply side conditions

does prospect theory explain ipo market behavior we derive a behavioral measure of the ipo decision maker s satisfaction with the underwriter s performance based on loughran and ritter 2002 and assess its ability to explain the decision maker s choice among underwriters in subsequent securities offerings controlling for other known factors ipo firms are less likely to switch underwriters when our behavioral measure indicates they were satisfied with the ipo underwriter s performance underwriters also extract higher fees for subsequent transactions involving satisfied decision makers although our tests suggest that the behavioral model has explanatory power they do not speak directly to whether deviations from expected utility maximization determine patterns in ipo initial returns the primary equity or ipo markets are subject to a variety of well known idiosyncratic patterns not least the tendency for ipos to appear underpriced on the first day of trading the profession has invested heavily in explanations for these patterns see ritter and welch 2002 and jenkinson and ljungqvist 2001 for recent reviews the vast majority of theoretical work in the area builds at least implicitly on the premise that market participants are rational and maximize expected utility subject to the burden of market frictions asymmetric information of one sort or another is the friction most widely examined and there is a substantial body of evidence suggesting that such frictions account for at least some of the cross sectional and time variation in the idiosyncratic patterns and yet the question remains whether we can explain more than a small fraction of variation in the data recent events related to the dot corn bubble of the late 1990s lend weight to this concern and lead ritter and welch 2002 to suggest that shifting the focus of the research agenda will lead to

the berlin stock exchange in imperial germany a market for new technology analysing 474 cases of firms going public in the german capital between 1892 and 1913 we show that innovative firms could rely on the berlin stock market as a source of financing the data also reveal that initial public offerings ipo of innovative firms were characterized by particularly low underpricing comparatively high first trading prices and no long run underperformance we interpret these empirical results as evidence for the surprising fact that contemporary investors had rational expectations

an optimal ipo mechanism we analyse the optimal initial public offering ipo mechanism in a multidimensional adverse selection setting where institutional investors have private information about the market valuation of the shares the intermediary has private information about the demand and the institutional investors and intermediary collude theorem 1 states that uniform pricing is optimal all agents pay the same price and characterizes the ipo price in terms of conditional expectations theorem 2 states that the optimal mechanism can be implemented by a non linear price schedule decreasing in the quantity allocated to retail investors this is similar to ipo procedures used in the u k and france relying on french ipo data we perform a gmm structural estimation and test of the model the price schedule is estimated and the conditions characterizing the optimal mechanism are not rejected

insider trading without normality in this paper we analyse the existence and uniqueness of equilibrium in a particular class of monopolistic rational expectations models we show the equivalence between the kyle 1985 model of insider trading where the insider observes the amount of noise trading and the kyle 1989 model of informed speculation when there is one risk neutral insider and many risk neutral market makers we show that in these two equivalent models i there exists a unique equilibrium independently of the distribution of uncertainty ii this equilibrium minimizes the expected gains of the informed agent under incentive compatibility constraints we extend our results to a class of signalling games

what does the bundesbank target abstract although its primary ultimate objective is price stability the bundesbank has drawn a distinction between its money focused strategy and the inflation targeting approach recently adopted by a number of central banks we show that holding constant the current forecast of inflation german monetary policy responds very little to changes in forecasted money growth we conclude that the bundesbank is much better described as an inflation targeter than as a money targeter an additional contribution of the paper is to apply the structural var methods of b bernanke and i mihov measuring monetary policy working paper no 5145 national bureau of economic research cambridge ma june 1995 to determine the optimal indicator of german monetary policy we find that the lombard rate has historically been a good policy indicator although the use of the call rate as an indicator cannot be statistically rejected

the demand for stocks an analysis of ipo auctions we analyze a unique dataset that includes the full demand schedules of 27 israeli ipos that were conducted as nondiscriminatory uniform price auctions to the best of our knowledge this is the first time the whole demand schedule for any asset is described the demand schedules are relatively flat around the auction clearing price the average elasticity is 27 the elasticity is low when the return distribution contains a large unique component we also find a significant average abnormal return of 4 5 on the first trading day and a positive correlation between the abnormal return and the elasticity of demand article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

trade union density and inflation performance evidence from oecd panel data this paper examines the impact of union membership rates on inflation in oecd countries a positive effect of union density is estimated even after controlling for fixed effects and time dummies additional institutional characteristics for example union coordination employment protection laws and central bank independence do not affect inflation directly in a panel setting but do influence the size of the unionization coefficient via interaction terms the results are robust to controlling for potential common causes such as oil price shocks and the political stance of the government and to using gmm iv techniques to handle possible endogeneity biases

does the dynamic time consistency model of inflation explain cross country differences in inflations dynamics dynamic time consistency models of monetary policy imply that the size of the inflationary response to price shocks and the persistence of inflation is inversely related to factors that enhance the central bank s ability to commit to low average inflation hence these models predict that the dynamics of inflation vary over time and across countries in response to changes in measures of political support for low inflation we find support for this hypothesis in data fromeighteen oecd countries over the period 1961 94 however political variables account for only a small fraction of the variation in inflation dynamics across countries 2004 elsevier ltd all rights reserved

market mechanisms in online peer to peer lending online peer to peer lending p2p lending has emerged as an appealing new channel of financing in recent years a fundamental but largely unanswered question in this nascent industry is the choice of market mechanisms i e how the supply and demand of funds are matched and the terms price at which transactions will occur two of the most popular mechanisms are auctions where the crowd determines the price of the transaction through an auction process and posted prices where the platform determines the price while p2p lending platforms typically use one or the other there is little systematic research on the implications of such choices for market participants transaction outcomes and social welfare we address this question both theoretically and empirically we first develop a game theoretic model that yields empirically testable hypotheses taking into account the incentive of the platform we then test these hypotheses by exploiting a regime change from auctions to posted prices on one of the largest p2p lending platforms consistent with our hypotheses we find that under platform mandated posted prices loans are funded with higher probability but the preset interest rates are higher than borrowers starting interest rates and contract interest rates in auctions more important all else equal loans funded under posted prices are more likely to default thereby undermining lenders returns on investment and their surplus although platform mandated posted prices may be faster in originating loans auctions that rely on the crowd to discover prices are not necessarily inferior in terms of overall social welfare this paper was accepted by chris forman information systems

