A Parimutuel Market Microstructure for Contingent Claims

Parimutuel principles are widely used as an alternative to fixed odds gambling in which a bookmaker acts as a dealer by quoting fixed rates of return on specified wagers. A parimutuel game is conducted as a call auction in which odds are allowed to fluctuate during the betting period until the betting period is closed or the auction ‘called’. The prices or odds of wagers are set based upon the relative amounts wagered on each risky outcome. In financial microstructure terms, trading under parimutuel principles is characterised by (1) call auction, non‐continuous trading; (2) riskless funding of claim payouts using the amounts paid for all of the claims during the auction; (3) special equilibrium pricing conditions requiring the relative prices of contingent claims equal the relative aggregate amounts wagered on such claims; (4) endogenous determination of unique state prices; and (5) higher efficiency. Recently, a number of large investment banks have adopted a parimutuel mechanism for offering contingent claims on various economic indices, such as the US Nonfarm payroll report and Eurozone Harmonised inflation. Our paper shows how the market microstructure incorporating parimutuel principles for contingent claims which allows for notional transactions, limit orders, and bundling of claims across states is constructed. We prove the existence of a unique price equilibrium for such a market and suggest an algorithm for computing the equilibrium. We also suggest that for a broad class of contingent claims, that the parimutuel microstructure recently deployed offers many advantages over the dominant dealer and exchange continuous time mechanisms.     

(Unusual) weather and stock returns—I am not in the mood for mood: further evidence from international markets

This paper investigates the explanatory power of weather variables deviations in two leading international financial trading centres (New York and London) on 58 global stock indices over the period September 2000 to December 2013. The empirical results find that unusual deviations of weather variables from their monthly averages have a statistically significant effect on stock returns across global returns. The paper also attempts to explain these effects through the sales and energy prices mechanisms. The results provide strong support to both mechanisms.     

Keeping anger in check: The role of personal and organizational characteristics on behavioral outcomes

ABSTRACT

The food and beverage sector of the hospitality industry is known for being an emotionally labor-intensive environment. The events that transpire over the course of a shift lead to various emotions, which ultimately dictate the behaviors of the employees working in this industry. Of particular interest to this study was the interplay between environmental antecedents (power and distributive justice) and their influence on a negative emotion (anger) and a positive emotion (affective organizational commitment). Additionally, this study sought to understand how anger and affective organizational commitment influenced positive (organizational citizenship behavior) and negative (counterproductive work behavior) workplace behaviors using the lens of the affective events theory. The results of this study revealed that anger had the strongest effect on counterproductive work behavior and that all of the relationships were significant except from anger to affective organizational commitment and affective organizational commitment to counterproductive work behavior.     

Shipping cost and development of the landlocked developing countries: Panel evidence from the common correlated effects approach

We estimate the impact of shipping cost on development for landlocked developing countries (LLDCs). Since container trade is important to them, we construct a country-specific measure of shipping cost, called HarpexCost, which combines the global cost of container shipping with information on how exposed to container shipping each LLDC is. We employ the common correlated effects (CCE) estimator of Pesaran (Econometrica, 2006; 55: 967) to first estimate the impact of HarpexCost on the LLDCs’ development, and then recover the actual impact of shipping cost from these estimates. Overall, we observe that shipping cost has large negative effects on the LLDCs. Building upon these results, we provide new estimates on the cost of landlockedness and how trade benefits their development.     

BlackBerry in red China: Research in motion navigates institutional barriers in an emerging market. Case comment: RIM in China

Research in Motion's (RIM's) entry into the Chinese market during a time when many distractions —principally a patent dispute with NTP—occupied management's attention was not a foregone conclusion. China remained a difficult market to crack. One holdup was an impasse with regard to RIM's use of encryption technology and the Chinese authorities' desire to monitor e‐mail traffic and content. Here the technical and political concerns were entangled. To further complicate things, the entirety of RIM had until recently been preoccupied with the legal settlement with NTP in the United States. Issues in this study highlight real‐world dilemmas in a thriving firm. The founders are still in charge, and new markets present themselves regularly. A very real challenge is divided attentions. The standstill over market entry calls for integrative thinking—bringing together disparate and contradictory elements for resolution. RIM's way out will invariably involve embracing complex relationships in order to find a resolution to the various conflicting institutional forces. © 2008 Wiley Periodicals, Inc.