Market price accounting and depositor discipline: The case of Japanese regional banks

We examine the determinants of Japanese regional bank pricing-to-market decisions and their impact on the intensity of depositor discipline, in the form of the sensitivity of deposit growth to bank financial conditions. To obtain consistent estimates, we first model and estimate the bank pricing-to-market decision and then estimate the intensity of depositor discipline after conditioning for that decision. We find that banks were less likely to adopt market price accounting the larger were their unrealized securities losses. We also find statistically significant evidence of depositor discipline among banks that elected to price to market. Our results indicate that depositor discipline was more intense for the subset of banks that adopted market price accounting.     

Market microstructure: A review from down under

The early automation of the Australian and New Zealand financial markets provided researchers with access to high‐frequency data to undertake extensive empirical market microstructure research. We use this anniversary edition of Accounting and Finance to review some of this research and to discuss the development of the Australian and New Zealand markets since their automation. We identify issues currently facing the markets and highlight potential areas for future research. The paper also provides a review of market microstructure theory on inventory control models and asymmetric information models.     

A comparison of trading and non-trading mechanisms for price discovery

This paper compares trading and non-trading mechanisms for price discovery during the Nasdaq pre-open and examines whether prices discovered though non-trading mechanisms are less efficient or reveal less information than prices discovered through trading. As Nasdaq pre-open trading volume increased, the opening price became more efficient and price discovery shifted from the opening trade to the pre-open. Price discovery shifted from the trading day to the pre-open only for the highest-volume stocks. These results suggest that pre-open trading contributes to the efficiency of the opening price, but that a critical threshold of trading volume is required to increase the amount of information in the opening price.     

A note on price limit performance: The case of illiquid stocks

In the Chinese stock markets, there are A-shares and B-shares. Both share-types have identical cash flow rights but different ownership structures (i.e., A-shares are owned by local Chinese citizens and B-shares are owned primarily by foreigners), causing B-shares to be less liquid relative to A-shares. However, even though B-shares have much wider bid—ask spreads than A-shares, both share-types are subject to the same 10% daily price limit regulation. As such, B-shares, simply due to their wider spreads, may be more inclined than A-shares to hit price limits. Our empirical results support this contention. The findings have policy implications. First, given wide spreads for illiquid stocks, exchanges may consider using midpoint prices (between bid and ask prices) to establish price limit ranges for illiquid stocks. In addition, and perhaps more importantly, exchanges may consider using wider price limits for less liquid classes of stocks.     

Rent Control with Matching Economies: A Model of European Housing Market Regulation

Housing markets are thin, and consumer search for housing is costly, time consuming, and risky. Mismatches between tenants and dwellings are common in a laissez-faire market. There are scale economies in accumulating tenants and houses and then matching them up to improve welfare. In many European countries, some housing is rent controlled and rationed by public centralized matching. Waiting time, risk in rationing, and risk in matching are costs that arise from such regulation. We show that welfare improvements over laissez-faire occur if gains from centralized matching can offset the decrease in housing quality, the possible increase in waiting times, and the risks in rationing induced by rent controls. Under regulation, there is a welfare maximizing partition of the stock into free and controlled markets; and contrary to observed practice, it is often welfare improving to set controlled rents above (not below) laissez-faire, which increases the supply offered for centralized matching and the opportunity for a better match.     

A股市场:在人民币升值预期背景之下

自从2005年7月21日人民币汇率不再盯住单一美元,而是实行以市场供求为基础、参考一篮子货币进行调节、有管理的浮动汇率制度以来,人民币一直呈现"稳步渐进"的升值趋势,截至2007年8月10日,人民币汇率已由当初的1美元兑8.11元人民币升至1美元兑7.5845元人民币,累计升值幅度达到6.929%.     

Market structure and the efficiency of European insurance companies: A stochastic frontier analysis

This paper is motivated by the progressive liberalisation of the European insurance market in recent years. It uses stochastic frontier analysis to estimate Flexible Fourier cost functions for European insurance companies. Separate frontiers are estimated for life, non-life and composite companies. We adopt a maximum likelihood approach to estimation in which the variance of both one-sided and two-sided error terms is modelled jointly with the frontiers. This approach allows us to simultaneously control for the impact of heteroskedasticity on the estimation of scale economies as well as estimating the effect of firm size and market structure on X-inefficiency. The study draws on Standard & Poor’s Eurothesys data set of financial reports for the period 1995 to 2001. This provides technical and non-technical accounts at year-end for life, non-life and composite insurance businesses in 14 major European countries. Our estimates suggest that over this period most European insurers were operating under conditions of decreasing costs (increasing returns to scale), and that company size and domestic market share were significant factors determining X-inefficiency. Larger firms, and those with high market shares, tend to have higher levels of cost inefficiency.     

Market price of risk specifications for affine models: Theory and evidence

We extend the standard specification of the market price of risk for affine yield models, and apply it to U.S. Treasury data. Our specification often provides better fit, sometimes with very high statistical significance. The improved fit comes from the time-series rather than cross-sectional features of the yield curve. We derive conditions under which our specification does not admit arbitrage opportunities. The extension has extremely strong statistical significance for affine yield models with multiple square-root type variables. Although we focus on affine yield models, our specification can be used with other asset pricing models as well.     

