Life in the pits: competitive market making and inventory control

We use futures transaction data to investigate cross-sectionalrelationships between market-maker inventory positions and tradeactivity. The investigating documents strongly that traderscontrol inventory throughout the trading day. Despite this evidenceof inventory management, typical inventory control models predictthat market-maker reservation prices are negatively influencedby inventory. Surprisingly, our evidence shows, as a strongand consistent empirical regularity, that correlations betweeninventory and reservation prices are positive. We interpretthe evidence as consistent with active position takeing by futuresmarket floor traders.     

Measures of hospital market structure: a review of the alternatives and a proposed approach.

Efforts to evaluate the plethora of recent programs adopted by public and private payers to promote hospital price competition critically depend on the availability of measures of local market structure. To gauge the effects of these policies, researchers must be able to delineate hospital market areas and measure the intensity of competition within these markets. This article reviews alternative methods that have been used to define hospital market areas and measure market structure. We propose an empirical patient origin-based method for measuring hospital market structure. The results of sensitivity analyses using data on California hospitals demonstrate the robustness of our measures over a broad range of parameter values.     

Why organic food in Germany is a merit good

The conventional view of welfare economics is that subsidies for organic food are inefficient. This paper challenges this view and argues that subsidies for organic food may be justified by the concept of individualistic merit goods. Therefore, the concept of individualistic merit goods is briefly reviewed. Market preferences and reflective preferences for organic food in Germany are described. It is then shown how they relate to political preferences. Finally, it is argued how economic theory in general and food policy in particular should take account of the existence of merit goods.     

Explaining the Rate Spread on Corporate Bonds

The purpose of this article is to explain the spread between rates on corporate and government bonds. We show that expected default accounts for a surprisingly small fraction of the premium in corporate rates over treasuries. While state taxes explain a substantial portion of the difference, the remaining portion of the spread is closely related to the factors that we commonly accept as explaining risk premiums for common stocks. Both our time series and cross-sectional tests support the existence of a risk premium on corporate bonds.     

An income distribution model for Mexico

Employing a multiple regression model, the purpose of the study is to statistically analyze the variations in income concentration between the federal entities of Mexico. The model presented accounts for 72 percent of inter-state variations in individual income concentration.     

A model of R&D leadership and team communication: the relationship with project performance

Industrial research and development (R&D) involves the processing and transformation of new knowledge into a commercially valuable outcome. Communication is an effective mechanism to translate, share and integrate new information into commercial products or processes. We developed a five-factor model of team communication comprising: leadership role performance, team boundary spanning, communication safety, team reflexivity and task communication and tested the model using a one-year longitudinal study. Analyses were conducted on team level data from 56 teams, comprising 350 employees. Independent measures of project performance were obtained from surveys of research managers as well as project customers. Three findings emerged. Different factors predicted different stakeholders' ratings of project performance. Communication safety was the strongest predictor of customer ratings of performance. Boundary spanning is most effective when performed by the project leader not the team.     

Dynamic mode decomposition for financial trading strategies

We demonstrate the application of an algorithmic trading strategy based upon the recently developed dynamic mode decomposition on portfolios of financial data. The method is capable of characterizing complex dynamical systems, in this case financial market dynamics, in an equation-free manner by decomposing the state of the system into low-rank terms whose temporal coefficients in time are known. By extracting key temporal coherent structures (portfolios) in its sampling window, it provides a regression to a best fit linear dynamical system, allowing for a predictive assessment of the market dynamics and informing an investment strategy. The data-driven analytics capitalizes on stock market patterns, either real or perceived, to inform buy/sell/hold investment decisions. Critical to the method is an associated learning algorithm that optimizes the sampling and prediction windows of the algorithm by discovering trading hot-spots. The underlying mathematical structure of the algorithms is rooted in methods from nonlinear dynamical systems and shows that the decomposition is an effective mathematical tool for data-driven discovery of market patterns.     

