imperfect information and consumption in the united states and the united kingdom pischke 1995 has argued that imperfect information may account for the failure of hall s permanent income hypothesis to explain the behaviour of aggregate consumption we identify the restrictions that pischke s theory places on the dynamics of aggregate consumption and test them using quarterly data for the united kingdom and united states our results suggest that while pischke s model explains some features of the data which the hall model cannot it is formally rejected

the asymmetric relation between initial margin requirements and stock market volatility across bull and bear markets higher initial margin requirements are associated with lower subsequent stock market volatility during normal and bull periods but show no relationship during bear periods higher margins are also negatively related to the conditional mean of stock returns apparently because they reduce systemic risk we conclude that a prudential rule for setting margins or other regulatory restrictions is to lower them in sharply declining markets in order to enhance liquidity and avoid a depyramiding effect in stock prices but subsequently raise them and keep them at the higher level in order to prevent a future pyramiding effect copyright 2002 oxford university press

losing money on the margin abstract margin trading is popular with retail investors around the world to limit the scale of these investors potential losses regulators impose a system of collateral requirements and margin calls we show in this paper however that the collateral requirement imposed by margin calls results in negative expected returns for these traders whilst also inducing positive skew in the returns distribution investments in assets with symmetric returns when traded on margin instead offer limited losses and a small chance of a large gain much like lottery stocks and other gambles we demonstrate this theoretically and then show empirically using a unique database of account data from a chinese retail brokerage that the realized losses of margin traders are often substantial this leads us to question whether current regulation is appropriate

partial adjustment and the permanent income hypothesis abstract the paper extends the permanent income hypothesis to incorporate two alternative theories of partial adjustment the first is the conventional forward looking quadratic costs of adjustment model the second develops the idea that adjustment of consumption to changes in permanent income are faster the more advanced is the notice of such changes both theories can in principle account for the excess smoothness and excess sensitivity phenomena highlighted in recent research both models are applied to u s and u k quarterly data the second model appears to provide a more satisfactory explanation of consumption in the two countries

discoveries of fakes their impact on the art market despite the dramatic surge in the production of fakes their impact on the art market remains unexplored this paper investigates the overall impact that the discovery of a fake painting for example a fake gauguin has on the market for paintings from the same artist gauguin s artworks before the fake s discovery artworks are less likely to be sold through sotheby s or christie s suggesting that sellers may wish to avoid their extensive scrutiny however when fakes have been discovered sellers rely more often on these auction houses probably because they are viewed as providing a credible form of certification surprisingly fake discoveries have almost no impact on the probability to sell an artwork prices only react negatively with a lag suggesting that sellers try to postpone their sales as long as possible eventually close to a year after fakes have been made public prices increase indicating that buyers view the market as purged

trader leverage and liquidity does trader leverage drive equity market liquidity we use the unique features of the margin trading system in india to identify a causal relationship between traders ability to borrow and a stock s market liquidity to quantify the impact of trader leverage we employ a regression discontinuity design that exploits threshold rules that determine a stock s margin trading eligibility we find that liquidity is higher when stocks become eligible for margin trading and that this liquidity enhancement is driven by margin traders contrarian strategies consistent with downward liquidity spirals due to deleveraging we also find that this effect reverses during crises

art as a wartime investment conspicuous consumption and discretion the financial underperformance of art as an investment is well documented in contrast to studies conducted on peace time periods this paper shows that the art market in occupied france during wwii significantly outperformed all alternative investments bonds equities as well as currencies exchanged on the black market other than gold this suggests that art may be a good hedge against low probability disasters the paper further demonstrates that motives to purchase art consumption and investment vary over time in his theoretical model mandel 2009 attributes art s low return to the utility derived from conspicuous consumption in occupied france during wwii conspicuous consumption was impossible for artworks deemed degenerate by the nazis the price evolution of degenerate versus non degenerate artworks confirms the importance of conspicuous consumption in artworks pricing eventually the paper defines the concept of discretion the ability to store a large amount of value in small and easily transportable goods during wartime illegal activities and the risk of being forced to flee the country increased the interest for discreet assets as shown by the better performance of small and thus discreet artworks in comparison to large ones

