How useful are signals? A micro-structure analysis

We analyze how the market processes a signaling event by studying a sample of self-tender offers, events often viewed as signals of firm value. By examining changes in the degree of informed trading, we find asymmetric information costs fall at announcement, remain low throughout the event, and increase at offer expiration. By one month following expiration, informed trading returns to a level not significantly different from that prior to the offer. Higher risk firms have significantly larger declines in information asymmetry during the offer. Increases in information asymmetry persist one month following expiration for firms with lower pre-offer informed trading. (JEL G14, G32)     

Relative importance of scheduled macroeconomic news for stock market investors

This paper investigates the relative importance of scheduled U.S. macroeconomic news releases for stock valuation. The study focuses on 11 macroeconomic announcements selected on the basis of the previous literature and the Bureau of Labor Statistics classifications of major economic indicators. The paper shows that five out of the 11 announcements have significant influence on stock valuation. These are the Employment Report, NAPM (manufacturing), Producer Price Index, Import and Export Price Indices, and Employment Cost Index. Of these six announcements, the Employment Report and NAPM (manufacturing) exert the greatest influence. The time of the announcement, measured by days from the beginning of the month to the release day, has a moderating impact on the relationship between macroeconomic announcements and its importance.     

Growth,Convergence, and Social Cohesion in the European Union

The aim of this paper is to analyze the economic and social cohesion in the European Union. There are different factors to explain the convergence process and besides, empirical findings are not conclusive. To the European Union, GDP per head interregional differences have decreased for certain periods but it has remained unchanged or even increased for others periods. The second report on the economic and social cohesion indicates that some decades are necessary to eliminate regional differences. These differences in regional GDP are mainly explained by differences in their productive structures, degree of innovate activity, communications structures, which depend on the relative level of transport infrastructures, and manpower qualifications. This analysis allows us to obtain some conclusions to the economic policies and the social cohesion. A preliminary version of this paper was presented in the 57th International Atlantic Conference, held in Lisbon, Portugal, March 10–14, 2004.     

Unit and Fractional Roots at the Long Run and the Seasonal Frequencies in Macroeconomic Time Series

In this article, we show that macroeconomic time series may contain unit and fractional roots at both, at zero and at zero and at the seasonal frequencies. The importance of the root at the long run or zero frequency requires in many cases to consider this root at both, separately in an independent polynomial, and also included in the seasonal one. Several Monte Carlo experiments are conducted to examine cases when the root at the zero frequency is not appropriately considered. An empirical application based on the tests of Robinson, Peter M. “Efficient Tests of Nonstationary Hypotheses,” Journal of the American Statistical Association, 89, 1994, pp. 1420–37 is also carried out at the end of the article.The author gratefully acknowledges financial support from the Government of Navarra (“Ayudas de Formación e Investigación y Desarrollo”).     

Cost Uncertainty and Unilateral Abatement

Unilateral abatement is sometimes advocated in order to set a good example that will make other countries follow. The aim of this paper is to investigate whether existence of correlated cost uncertainty provides an incentive for a country to undertake unilateral abatement. The theoretical model is driven by two main mechanisms; first, a learning effect, as the follower country might reduce its risk premium as it can observe the cost level in the leader country. Second, there is the public good effect, i.e., the marginal benefit of abatement declines when abatement is a public good and other countries contribute to pollution reductions. Results shows that unilateral abatement would be efficient in reducing uncertainty about the unit costs of abatement if a country with low cost uncertainty would undertake abatement first, while a country with initially high cost uncertainty would follow. However, countries may prefer to act simultaneously because of the larger uncertainties that are inherent in a sequential game.      

The knowledge management strategy and the formation of innovative networks in emerging industries

This paper presents an agent-based simulation model with local network externality to analyze strategic interactions over investment on new economic knowledge. R&D knowledge flows and spillovers are the results of non-cooperative games played between neighboring agents in the model. The model demonstrates a situation where no agents have incentives to hide their economic knowledge, a situation that is observed in open source software development projects. The likelihood of obtaining a stable situation where new economic knowledge is openly shared is increased when heterogeneity of agents is introduced.      

A note on strategies for bandit problems with infinitely many arms

A bandit problem consisting of a sequence of n choices (n) from a number of infinitely many Bernoulli arms is considered. The parameters of Bernoulli arms are independent and identically distributed random variables from a common distribution F on the interval [0,1] and F is continuous with F(0)=0 and F(1)=1. The goal is to investigate the asymptotic expected failure rates of k-failure strategies, and obtain a lower bound for the expected failure proportion over all strategies presented in Berry et al. (1997). We show that the asymptotic expected failure rates of k-failure strategies when 0<b1 and a lower bound can be evaluated if the limit of the ratio F(1)–F(t) versus (1–t)^b exists as t1^– for some b>0.