How profitable are FX technical trading rules?

This paper provides a comprehensive empirical investigation of the profitability of foreign exchange technical trading rules over the 1996:10–2015:06 period for 22 currencies quoted in US dollars. It reports evidence of profitability across a universe of 113,148 rules that include traditional moving average rules and those constructed on the basis of technical indicators such as Bollinger bands and the relative strength index. The best trading rules achieve annualised returns of up to 30%. The Step-SPA test (Hsu, Hsu, & Kuan, 2010) results show a sharp fall in the total number of rules that are robust to data snooping bias. Virtually no traditional rule is significant in the 2006–2015 sub-sample, in line with the adaptive market hypothesis. By contrast, rules based on new technical indicator such as Bollinger band and relative strength index rules remain robustly profitable across all currencies over the more recent sub-sample.     

Does FOMC news increase global FX trading?

Does global currency volume increase on Federal Open Market Committee (FOMC) days? To test hypotheses of abnormal currency volume on FOMC days, a new data set from the Continuous Linked Settlement (CLS) Bank is used. The CLS measure captures more than half of the global trading volume in foreign exchange (FX) markets. The evidence shows that FX trading volume increases about 5% in the spot and the spot-next market following FOMC deliberations. The novelty of this result is that the aggregated CLS data controls for responses in various derivatives markets: a feature that existing studies based on intradaily data for specific trading platforms do not consider.     

How effective are trading pauses?

Exploiting Nasdaq order book data and difference-in-differences methodology, we identify the distinct effects of trading pause mechanisms introduced on US stock exchanges after May 2010. We show that the mere existence of such a regulation makes market participants behave differently in anticipation of a pause. Pauses enhance price discovery during the break but have adverse effects on price stability and liquidity after the pause. We find that pauses ultimately do not “cool off” markets but cause extra volatility. This implies a regulatory trade-off between the protective role of trading pauses and their adverse effects on market quality.     

General and specific cancer risk perceptions: how are they related?

Understanding how people construe and act upon cancer risk is important for efforts to target risk-increasing health behaviors. Importantly, research participants are often asked to estimate their risk for cancer (in general), which could mask the fact that cancer represents a range of diseases, and that different cancer types can have distinct risk factors. It is unclear whether individuals perceive general cancer risk as being comprised of an aggregation of risk for specific cancer sites, or whether general cancer risk perceptions reflect the specific type of cancer most salient to them. In this study, general cancer risk perceptions were regressed on specific risk perceptions for colon, lung, prostate (men only), and breast (women only), using data from a nationally representative sample. We found that among men and women, all forms of cancer predicted independent variance in estimates of general cancer risk. There were also stronger relationships between general risk perceptions and each specific risk perception than between any two specific risk perceptions, suggesting that individuals differentiate between specific cancers and general cancer risk. These findings offer some confidence that people’s estimates of general cancer risk take multiple cancer types into account.     

US firms – How global are they? A longitudinal study

Many studies examine firm-level internationalisation using measures such as percentage foreign sales, number of foreign subsidiaries and the number of countries in which the firm operates, but few examine the changes in these measures over time. We conduct a longitudinal study of the internationalisation of Russell 1000 US firms between 1996 and 2010, with further categorisations by age, industry and size. We find little change in the number of purely domestic firms, but substantial overall increases in the extent and scope of internationalisation of MNCs, with periods of both de- and re-internationalisation. Firms appear to expand into new regions and increase their foreign sales in those regions in subsequent years. More than half of the MNCs in our sample experienced a decrease in foreign sales after the 2007/08 credit crisis, with relatively few decreases in the regions in which they operate. By 2010 we find that the majority of the MNCs in our sample are pursuing a semi-global strategy.     

Integrated models of capital adequacy – Why banks are undercapitalised

With the majority of large UK and many US banks collapsing or being forced to raise capital over the 2007–9 period, blaming bankers may be satisfying but is patently insufficient; Basel II and Federal oversight frameworks also deserve criticism. We propose that the current methodological void at the heart of Basel II, Pillar 2 is filled with the recommendation that banks develop fully-integrated models for economic capital that relate asset values to fundamental drivers of risk in the economy to capture systematic effects and inter-asset dependencies in a way that crude correlation assumptions do not. We implement a fully-integrated risk analysis based on the balance sheet of a composite European bank using an economic-scenario generation model calibrated to conditions at the end of 2007. Our results suggest that the more modular, correlation-based approaches to economic capital that currently dominate practice could have led to an undercapitalisation of banks, a result that is clearly of interest given subsequent events. The introduction of integrated economic-scenario-based models in future can improve capital adequacy, enhance Pillar 2’s application and rejuvenate the relevance of the Basel regulatory framework.     

Measuring discretionary accruals: are ROA-matched models better than the original Jones-type models?