Doing it the Swiss Way

Doing it the Swiss Way In the mid‐nineties, Switzerland changed from a high‐price support policy to a policy‐concept that was designed to guarantee a multifunctional agriculture. This change was brought about by some plebiscites in which people first voted against simply switching to direct payments not bound to environmental quality and then decided in favour of a direct payment system with a strong emphasis on environmental quality. Farmers now receive most direct payments if they comply with certain minimum environmental standards, and additional payments for additional improvements to ecological quality as defined at the national level. New regulations that enable the support of regional networks which deliver particularly high ecological quality are of particular interest. At the same time, the importance of market support is decreasing rapidly. The experience with this system can be evaluated according to how structural change in agriculture is buffered, how the ecological quality of Swiss landscapes is maintained or enhanced and the effectiveness of the individual programmes. All three yardsticks lead to fairly positive results. This suggests that a rational agricultural policy approach does not necessarily mean liberalisation. A multifunctional concept of agriculture may allow substantial intervention by the state. Faites le à la Suisse Dans le courant des années 90, la politique agricole Suisse est passée ?un soutien fondé sur des prix élevés à un système destinéà assurer ?existence ?une agriculture multifonctionnelle. Ce changement est la conséquence ?une série de votes‐référendum dans lesquels les électeurs ?abord repoussèrent ?idée de paiements directs sans lien avec ?environnement puis, ensuite, adoptèrent un système de paiements directs mettant ?accent sur la qualité de ?environnement. A ?heure actuelle, pour recevoir la plus grande partie de leurs paiements directs, les agriculteurs doivent respecter certains standards environnementaux minimums. Ils ont droit à des paiements supplémentaires s'ils améliorent la qualité ecologique de leur environnement, telle qu'elle est définie au niveau national. Un intérêt spécial s'attache aux nouveaux règlements qui permettent de soutenir des réseaux régionaux susceptibles de conduire à une qualitéécologique particulière. En même temps, le volume des soutiens directs aux marchés est en baisse rapide. Pour évaluer ce système, il faut examiner comment les changements structures en agriculture sont amortis, si la qualité des paysages suisses est maintenue ou améliorée, et si les programmes individuels sont efficaces. Chacun de ces critères conduit à une appréciation positive, ce qui montre qu'une approche rationnelle de la politique agricole n'est pas forcément synonyme de libéralisation. Le caractère multifonctionnel de ?agriculture peut justifier une assez large intervention de ?Etat. Auf schweizerische Art. Mitte der 1990er Jahre veränderte die Schweiz ihre Politik der Hochpreisstützung hin zu einer Politik, die eine multifunktionale Landwirtschaft garantieren sollte. Diese Veränderung wurde durch mehrere Volksentscheide herbeigeführt, im Laufe derer sich das Volk zunächst dagegen entschied, direkte Zahlungen einzuführen, welche nicht an die Qualität der Umwelt gebunden sind; später jedoch entschied sich das Volk für direkte Zahlungen mit starker Berücksichtigung der Umweltqualität. In den meisten Fällen erhalten die Landwirte nun direkte Zahlungen, wenn sie bestimmte Mindeststandards im Hinblick auf die Umwelt erfüllen, und zusätzliche Zahlungen, wenn sie zusätzlich zur auf nationaler Ebene festgelegten ökologischen Qualität beitragen. Neue Bestimmungen, welche die Unterstützung von regionalen Netzwerken ermöglichen, welche eine besonders hohe ökologische Qualität hervorbringen, sind von besonderem Interesse. Zugleich nimmt die Bedeutung von marktstützenden Maβnahmen rapide ab. Die Erfahrungen mit diesem System können danach bewertet werden, wie der Strukturwandel in der Landwirtschaft abgefedert wird, wie die ökologische Qualität der schweizerischen Landschaft aufrecht erhalten oder verbessert wird, sowie anhand der Wirksamkeit der einzelnen Programme. Alle drei Maβstäbe führen zu recht positiven Ergebnissen. Dies legt nahe, dass ein rationaler Ansatz für die Agrarpolitik nicht notwendigerweise eine Liberalisierung bedeutet. Ein multifunktionales Verständnis von Landwirtschaft könnte eine beträchtliche staatliche Intervention zulassen.