站稳欧洲市场：合作最重要

近几年来,在调整经济结构、调整能源结构、应对气候变化的重大背景之下,中国新能源产业一直在快速发展,特别是,中国的太阳能热利用、低温热利用始终在全球处于领先地位,为中国的节能减排做出了重大贡献。那么,未来如何发展？特别是如何在发达国家获得进一步发展？前不久,《太阳风热能源》杂志亚洲区编辑Sven Tetzlaff就中国企业如何在欧洲取得成功发表了看法。他说：     

The role of saving and investment in exchange rate determination under alternative monetary mechanisms

We argue that the demand for national currencies depends on existing payment arrangements for imports and exports. Therefore, exchange rate movements depend on these arrangement. As a result, the relationship between exchange rate movements and various macroeconomic aggregates — like saving and investment — depend on what we call the monetary mechanism. These points are explicitly demonstrated by studying two extreme monetary mechanisms, one in which all payments are done with the seller's currency and one in which all payments are done with the buyer's currency.     

A maximum likelihood approach to volatility estimation for a Brownian motion using high,low and close price data

Abstract

Volatility plays an important role in derivatives pricing, asset allocation, and risk management, to name but a few areas. It is therefore crucial to make the utmost use of the scant information typically available in short time windows when estimating the volatility. We propose a volatility estimator using the high and the low information in addition to the close price, all of which are typically available to investors. The proposed estimator is based on a maximum likelihood approach. We present explicit formulae for the likelihood of the drift and volatility parameters when the underlying asset is assumed to follow a Brownian motion with constant drift and volatility. Our approach is to then maximize this likelihood to obtain the estimator of the volatility. While we present the method in the context of a Brownian motion, the general methodology is applicable whenever one can obtain the likelihood of the volatility parameter given the high, low and close information. We present simulations which indicate that our estimator achieves consistently better performance than existing estimators (that use the same information and assumptions) for simulated data. In addition, our simulations using real price data demonstrate that our method produces more stable estimates. We also consider the effects of quantized prices and discretized time.     

Monetary union, price level convergence, and inflation: How close is Europe to the USA?

The pattern of price dispersion across European and US cities from 1990 to 2004 is documented. There is a striking decline in dispersion for traded goods prices in Europe, most of which took place prior to the launch of the euro. Dispersion in the euro area is now quite close to that of the USA. This evidence provides useful facts for future work assessing the importance of various developments in Europe: harmonization of tax rates, convergence of incomes and labor costs, liberalization of trade and factor markets, and increased coherence of monetary policy.     

Environmental engagement and stock price crash risk: Evidence from the European banking industry

This paper investigates the impact of banks' environmental engagement on their future stock price crash risk. Given the strong commitment of European institutions towards a low carbon economy, we focus on European banks, which are expected to be crucial actors in driving this challenge. Using a sample of 447 bank-year observations across 22 European countries from 2015 to 2021, we find a negative relationship between banks' environmental engagement and future stock price crash risk, in accordance with the signalling theory, suggesting that a high level of environmental engagement corresponds to high ethical standards of bank managers and high levels of financial transparency.     

Social media and price discovery: The case of cross-listed firms

In this article, we examine whether social media information affects the price-discovery process for cross-listed companies. Using over 29 million overnight tweets mentioning cross-listed companies, we examine the role of social media for a link between the last periods of trading in the US markets and the first periods in the UK market. Our estimates suggest that the size and content of information flows on social networks support the price-discovery process. The interactions between lagged US stock features and overnight tweets significantly affect stock returns and volatility of cross-listed stocks when the UK market opens. These effects weaken and disappear 1 to 3 hr after the opening of the UK market. We also develop a profitable trading strategy based on overnight social media, and the profits remain economically significant after considering transaction costs.     

A model of optimal portfolio selection under liquidity risk and price impact

We study a financial model with one risk-free and one risky asset subject to liquidity risk and price impact. In this market, an investor may transfer funds between the two assets at any discrete time. Each purchase or sale policy decision affects the rice of the risky asset and incurs some fixed transaction cost. The objective is to maximize the expected utility from terminal liquidation value over a finite horizon and subject to a solvency constraint. This is formulated as an impulse control problem under state constraints and we characterize the value function as the unique constrained viscosity solution to the associated quasi-variational Hamilton–Jacobi–Bellman inequality. We would like to thank Mihail Zervos for useful discussions.     

Asymmetric price rigidity and the responsiveness of customers to price changes: The case of deposit interest rates

This article examines differences in the level and type of price rigidity as it applies to different types of deposits offered by commercial banks. Numerous characteristics of the data set employed make it ideally suited for such an investigation. Three basic findings are presented. First, the degree of price rigidity observed for a product varies systematically with the quantity response to a price change likely to be exhibited by customers,with greater rigidity associated with less customer responsiveness. Second, price rigidity is asymmetric in the sense that greater rigidity is observed for upward movements in deposit rates than for downward changes. Finally, this observed asymmetry appears to be greater for cases in which customers are likely to exhibit less of a quantity response to a change in deposit rates.     

欧洲金融市场一体化进程中的金融中心研究

欧洲金融市场一体化目前已经达到了非常高的程度。对欧洲金融市场一体化进程中的金融中心的研究表明,金融市场一体化并不会导致欧洲只存在一个(或少数几个)金融中心,尽管欧洲金融中心体系内各层次金融中心的功能和作用有了调整,但欧洲多层次金融中心体系并没有因此而受到削弱。中国各区域之间同样正经历着一个金融市场日益融合的过程,因而欧洲的经验对于中国金融中心建设具有较强的借鉴意义。