An Investigation of Transactions Data for NYSE Stocks

Using transactions data, the behavior of returns and characteristics of trades at the micro level is examined. A minute-by-minute market return series is formed and tested for normality and autocorrelation. Evidence of differences in return distributions is found among overnight trades, trades during the first 30 minutes following the market opening, trades at the close, and trades during the remainder of the day. The latter distribution is found to be normal. Unusually high returns and standard deviations of returns are found at the beginning and the end of the trading day. When the beginning-and end-of-the-day effects are omitted, autocorrelation in the market return series is reduced substantially. A number of patterns in trading are reported.     

The 52-Week High and Momentum Investing

When coupled with a stock's current price, a readily available piece of information—the 52‐week high price–explains a large portion of the profits from momentum investing. Nearness to the 52‐week high dominates and improves upon the forecasting power of past returns (both individual and industry returns) for future returns. Future returns forecast using the 52‐week high do not reverse in the long run. These results indicate that short‐term momentum and long‐term reversals are largely separate phenomena, which presents a challenge to current theory that models these aspects of security returns as integrated components of the market's response to news.     

LIFE INSURANCE COMPANY RISK EXPOSURE: MARKET EVIDENCE AND POLICY IMPLICATIONS

Life insurance company (LIC) risk exposure increased during the 1980s while capital ratios declined. State guarantee funds that exist to handle policyholder's losses in the event of LIC failure can create incentives for excessive risk taking, just as the federal deposit insurance system did for savings and loan associations. This paper examines the relationship between stock market risk and LIC risk exposure. A sample of 44 LICs revealed that stock market risk is positively related to financial leverage as well as to differences in asset mix. This finding confirms that market data can help identify LICs with greater risk exposure .     

ADVERTISING SUNK COSTS AND CREDIBLE SPATIAL PREEMPTION

Large sunk investments in advertising allow managers to credibly preempt potential entrants by introducing new products prior to anticipated increases in market growth. Previous investment in advertising can lower a firm's cost to introduce new products allowing it to credibly preempt potential entrants. Entrants may not have enough residual share to find it profitable to enter later, and incumbents find it profitable to keep new products in the market even if entrants choose to enter. I present empirical evidence from the RTE cereal industry.     

Consumption and Income Inequality in Australia

Consumption may be a more appropriate measure of household well-being than income or earnings. Using four ABS Household Expenditures Surveys collected between 1975 and 1993, we compare trends in consumption and income inequality among Australian households. We find that consumption is much more equal than income. While there were significant increases in both income and consumption inequality, consumption inequality rose by much less. One interpretation of the results is that some income inequality in Australia reflects transitory fluctuations which households can smooth,'and that part of the growth in income inequality reflects an increase in these transitory fluctuations.