The Relationship Between Energy Commodity Prices and Electricity and Market Index Performances: Evidence from an Emerging Market

We investigate the effect of energy commodity price movements on market and electricity index returns in Turkey for the periods before, during, and after the year 2008. Although the Turkish economy is highly reliant on oil, we find that oil price does not lead either electricity or market indexes. This might be attributable to sluggish integration of financial markets in Turkey compared to developed markets. Natural gas price leads electricity index in the pre-2008 period. Its significance is reduced following the decline in natural gas usage in electricity production. This suggests that commodity dependence may be driving the link between commodity and asset prices in related sectors.     

The frequency and size of price changes: evidence from non-parametric estimations

The majority of price setting models predict a negative correlation between the frequency and size of price changes. Using a unique micro-level price data from Slovakia, we find that a negative correlation between frequency and size of price changes holds only for more rigid prices. On the other hand, less rigid prices such as gasoline prices exhibit positive correlation in line with Rotemberg's pricing model.     

The Dynamics of Gasoline Prices: Evidence from Daily French Micro Data

Using millions of individual gasoline prices collected at a daily frequency, we examine the speed at which market prices of refined oil are transmitted to retail gasoline prices in France. For that, we estimate a reduced‐form model of state‐dependent pricing where thresholds triggering price changes are allowed to vary over time and depend on the duration since the last price change. We find that the degree of pass‐through of wholesale prices to retail gasoline prices is on average 0.77 for diesel and 0.67 for petrol and depend on local market characteristics. The duration for a shock to be fully transmitted into prices is about 10 days. There is no significant asymmetry in the transmission of wholesale price to retail prices. Finally, the duration since the last price change has a significant effect on thresholds triggering price changes but a large variance of idiosyncratic shocks on thresholds is also crucial to replicate the size distribution of price changes.     

Are There Any Diversification Benefits Among Global Finance Center Candidates in Eurasia?

Several Eurasian markets are considered as potential global financial centers. The main objective of this article is to evaluate the two strong candidates, Russia and Turkey, based on short- and long-run diversification benefits they provide to global investors along with big four global finance centers (US, UK, Hong Kong, Singapore) in the world. To that respect, we investigate both price spillover and volatility spillover effects among global finance centers and the two strong Eurasian candidates. Our results suggest that Istanbul Stock Exchange (ISE) has more diversification benefits and is more resilient to risk transfers from other markets compared to Moskow Stock Exchange (MSE).     

Managerial actions and nominal stock price levels

We examine nominal and real stock prices and the sequential price pattern of stock dividends and stock splits. We find that the average stock price has been fairly stable over time except for two decades in the beginning and end of the twentieth century. Inclusion of these periods yield a decline over time which is generally consistent with the drop in price levels found by Chittenden et al. [2010. “A Note on Affordability and the Optimal Share Price.” Financial Review 45: 205–216]. In a multivariate setting, the frequency of stock dividends and stock splits is positively related to the frequency for these events the prior year and recent market return. In further tests of the price change we find a positive relationship to the median price change for stock dividends/splits and negatively to labour income growth for stock splits. These findings indicate that stock price reduction via stock dividends and splits attracts individual investors as income grows. One key conclusion is that the primary reason for any stock action, dividend or split, is to fit the ‘norm’ stock price level of the market.     

Identifying Price Reviews by Firms: An Econometric Approach

Price reviews are a potentially costly activity. A significant fraction of unchanged prices may stem from firms not reviewing prices, rather than from obstacles to changing prices per se, such as menu costs. In this paper, we disentangle these two causes of price stickiness by estimating an inflated ordered probit model on a panel of French manufacturing firms. The results point to a low frequency of price reviews, suggestive of the relevance of information costs as a determinant of the observed price stickiness. In view of the “inattentive producers” literature, pointing that the source of price rigidity matters, this is suggestive of a large real effect of monetary policy.     

Testing the bivariate mixture hypothesis using German Stock market data

According to the bivariate mixture hypothesis (BMH) as proposed by Tauchen and Pitts (1983) and Harris (1986, 1987) the daily price changes and the corresponding trading volume on speculative markets follow a joint mixture of distributions with the unobservable number of daily information events serving as the mixing variable. Using German stock market data of 15 major companies the distributional properties of the BMH is tested employing maximum-likelihood as well as generalised method of moments estimation techniques. In addition to providing a new approach for the pointwise estimation of the latent information arrival rate based on the maximum-likelihood method, we investigate the time-series properties of the BMH. the major results can be summarised as follows: (i) the distributional characteristics of the data (especially leptokurtosis and skewness in the distribution of price changes and volume respectively) cannot be explained satisfactorily by the BMH; univariate mixture models for price changes and trading volume separately reveal a possible specification error in the model; (ii) a univariate normal mixture model can account for the observed distributional characteristics of price changes; (iii) the estimated process of the latent information rate cannot fully explain the time-series characteristics of the data (especially the volatility clustering or ARCH-effects).     