a theory of the transition to secondary market trading of ipos abstract we develop a model in which investment banks and institutional investors collaborate in smoothing an initial public offering s ipos transition to secondary market trading their intervention promotes welfare under the assumption that significant new information arrives in the market in the immediate aftermath of the ipo under this assumption it is optimal to stage the offering and suboptimal to commit to selling shares at a uniform price the optimal strategy yields an economic rationale for secondary market price stabilization for ipos carried out via a well coordinated network of repeat institutional investors

signalling by underpricing in the ipo market abstract empirical evidence suggests the existence of hot issue markets for initial public offerings in certain periods and in certain industries new issues are underpriced and rationing occurs this paper develops a model consistent with this observation which assumes the firm itself best knows its prospects in certain circumstances firms with the most favorable prospects find it optimal to signal their type by underpricing their initial issue of shares and investors know that only the best can recoup the cost of this signal from subsequent issues

auctions vs bookbuilding and the control of underpricing in hot ipo markets market returns before the offer price is set affect the amount and variability of initial public offering ipo underpricing thus an important question is what ipo procedure is best adapted for controlling underpricing in hot versus cold market conditions the french stock market offers a unique arena for empirical research on this topic since three substantially different issuing mechanisms auctions bookbuilding and fixed price are used there using 1992 1998 data we find that the auction mechanism is associated with less underpricing and lower variance of underpricing we show that the auction procedure s ability to incorporate more information from recent market conditions into the ipo price is an important reason copyright 2003 oxford university press

initial public offering discount and competition abstract lacking examples of initial public offering ipo mechanisms that are open to the public and priced competitively previous studies could not determine what size discount if any is economically efficient we compare two pricing regimes on the tel aviv stock exchange an investor driven dutch auction limited by a binding maximum price replaced by one that is free of that constraint our evidence shows that rationing and herding disappear improving the access of uninformed investors to strong issues and alleviating their exposure to losses attached to weak issues pricing quality increases by the elimination of the underpricing bias decreased price dispersion and increased price sensitivity to ipo unique factors underwriter services do not deteriorate but garner moderately higher fees apparently to compensate for a higher risk consistently there is no deterioration in ipo efficiency as a screen from weak issues our evidence does not support the view that underpricing is competitive or eff

exchange rate regimes and shifts in inflation persistence does nothing else matter this paper reexamines the findings of george s alogoskoufis and ron smith 1991 who argue that sharp increases in inflation persistence can be attributed to changes in the exchange rate regime using long time series data from the united kingdom the united states canada and sweden the authors suggest that these authors emphasis on a post 1967 shift in inflation persistence is misplaced and that there are other equally good candidates to account for changes in inflation persistence such as wars oil price shocks and central bank reforms this conclusion is supported by recently developed tests that allow for multiple structural shifts at unknown dates

manipulation and the allocational role of prices it is commonly believed that prices in secondary financial markets play an important allocational role because they contain information that facilitates the efficient allocation of resources this paper identifies a limitation inherent in this role of prices it shows that the presence of a feedback effect from the financial market to the real value of a firm creates an incentive for an uninformed trader to sell the firm s stock when this happens the informativeness of the stock price decreases and the beneficial allocational role of the financial market weakens the trader profits from this trading strategy partly because his trading distorts the firm s investment we therefore refer to this strategy as manipulation we show that trading without information is profitable only with sell orders driving a wedge between the allocational implications of buyer and seller initiated speculation and providing justification for restrictions on short sales

central bank independence centralization of wage bargaining inflation and unemployment theory and some evidence abstract this paper proposes a conceptual framework to investigate the effects of central bank independence of the degree of centralization of wage bargaining and of the interaction between those institutional variables on real wages unemployment and inflation in a framework in which unions are averse to inflation this aversion moderates union s wage demands as they attempt to induce the central bank to inflate at a lower rate an increase in the degree of centralization of wage bargaining a decrease in the number of unions triggers two opposite effects on real wages unemployment and inflation it reduces the substitutability between the labor of different unions and therefore the degree of effective competition between them this reduced competition effect raises real wages unemployment and inflation but the decrease in the number of unions also strengthens the moderating effect of inflationary fears on the real wage demands of each union this strategic effect lowers real wages unemployment and inflation for sufficiently inflation averse unions the interaction between those two effects produces a calmfors driffill type relation between real wages and centralization the paper analyzes the effects of central bank independence on the position and the shape of this relation as well as on inflation and unemployment the paper features two mechanisms one of which is novel through which monetary institutions have real effects the model implies that if there is a single union social welfare is maximized when the central bank attaches a zero weight to inflation but when the number of unions is larger than one this result is no longer true in general empirical evaluation of some of the theoretical implications using data from 19 developed economies is for the most part supportive of those implications

the modern history of exchange rate arrangements a reinterpretation we develop a novel system of reclassifying historical exchange rate regimes one key difference between our study and previous classifications is that we employ monthly data on market determined parallel exchange rates going back to 1946 for 153 countries our approach differs from the imf official classification which we show to be only a little better than random it also differs radically from all previous attempts at historical reclassification our classification points to a rethinking of economic performance under alternative exchange rate regimes indeed the breakup of bretton woods had less impact on exchange rate regimes than is popularly believed