asset pricing with heterogeneous preferences beliefs and portfolio constraints portfolio constraints are widespread and have significant effects on asset prices this paper studies the effects of constraints in a dynamic economy populated by investors with different risk aversions and beliefs about the rate of economic growth the paper provides a comparison of various constraints and conditions under which these constraints help match certain empirical facts about asset prices under these conditions borrowing and short sale constraints decrease stock return volatilities whereas limited stock market participation constraints amplify them moreover borrowing constraints generate spikes in interest rates and volatilities and have stronger effects on asset prices than short sale constraints

margin requirements speculative trading and stock price fluctuations the case of japan an increase in margin requirements in the first section of the tokyo stock exchange is followed by a decline in margin borrowing trading volume the proportion of trading performed through margin accounts the growth in stock prices and the conditional volatility of daily returns the nonmarginable second section stocks show a smaller change in volatility and only a delayed weak price response the hypothesis that margin requirements restrict the behavior of destabilizing speculators can explain these correlations but cannot explain the observation that individuals the most active users of margin funds appear to be good market timers

consumption saving and rational expectations some further evidence for the u k this paper examines implications of the rational expectations permanent income framework for quasi savings using u k data the residual from a cointegrating regression between income and consumption provides the quasi savings series that is used in conjunction with differenced income in a bivariate vector autoregression with associated restrictions and exclusion tests a further implication is that savings should granger cause labor income changes incomes and consumption are found to be cointegrated in levels as a robust result and the bivariate system performs well however savings granger cause labor income changes with a perverse positive sign and exclusion restrictions fail copyright 1989 by royal economic society

savings and rational expectations a correction and further observations the aim of macdonald and speight i989 hereafter ms was to empirically implement and test the rational expectations permanent income model repi with appropriate stationary variables the paper was in essentially two parts the first part dealt with the cointegration of disposable income and two measures of real consumer expenditure whilst the second part contained some restrictions tests from a bvar model with quasi savings and the change in labour income a subsidiary finding of our modelling strategy was the result that savings positively granger caused the change in labour income attfield demery and duck i 990 hereafter add question the numerical accuracy of our labour income series attributing our finding of a positive relationship between savings and the change in labour income to this inaccuracy the appropriate theoretical measure of labour income and the efficiency of our tests of the repi as our response to these points indicates add s comments do not undermine the central findings of our previous paper indeed the striking finding of our previous paper that once allowance for transitory consumption is made the repi restrictions cannot be rejected is reinforced in our current note

sale rates and price movements in art auctions this paper examines the relationship between sale rates and price shocks in art auctions using data on contemporary and impressionist art we show that while sale rates appear to have little relationship to current prices there exists a strong negative relationship of sale rates to unexpected price shocks which is reminiscent of a phillips curve we estimate an empirical model that suggests that the reserve price is set on average at about 70 of the low estimate

how auctions work for wine and art interview auctioneers and even to buy a little wine in the meantime i have also had the opportunity with john abowd 1988 to observe and collect data on the auction sale of impressionist and contemporary paintings this paper reports on some of the empirical regularities that i and others have observed in the actual operation of the auction markets for these items in view of the rich and diverse array of theoretical literature on auctions it seems high time economists began to spell out precisely what facts it is meant to explain 2

reconsidering hedonic art price indexes art price indexes typically rely on heavily biased samples for several reasons a refined hedonic index is developed which explicitly addresses such concerns an empirical illustration is then provided for symbolist paintings appearing at auctions between 1990 and 2001

art market inefficiency art is often used as an investment vehicle given the importance of market efficiency in finance we use a large auction based index to test whether the art market is weakly efficient evidence reveals that returns on artworks exhibit high positive auto correlation we attribute this result to price truncation resulting from unobservable reserve prices in auctions we conclude that the art market is not efficient mainly because price formation is opaque to outsiders who lack information on unsold artworks