Discretionary accruals estimated from Jones-type models are elevated or depressed for firms with extreme performance. Kothari et al. (J Acc Econ 39:163–197, 2005) propose performance matching to address the issue, that is, to difference discretionary accruals estimated from Jones-type models for treatment and control firms matched on current ROA. This study shows (1) performance matching will systematically cause discretionary accruals of either sign to be underestimated, and (2) the measurement error will be negatively correlated with the true discretionary accruals. As a result, using discretionary accruals estimated with performance matching to test whether certain events induce earnings management will increase the frequency of Type II errors, and using them as the dependent or an independent variable in regression analysis will bias the regression coefficient toward zero. The results of our empirical tests are consistent with these predictions.     

If brands are built over years, why are they managed over quarters?

Brands are on the wane. Many consumer-goods companies blame the big-box discount retailers, but the Wharton School's Leonard Lodish and the Fuqua School's Carl Mela have a different explanation. Their research suggests that companies have damaged their brands by investing too much in short-term price promotions and too little in long-term brand building. To rescue their brands and increase profitability, corporate managers must arm themselves with long-term measures of brand performance and use them to make smarter marketing decisions. Several factors explain the short-sightedness of brand management: the increased availability of weekly, or even hourly, scanner data, which show a clear link between discounts and immediate boosts in sales; the relative difficulty of measuring the effects of advertising, new-product development, and distribution--all of which can contribute to a brand's long-term health; the short tenure of most brand managers; and the near-term orientation of Wall Street analysts. Although discounts do increase sales in the short-term, they ultimately lower profit margins. If a product is often discounted, consumers learn to buy it only when it's on sale. Moreover, when one firm increases its discounts, others usually follow suit, lowering everyone's margins. Executives can monitor a brand's long-term performance by watching a dashboard of measures. Only after examining such measures, for example, did managers at Clorox discover that the company's heavy discounting and decreased advertising had caused a steady decline in overall bleach sales and profit margins. In response, Clorox reduced discounting and increased television advertising, moves that ultimately strengthened the brand and reversed the firm's downward trends.     

Risk profiles: how do they change when stock markets collapse?

This paper has two main objectives: the first is to unveil the relative importance of global versus local risk factors in influencing excess returns in the emerging country stock markets; the second is to analyse how the observed risk profiles change when markets undergo a major crisis. Our main country of focus is Mexico, but we also analyse six Asian countries which went through the 1997 Asian crisis. Our findings indicate that during stable periods investors are mainly concerned about global risk factors, whereas close to a crisis they also include local factors in their information sets in forming expectations about future excess returns.     

Does high-frequency trading actually improve market liquidity? A comparative study for selected models and measures

The increasing volume of messages sent to the exchange by algorithmic traders stimulates a fierce debate among academics and practitioners on the impacts of high-frequency trading (HFT) on capital markets. By comparing a variety of regression models that associate various measures of market liquidity with measures of high-frequency activity on the same dataset, we find that for some models the increase in high-frequency activity improves market liquidity, but for others, we get the opposite effect. We indicate that this ambiguity does not depend only on the stock market or the data period, but also on the used HFT measure: the increase of high-frequency orders leads to lower market liquidity whereas the increase in high-frequency trades improves liquidity. We hypothesize that the observed decrease in market liquidity associated with an increasing level of high-frequency orders is caused by a rise in quote volatility.     

Who's bringing you hot ideas and how are you responding?

There's an unsung hero in your organization. It's the person who's bringing in new ideas from the outside about how to manage better. These aren't your product and service innovators--those people are celebrated loudly and often. This is the manager who, for instance, first uttered the phrase "balance scorecard" in your hallways, or "real options," or "intellectual capital." Managerial innovation is an increasingly important source of competitive advantage--especially given the speed with which product innovations are copied--but it doesn't happen automatically. It takes a certain kind of person to welcome new management ideas and usher them into an organization. The authors recently studied 100 such people to find out how they translate new ideas into action in their organizations. They discovered that they are a distinct type of practitioner; that is to say, they resemble their counterparts in other organizations more than they resemble their own colleagues, and they share a common way of working. "Idea practitioners," as the authors call them, begin by scouting for ideas. All of them are avid readers of management literature and enthusiastic participants in business conferences; many are friendly with business gurus. Once they've identified an idea that seems to hold promise, they tailor it to fit their organizations' specific needs. Next, they actively sell the idea--to senior executives, to the rank and file, to middle managers. And finally, they get the ball rolling by participating in small-scale experiments. But when those take off, they get out of the way and let others execute. In this article, the authors identify the characteristics of idea practitioners and offer strategies for managing them wisely.     

Do voluntary corporate restrictions on insider trading eliminate informed insider trading?

