Empirical Tests of Boundary Conditions for Toronto Stock Exchange Options

Using option and stock transaction data for the period 1978–1979, three issues were investigated: first, the conformance of observed prices to various boundary conditions; second, the evolution of the market over time, as the volume of trading and the number of listed options increased; and third, to test the efficiency of the market. It was found that violations did occur. Using a trading rule based on the signal of observed violations, the results suggest that even after transaction costs the market was inefficient over the sample period.     

Une expérience sur la précision des techniques d‘évaluation des probabilités en vérification

Résumé. Soixante-deux vérificateurs/praticiens ont pris part à une expérience d'estimation du solde d'un compte. Ayant reçu au préalable un matériel d'apprentissage à la fois écrit et oral, ils ont utilisé quatre techniques de déduction (FDC, FDP, EPE, et EFH) afin de quantifier leurs croyances subjectives ayant trait au solde de comptes clients d'un cas de vérification. Leurs réponses furent par la suite comparées aux résultats d'une étude de simulation portant sur six cents (600) échantillons, au moyen de la règle de pointage quadratique, de même qu'à la distribution résultant d'un consensus parmi tous les sujets en utilisant la mesure de Kolmogorov-Smirnov. Les résultats montrent que la technique de déduction FDP produit la distribution de probabilités préalables la plus précise pour utilisation dans le contexte de l'analyse Bayesienne. Les trois autres techniques de déduction se sont révélées égales entre elles, dans la mesure où leur précision était inférieure à celle de la technique de déduction FDP.     

Why do NASDAQ Market Makers Avoid Odd-Eighth Quotes?

The NASDAQ multiple dealer market is designed to produce narrow bid-ask spreads through the competition for order flow among individual dealers. However, we find that odd-eighth quotes are virtually nonexistent for 70 of 100 actively traded NASDAQ securities, including Apple Computer and Lotus Development. The lack of odd-eighth quotes cannot be explained by the negotiation hypothesis of Harris (1991) , trading activity, or other variables thought to impact spreads. This result implies that the inside spread for a large number of NASDAQ stocks is at least $0.25 and raises the question of whether NASDAQ dealers implicitly collude to maintain wide spreads.     

SCREENING AND MERGER ACTIVITY*

In our paper, the target of a proposed merger, by setting a reserve price, is able to screen prospective acquirers according to their (expected) ability to generate merger‐specific synergies. Both empirical evidence and many merger models suggest that the difference between high and low‐synergy mergers becomes smaller during booms. Thus, a target's opportunity cost for sorting out relatively less fitting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.     

The effects of differences in year‐round,full‐time labor market experience on gender wage levels in the United States

This paper utilizes longitudinal information on annual hours worked to construct a more robust measure of labor market experience for young workers in the USA. This enhanced experience measure is then used to assess recent gender wage differentials. Our experience measure yields a dramatic improvement in the ability of standard earnings regressions to explain the variation in wages across individuals, especially for young women. In addition, our results indicate that approximately one‐fourth of the gender difference in average wages is attributable to the higher work experience levels of men.