saving and rational expectations evidence for the u k macdonald and speight i989 hereafter ms report tests of the rational expectations permanent income hypothesis hereafter repi based on quarterly uk data from i966 i i986 3 they find that the formal restrictions implied by repi can be rejected moreover in striking contrast to the predictions of repi and the results presented in campbell i987 for the united states and campbell and clarida 1987 for canada and the united kingdom they find that saving positively granger causes the change in labour income ms s results are however based on a seriously miscalculated real labour income series in this paper we present tests of repi based on a measure of labour income corrected for both this error and for a conceptual flaw in their definition our main findings are that in accordance with repi saving negatively granger causes the change in labour income but that the restrictions implied by repi can be strongly rejected whether or not allowance is made for transitory consumption

cointegration of consumption and disposable income evidence from twelve oecd countries one of the implications of the rational expectation permanent income hypothesis is that consumption and disposable income are cointegrated campbell 3 using tests that are developed in engle and granger 7 concludes that this implication holds on the quarterly aggregate data of the u s he finds that although a phillips perron test could not reject the nonstationarity of the disposable income and consumption processes an augmented dickey fuller test rejects the existence of a unit root in the residuals obtained from the least square regression of disposable income on consumption campbell and clarida 4 confirm those conclusions with the quarterly aggregate time series data of canada these tests however may yield different conclusions if they are applied to data from other countries this is because the unit root tests in the literature have rather weak power when they are applied to individual time series of moderate length particularly when the alternative is close to the null indeed attfield demery and duck 1 using quarterly aggregate time series data of the u k find that phillips perron test strongly rejects at the 1 level the nonstationarity of the disposable income process they also find no evidence at even the 10 level against a unit root in the residuals of the regression between disposable income and consumption with augmented dickey fuller tests of 1 or 4 lags campbell and clarida 4 indicate that for the united kingdom the unit root hypothesis for the disposable income is rejected at the 5 level and the hypothesis of no cointegration between consumption and disposable income can only be rejected at the 10 level 2

the production and consumption of the arts a view of cultural economics by most criteria the arts comprise a significant area of economic activity in 1990 american consumers spent 5 billion on admissions to theater opera galleries and other nonprofit arts events more than on admissions to spectator sports 4 1 billion on movie admissions and 17 6 billion on books because of difficulties in defining boundaries around the arts industry statistics on its contribution to gdp are problematical but available data suggest that the arts theater music opera dance visual arts crafts literature community and folk arts account for a little under one percent of the united states gdp and a little over one percent of the civilian labor force if the net is cast somewhat wider defining the cultural industries as including the arts motion pictures radio and television and printing and publishing an aggregate value of output can be measured for 1988 of about 130 billion or 2 5 percent of gdp national endowment for the arts 1992 likewise support for the arts and culture in the u s through government and voluntary contributions amounts to a significant annual commitment of funds combined federal state and local government expenditure on the arts and museums in 1987 amounted to about 0 8 billion and in 1990 6 4 percent of charitable giving was channeled to arts culture and the humanities yielding a total level of voluntary contributions in these areas of 7 9 billion in that year private markets in the arts too are of significant size looking at the international art trade for example we can note that the worldwide net sales of the two major art auction houses christie s and sotheby s amounted to 6 6 billion in 1989 90 1 yet despite the fact that production and consumption of art have been elements of human activity for longer than most of the phenomena that have en

art as an investment the market for modern prints repeat sales of modern prints at auction are used to estimate a semiannual index of prices for the period 1977 92 as in other studies of art as an investment prints do not compare favorably to traditional financial assets there is substantial noise in auction prices but little or no support for the proposition that some artists command higher prices in certain countries or that masterpieces outperform the market one puzzle is the continuing tendency for prices realized at certain auction houses to exceed those realized at others notably at sotheby s relative to christie s in new york copyright 1993 by american economic association

the inefficiency of bitcoin bitcoin has received much attention in the media and by investors in recent years although there remains scepticism and a lack of understanding of this cryptocurrency we add to the literature on bitcoin by studying the market efficiency of bitcoin through a battery of robust tests evidence reveals that returns are significantly inefficient over our full sample but when we split our sample into two subsample periods we find that some tests indicate that bitcoin is efficient in the latter period therefore we conclude that bitcoin in an inefficient market but may be in the process of moving towards an efficient market