Price Limits and Beta

Price limits, which restrict daily price changes of a stock within a pre-specified range, make the stochastic properties of observed returns deviate from those of true returns, and hence lead to a biased estimates of the market model parameters. To investigate the impacts of price limits on the market model parameters, especially on beta, the restricted regression analysis is performed as well as the two-pass regression analysis used in examining the intervalling effect bias on beta. Empirical results suggest that, when prices are observed within a pre-specified bound, the estimates of beta using ordinary least squares substantially understate the true beta and suffer more from the intervalling effect bias. However, the delay effect of price limits on the adjustment of a security's price does not last too long, that is, remaining information is reflected on the subsequent day's stock prices very rapidly.     

Frequency of Transaction and House Price Modeling

This article examines the characteristics and price behavior of repeatedly transacted properties. Using data from four U.S. counties, we estimate hedonic price models of properties grouped by transaction frequency, and compare estimated standard deviations and estimated appreciation rates by group.For each of four counties studied, we find that estimated house price appreciation is systematically higher among properties that transact more frequently. One possible explanation for this result is that purchasers make property improvements that are not adequately reflected in the available data.We also find that estimated standard deviations of the disturbance term show a marked decrease as the frequency of transaction increases. Since frequently transacting properties are not found to be systematically more homogeneous than seldomly transacting properties, we do not attribute this to any increase in homogeneity for frequently transacting properties, but rather to the length of time elapsed between transactions of properties.The findings of this article suggest that repeat-sales price models may need to be adjusted to account for cross-sectional variation in transaction probabilities---that is, the selectivity of the subsample of properties that transacted (or transacted repeatedly) during any finite study period.     

Quote inefficiency in options markets

In an arbitrage-free economy with non-zero bid-ask spreads the existence of payoffs whose price is lower than the price of a dominated payoff cannot be discarded in general. However, when the former price corresponds to trivial portfolios which involve buying or selling one unit of the basis assets, its presence, although not an arbitrage, is a severe market anomaly which we refer to as an inefficient quote. In an empirical study, we report evidence that indicates that in options markets both the frequency and the magnitude of these anomalies are substantial and we document puzzling patterns in their behavior.     

The Effect of Tick Size on Price Clustering and Trading Volume

Proposals have been made for some stock exchanges to reduce the size of their trading tick in order to lower transactions costs and, as a result, attract more trading volume and firm listings. We investigate the impact of tick size on price clustering and trading volume when the minimum price change varies with price level. Controlling the firm specific variables, we find that a smaller trading tick tends to exacerbate price clustering. Furthermore, a reduction in tick size is more likely to increase trading volume if the shares are heavily traded. These results suggest that previous studies on other stock markets may have overstated the benefits of a smaller trading tick to traders.     

Dollar exchange rate and stock price: evidence from multivariate cointegration and error correction model

In this paper, we investigate existence of long-run equilibrium relationships among the aggregate stock price, industrial production, real exchange rate, interest rate, and inflation in the United States. Applying Johansen's cointegration analysis to monthly data for the 1974:01-1998:12 period, we find that the S&P 500 stock price is positively related to the industrial production but negatively to the real exchange rate, interest rate, and inflation. Analysis of error correction mechanism reveals that the stock price, industrial production, and inflation adjust to correct disequilibrium among the five variables, while variance decompositions indicate that the stock price is driven to a considerable extent by innovations in the interest rate. Structural stability tests show that the parameters of the cointegrating system and the error correction term are stationary.     

On the origin of power-law tails in price fluctuations

We analyse large stock price changes of more than five standard deviations for (i) TAQ data for the year 1997 and (ii) order book data from the Island ECN for the year 2002. We argue that a large trading volume alone is not a sufficient explanation for large price changes. Instead, we find that a low density of limit orders in the order book, i.e. a small liquidity, is a necessary prerequisite for the occurrence of extreme price fluctuations. Taking into account both order flow and liquidity, large stock price fluctuations can be explained quantitatively.     

汇率与黄金价格的非对称传递效应——来自全球八大黄金产消地的经验证据

本文构建NARDL模型研究全球八大黄金产消地1990-2019年汇率波动与金价变动的联系.结果表明,长期看,主要黄金消费地印度、美国、土耳其金价对汇率下跌的正响应大于对汇率上升的负响应;主要黄金生产地澳大利亚金价对汇率波动的负向传递效应为正向传递的1.3倍;短期内,黄金供需弹性分化加剧主要产消地之间金价与汇率波动的异质...     

