Option volume and volatility response to scheduled economic news releases

In this article, we examine the impact of 21 different types of scheduled macroeconomic news announcements on S&P 100 stock‐index option volume and implied volatility. We find that there is a 2‐h delay after the announcement before volume increases. However, there is an immediate increase in volatility, which slowly dissipates over several hours. Further analysis shows that most of the high volume and volatility after announcements come from the announcements that are considered bad news. That is, bad news creates high volatility and high volume, whereas good news elicits lower volume and is not associated with higher volatility. These results are not consistent with the predictions of any one model. We also find that the announcements that cause the largest reaction in the equity option market are Consumer Credit, Consumer Spending, Factory Inventories, NAPM, and Non‐Farm Payrolls. Six other announcements elicit a mild response. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:315–345, 2003     

The effect of spot and futures trading on stock index market volatility: A nonparametric approach

This article provides empirical evidence on the intraday relation between spot volatility and trading volume in the Spanish stock index futures market. GARCH methodology is used to estimate spot volatility. We analyze the potential relation between spot and futures trading volume and spot volatility by estimating the corresponding conditional density functions as proposed in Quah (1997). Our results reveal no significant link between those variables. Similar findings arise when expected and unexpected volume is considered. Our results suggest that derivative market is not a force behind episodes of significant spot jump volatility. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:841–858, 2003     

On the adequacy of single‐stock futures margining requirements

Unlike the traditional futures contract risk‐based approach to margining, new security futures contracts are margined under a strategy‐based margining system similar to that which applies in the equity options markets. As a result, these new margin requirements are potentially much less sensitive to changes in market conditions. This article performs a simulation to evaluate whether these alternative margining methodologies can be expected to produce comparable outcomes. The analysis suggests that a 1‐day settlement period will likely lead to collection of customer margins that are virtually always greater than that which its traditional risk‐based counterpart would require. A 4‐day settlement period would lead to margin requirements that both significantly under‐ and overmargin relative to a comparable risk‐based system. This study argues that exchanges may approach the preferred probability of customer exhaustion by managing margin settlement intervals. Thus, the new strategy‐based rules, in and of themselves, will not necessarily inhibit new security futures trading activity. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:989–1002, 2003     

MANAGING VENDOR INVENTORY IN A DUAL LEVEL DISTRIBUTION SYSTEM

Collaborative arrangements among members of the supply chain have received a great deal of interest in recent years as a means of reducing costs. One such arrangement is vendor managed inventory (VMI). VMI allows the vendor to make decisions concerning the quantity and timing of deliveries to the retailer. Such an arrangement offers the potential of a more efficient supply chain by removing the negative effects of retail ordering policies. A thorough review of the literature was conducted to identify factors likely to impact the performance of a VMI partnership. Computer simulation was used to study the effects of these factors from both the vendor's and retailer's perspectives. The results lend insight into the performance of VMI and guidance for managers as to the environments in which VMI is most effective.     

LOGISTICS OUTSOURCING RELATIONSHIPS: CUSTOMER PERSPECTIVES

This study attempts to infuse relationship marketing theory into the study of logistics outsourcing relationships. In particular, the study demonstrates that not all of the partnerships between customers and providers of third‐party logistics services are the same in terms of their level of development. The existence of distinct levels of partnership established previously in the logistics literature is partially supported and a relationship between level of partnership development and the customer perceptions of key relationship marketing elements and outcomes is established. While exploratory in nature, these findings suggest there are benefits for the increased costs of developing closer partnerships.     

Price rigidities and institutional variations in markets with posted prices

Summary Standard laboratory posted-offer markets respond slowly and incompletely to demand shocks. In these one-sided markets, where sellers control the setting of prices, very little information is transmitted via the process of exchange. For this reason, traders have trouble distinguishing randomness in their own experience from changes in market fundamentals. This paper reports the results of twelve laboratory markets conducted to assess whether some common variants to standard posted-offer rules can correct the adjustment deficiences. Although discounting, multiple postings and excess demand information all improve performance, we find that response remains poor, and efficiencies low.Support for this research was provided by the National Science Foundation (SBR 9319842 and SBR 9320044), and the University of Virginia Bankard Fund. Data are archived at FTP address: fido.econlab.arizona.edu. We wish to thank Charles Plott and Shyam Sunder for useful comments on an earlier draft of this paper. The usual disclaimer applies.     