sentiment and art prices we hypothesize the existence of a slow moving fad component in art prices using unique panel survey data on art market participants confidence levels in the outlook for a set of artists we find that sentiment indeed predicts short term returns

auctions and the price of art the value of most important works of art is established by public auction either directly by an actual sale or indirectly by reference to other sales how the auction system works is thus a critical determinant of how the public s preferences are translated into the evaluation of artistic work the auction system is central in the determination of the incentives for artistic work and the efficiency of the auction system is a key determinant of the cost of creating and distributing works of art this paper contains a review of the burgeoning new research of the last decade that has been designed to shed light on how the art auction system actually works what it indicates about price formation and how well it performs we begin our discussion in section 2 with a short description of the mechanics of the auction system and then organize the remainder of our discussion around two major topics the first topic concerns how auction prices can be used to determine and compare overall price movements within the art market and other markets and the second topic concerns how the auction mechanism influences prices we

dynamic equilibrium with two stocks heterogeneous investors and portfolio constraints we study dynamic equilibrium in a lucas economy with two stocks two heterogeneous constant relative risk aversion investors and portfolio constraints we focus on margin and leverage constraints which restrict access to credit we find a positive relationship between the amount of leverage in the economy and magnitudes of stock return correlations and volatilities tighter constraints generate rich patterns in correlations and volatilities make them less countercyclical increase risk premia proportionally to assets margins and increase prices of low margin assets more than prices of high margin assets we derive closed form solutions for the unconstrained case and the case of leverage constraints

the market value of rarity abstract most theories of demand assume that consumers value the characteristics of products but are unconcerned with how many other consumers also consume the product however several theories of demand argue that consumers can value the exclusivity of possessing a rare object we test this implication on a particular collectible rare coins our paper examines the case of coins of a given type and identical quality that have mintages in different quantities this allows us to exclude the common case in which rarity or price itself is an indicator of quality for our sample rarer coins command higher prices rarity in the form of original mintage more strongly influences the market price than does collectibility as represented by the rarest coins of each mint mark or year we also point out that here may be other goods such as automobiles for which rarity may influence market demand

buying beauty on prices and returns in the art market this paper investigates the price determinants and investment performance of art we apply a hedonic regression analysis to a new data set of more than one million auction transactions of paintings and works on paper based on the resulting price index we conclude that art has appreciated in value by a moderate 3 97 per year in real u s dollar terms between 1957 and 2007 this is a performance similar to that of corporate bonds at much higher risk a repeat sales regression on a subset of the data demonstrates the robustness of our index next quantile regressions document larger average price appreciations and higher volatilities in more expensive price brackets we also find variation in historical returns across mediums and movements finally we show that measures of high income consumer confidence and art market sentiment predict art price trends this paper was accepted by wei xiong finance

on the rate of return in the art market survey and evaluation abstract existing estimates of rates of return on single art objects and whole collections are surveyed and critically evaluated the psychic benefits from art are in the few cases they are considered at all derived from the difference to financial returns on other markets this paper discusses determinants of psychic benefits and suggests rental fees and willingness to pay studies as a possible way to analyze and estimate the psychic benefits from art

informational efficiency of the clandestine and official gold markets in paris for gold moving from clandestine to official trading does not significantly change informational efficiency both markets are inefficient suggesting that efficiency is linked more to the type of asset than to the legal status of the market

short selling margin trading and price efficiency evidence from the chinese market abstract china launched a pilot scheme in march 2010 to lift the ban on short selling and margin trading for stocks on a designated list we find that stocks experience negative returns when added to the list after the ban is lifted price efficiency increases while stock return volatility decreases panel data regressions reveal that intensified short selling activities are associated with improved price efficiency short sellers trade to eliminate overpricing by selling stocks with higher contemporaneous returns following a downward trend and their trades predict future returns in contrast we find intensified margin trading activities for stocks with lower contemporaneous returns and these trades have no return predictive power