On the Asymmetric Recognition of Good and Bad News in France, Germany and the United Kingdom

We investigate whether accounting systems recognise bad news more promptly in earnings than good news, where news is proxied by changes in share price. The analysis is based on a sample of firm/years drawn from France, Germany, and the UK during 1990 to 1998. These three countries are the originators of three distinct legal traditions. Previous studies have argued that asymmetric recognition, one manifestation of conservative accounting, is sensitive to legal background and history. We find that in all three countries the contemporaneous association between earnings and returns is much stronger for bad news (i.e. when price changes are negative) than for good news, and although the results are strongest for the UK, and then France, the inter-country differences are not statistically significant. The stronger reaction to bad news is more pronounced for firms with relatively low capitalisation. We also find that the relative persistence of profits and losses are consistent with asymmetric recognition in France and the UK, but not in Germany, and that the more timely recognition of bad news is maintained even when we control for earnings persistence. When we extend the model to include price changes from previous periods, we see that the stronger reaction to bad news decays over time. The results from this model also suggest that 'pervasive' conservatism, unrelated to news, is observed in Germany and France, but the UK results are consistent with optimism. Although asymmetric recognition is generally strongest in the UK and weakest in Germany, and this broadly conforms to our expectations, the differences are less clear than the results from earlier periods.     

Behavioral Public Finance: Tax Design as Price Presentation

In this essay we review the evidence from marketing research about price presentation of consumer products and discuss how these lessons have been applied—consciously or unconsciously—in the design of the U.S. tax system. Our perspective is that, in most situations, the designers of the tax system attempt to minimize the perceived burden of any given amount of tax collections. We allow, though, that in certain situations an additional goal is to maximize the perceived burden of others. We also investigate how, when the objective is to encourage a particular activity, price presentation may enhance the achievement of that goal for a given amount of tax subsidy. We conclude by addressing the ethical and normative implications of price presentation in the tax system.     

Pricing Structure in Tokyo Metropolitan Land Markets and its Structural Changes: Pre-bubble,Bubble, and Post-bubble Periods

In this paper, we estimate hedonic price equations of Japanese commercial and residential land prices for a 25-year period and to investigate possible structural changes in these price equations. Our price equations are based on transaction prices, not appraised land values, of commercial land in Central Business Districts of Tokyo (Chiyoda Ward, Chuo Ward, and Minato Ward), and residential land of its suburb (Setagaya Ward). We find that price structure differs substantially among locations, reflecting differences in supplier pricing and end-user preferences. We also find significant structural changes in price structure, identifying pre-bubble, bubble and post-bubble periods.

Asymmetries in Price‐Setting Behavior: New Microeconometric Evidence from Switzerland

In this paper, we follow the recent empirical literature that has specified reduced‐form models for price setting that are closely tied to (S, s) ‐pricing rules. Our contribution to the literature is twofold. First, we propose an estimator that relaxes distributional assumptions on the unobserved heterogeneity. Second, we use the estimator to examine the prevalence of positive price changes in a low‐inflation environment. Our model estimates suggest that, if inflation falls from 0.9% to zero, the share of positive price changes in all price changes falls from 63.6% to 56.2%.     

The Effectiveness of Price Limits and Stock Characteristics: Evidence from the Shanghai and Shenzhen Stock Exchanges

We examine the effectiveness of price limits on Chinese A shares and investigate the characteristics of those stocks that hit their price limits more frequently. We find that the effect of price limits is asymmetric for the A shares in upward and downward price movements and different for bullish and bearish sample periods. During a bullish period price limits effectively reduce stock volatility for downward price movements, but not for upward price movements; while during a bearish period price limits effectively reduce stock volatility for upward price movements, but not for downward price movements. Second, price limits delay efficient price discovery for upward price movements, but not for downward price movements. However, we do not find evidence to suggest that price limits harmfully interfere with the stock trading processes in the Chinese A share markets. Finally, we find that actively traded stocks hit their price limits more often and tend to hit the lower limit more frequently when overall market conditions are bearish. Stocks with high book-to-market values of equity hit their upper price limits more frequently, while stocks with a high ratio of tradable shares tend to hit their price limits less frequently.JEL Classification: G10, G14, G15     

Volume and Volatility in Foreign Currency Futures Markets

In this paper we propose and test several hypotheses concerning time series properties of trading volume, price, short and long-term relationships between price and volume and the determinants of trading volume in forcign currency futures. The nearby contracts for British Pound, Canadian Dollar, Japanese Yen, German Mark and Swiss Franc are analyzed in three frequencies i.e. daily, weekly and monthly.We find supportive evidence for all the five currencies that the price volatility is a determinant of the trading volume changes. Furthermore, the volatility of the price process is a determinant of the unexpected component of the changes in trading volume. Also, there is a significant relationship between the volatility of price and the volatility of trading volume changes for three of the five currencies in the daily frequency and for one currency in the monthly frequency.