We investigate whether voluntary corporate restrictions on insider trading effectively prevent insiders from exploiting their private information. Our results show that insiders of firms with seeming restrictions on insider trading continue to take advantage of positive private information while being more cautious when exploiting negative private information. The results suggest that insiders continue to exploit their informational advantages in a way that minimizes their legal risk. We also find that the degree of information asymmetry is significantly lower in firms with restriction policies and that corporate governance significantly affects firms' decisions to adopt these policies.     

Does vega-neutral options trading contain information?

This study suggests a novel approach for decomposing net options demands into the options order imbalances with and without volatility risk. By analyzing a high-frequency index futures and options dataset, we examine the information content of (i) the direction-motivated order imbalance induced by a single option type, which is exposed to volatility risk, and (ii) that constructed by both calls and puts, which is vega-neutral. The aggregate options order imbalance does not convey information after controlling for futures market trading. However, the intraday options order imbalance by trading without volatility risk significantly predicts spot index returns, though its longer-horizon forecasting ability is relatively weak because of a possible cross-market hedging effect. The predictive abilities of informed foreigners’ trades and out-of-the-money options trading are prominent. Our empirical results suggest that the vega-neutral options trading conveys additional information distinct from the futures order imbalance.     

Board directors’ preferences – What are good aggregation rules?

I analyze how boards of directors with heterogeneous preferences can affect the information shared with the CEO with the help of a cheap-talk model that allows for large groups of receivers. This paper provides new insights on how heterogeneity of boards can change the way of communication between the board and the CEO, related to different ways of decision making. I also indicate how coalition forming in the boardroom can be influenced by heterogeneous preferences. Finally this model gives a possible answer why board of directors’ heterogeneity differs for shareholder representatives if there are any employees on the board.     

Which past returns affect trading volume?

Anecdotal evidence suggests and recent theoretical models argue that past stock returns affect subsequent stock trading volume. We study 3,000 individual investors over a 51 month period to test this apparent link between past returns and volume using several different panel regression models (linear panel regressions, negative binomial panel regressions, Tobit panel regressions). We find that both past market returns as well as past portfolio returns affect trading activity of individual investors (as measured by stock portfolio turnover, the number of stock transactions, and the propensity to trade stocks in a given month). After high portfolio returns, investors buy high risk stocks and reduce the number of stocks in their portfolio. High past market returns do not lead to higher risk taking or underdiversification. We argue that the only explanations for our findings are overconfidence theories based on biased self-attribution and differences of opinion explanations for high levels of trading activity.     

Do interbank customer relationships exist? And how did they function in the crisis? Learning from Italy

Using 11 years of monthly Italian bank-by-bank data, this paper correlates the bilateral amounts and the identity of each interbank borrower and lender with a long list of explanatory variables. The results show that interbank customer relationships, i.e. stable and strong relationships between pairs of borrowing and lending banks, do exist in Italy, that they persist over time, and that they functioned well during the crisis, enabling the healthier banks to provide and the troubled ones to receive funds.     

Nonlinear analysis for forecasting currencies: are they useful to the portfolio manager?

The importance of a time-varying specification for both the return and the risk of financial assets is well known. The purpose of this study is to investigate if some of the most recently developed econometric models, combined with technical indicators often used by practitioners, can significantly predict future returns. While most studies have focused on either univariate series or in-sample analyses of a given econometric specification, this study considers a multivariate framework where a US based investor daily reallocates a portfolio of three currencies (Deutschmark, Swiss Franc and Japanese Yen). Series of three years out-of-sample forecasts are analysed in terms of risk and return and it is shown that some of the tested speciications can indeed signiicantly predict future daily returns and correlations over this three-year period.     

Capital structure of Islamic banks: How different are they from conventional banks?

This paper uses comprehensive data for 112 Islamic and 709 conventional banks from 23 countries over 1995–2015 to compare the capital structure of Islamic banks (IBs) and conventional banks (CBs) from several perspectives. We find that IBs and CBs seem to face different cost pressures in the process of adjusting towards the target capital structure. Asset growth is a key driver of capital structure change, and CBs adjust leverage more aggressively in response to changes in total assets compared to IBs, because they have an advantage in obtaining external funds and can achieve leverage adjustments faster and at a low cost. IBs have more regulatory capital, but their ability to respond to risks is weaker than traditional banks. The results of this paper suggest that Islamic banks are in a disadvantaged position compared to CBs in capital structure management. The conclusion suggests that IBs need to expand its financing tools and funding sources to reduce adjustment costs and improve their capability to deal with asset risk.     

Who says they are satisfied with their job? Evidence from the BHPS Introduction

<正>Nowadays,many people are not satisfied with their work and the dissatisfaction may bring employees the sense of insecurity and instability.In the current modern society,people are suffering fierce competition and fast changing,so job satisfaction becomes a common problem for employees.