Coordinated strategies for economic cooperation between Europe and the United States

Zusammenfassung Koordinierte Strategien für wirtschaftliche Zusammenarbeit zwischen Europa und den Vereinigten Staaten. - In diesem Aufsatz wird die dynamische Spieltheorie auf die Koordinierung der Politik zwischen den Vereinigten Staaten und der EWG in einem stark aggregierten Modell angewandt und folgendes gezeigt: (i) Eine Politik, die den Einflu\ von Ma\nahmen anderer L?nder vernachl?ssigt, führt in den USA zu Fiskalischen Einschr?nkungen und einer Verminderung der staatlichen Interventionen, in Europa dagegen zu einer Nachfragestimulierung, verbunden mit einer kontinuierlichen Herabsetzung des Diskontsatzes. Die EWG-L?nder sind, da sie ihre Politik nicht koordinieren, nach einigen Jahren wegen Zahlungsbilanzschwierigkeiten zu einer kontraktiven Nachfragepolitik gezwungen. (ii) Koordinierte Strategien best?tigen, da\ nicht-synchronisierte Politiken die Weltwirtschaft stabilisieren k?nnen. (in) Kooperation verbessert die wirtschaftlichen Leistungen, ausgedrückt in den Wachstumsraten und den Zahlungsbilanzen. Allerdings erbringt die ausdrückliche Zusammenarbeit kaum noch zus?tzliche Vorteile zu denen, die bereits im Rahmen der vollen Koordinierung erreicht werden k?nnen.

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Resumen Estrategias coordinadas de cooperación económica entre Europa y los EEUU.- La aplicación de un modelo dinámico de teoría de juegos a la coordinatión de política económica entre los EEUU y la CEE, como parte de un modelo altamente agregado de la economía mundial, permite concluír en este trabajo que (i) políticas que ignoran la influencia de medidas tomadas en otros países dan lugar a una contractión fiscal y a una menor interventión del Gobierno en los EEUU, pero a una estimulación de la demanda combinada con reducciones continuas de la tasa de descuento en Europa; al seguir políticas descoordinadas los países de la CEE están obligados a contraer la demanda agregada al cabo de unos a?os, debido a los problemas de balance de pagos, (ii) estrategias coordinadas confirman que políticas no sincronizadas pueden estabilizar la economía mundial; (iii) la cooperación favorece a la economía en términos de tasas de crecimiento y balance de pagos. Sin embargo, los beneficios adicionales de una cooperatión explícita resultan marginales en comparación con los beneficios ya alcanzados por la solución con coordinación total.

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Résumé Stratégies coordonnées pour la coopération entre l’Europe et les E.U. - En appliquant la théorie dynamique de jeu à la coordination de politique entre les E.U. et la CEE dans un modèle fortement agrégé de l’économie mondiale, cet article arrive aux conclusions suivants: (i) La politique qui ignore l’influence des actions suivies dans d’autres économies mène à la réduction fiscale et à moins interventions gouvernementales dans les E.U., mais à une stimulation de la demande avec des réductions continuelles du taux d’escompte en Europe. En cas d’une politique pas coordonnée les pays CEE sont forcés à prendre des mesures pour freiner la demande agrégée après quelques années à cause des problèmes de la balance des paiements. (ii) La stratégie coordonnée confirme que des politiques pas synchronisées pourraient stabiliser l’économie mondiale. (iii) La coopération peut élever le taux de croissance et améliorer la balance des paiements. Cependant, les gains additionnels d’une coopération explicite sont petits en comparaison avec les bénéfices déjà gagnés à l’aide d’une solution complètement coordonne’e.

     

Recall and recognition effects of brand name imagery

The strategic marketing decision regarding the selection of a brand name has long been an area neglected by academic researchers. This study attempts to apply psychological theory to this important strategic decision area. Specifically, the applicability of a dual-coding theory of memory to brand name recall/recognition is tested in an experimental setting. Results indicate, on average, a significant one hour and two day recall/recognition advantage of high imagery over low imagery brand names across a variety of product categories.