LIQUIDITY AND QUOTE CLUSTERING IN A MARKET WITH MULTIPLE TICK SIZES

We analyze market liquidity (i.e., spreads and depths) and quote clustering using data from the Kuala Lumpur Stock Exchange (KLSE), where the tick size increases with share price in a stepwise fashion. We find that stocks that are subject to larger mandatory tick sizes have wider spreads and less quote clustering. We also find that liquidity providers on the KLSE do not always quote larger depths for stocks with larger tick sizes. Overall, our results suggest that larger tick sizes for higher priced stocks are detrimental to market liquidity, although the adverse effect of larger tick sizes is mitigated by lower negotiation costs (i.e., less quote clustering).     

THE 2002 US FARM BILL: A MORE POSITIVE ASSESSMENT

The 2002 US Farm Bill: A More Positive Assessment Recent experience in the US strongly suggests that, given political realism, price instability is now the over‐riding problem of agricultural policy. From this perspective, the re‐adoption of deficiency payment support in the 2002 Farm Bill seems sensible. To critics who claim otherwise, on the ground that deficiency payments are not decoupled, it is argued here that decoupling is an empty concept for which empirical evidence is lacking, at least in agriculture. Being fixed, decoupled payments are not stabilising. The 2002 Farm Bill would have been even better if its fixed PFC payment element, inherited from the 1996 FAIR Act, had been omitted. Recent US experience with farm policy holds valuable lessons for CAP reform, including the need to ensure that producers are backed by an adequate price stabilising instrument. La loi agricole américaine 2002: une interprétation plus positive Sauf à manquer de réalisme politique, ? experience recente des Etats Unis conduit à considèrer ? instabilityé des prix comme le problème majeur de la politique agricole. De ce point de vue, ?‘adoption ?’ un système de ‘paiements compensatoires’ (deficiency payment) dans la loi agricole 2002 n'est pas dépourvu de sens. A ceux qui, au motif que les paiements compensatoires ne sont pas découples, disent le contraire, on répondra que le découplage est un concept vide de sens, dont ? existence n'est attestée par aucune étude empirique, en tout cas en agriculture. De par leur flxité même, les primes decouplers ne peuvent contribuer a la stabilisation. La loi agricole 2002 aurait été encore meilleure si elle avait supprime les primes fixes ‘PFC,’ héritées du FAIR act de 1996. Pour la PAC, il y a beaucoup de le?ons à tirer de cette expérience que les Etats Unis viennent de faire avec leur politique agricole, notamment la nécessité? adosser les producteurs à un système adéquat de stabilisation. Das US Landwirtschaftsgesetz von 2002 Eine etwas positivere Die jüngsten Erfahrungen aus den USA legen es nahe, dass bei realistis‐cher politischer Einschätzung die Preisinstabilität heute das größte Problem für die Agrarpolitik darstellt. Aus dieser Sicht erscheint die Wiederaufnahme der Stützung durch ‘deficiency payments’ (Produktsubventionen) in das Landwirt‐schaftsgesetz sinnvoll. Den Kritlkern, die das Gegenteil behaupten, da es sich bei deficiency payments nicht um entkoppelte Zahlungen handele, wird hier entgegen gehalten, dass es sich bei der Entkopplung um einen leeren Begriff handelt, für welchen zumindest im Bereich der Landwirtschaft keine empirischen Beweise vorliegen. Da entkoppelte Zahlungen vorab festgelegt werden, wirken sie sich nicht stabilisierend aus. Das Landwirtschaftsgesetz von 2002 würde noch besser greifen, wenn die aus dem FAIR‐Gesetz von 1996 ubernommenen festgelegten PFC (production flexibility contracts)‐Zahlungen nicht mit aufgenommen worden wären. Aus den jüngsten Erfahrungen mit der Agrarpolitik in den USA ergeben sich wertvolle Lehren in Hinblick auf die Reform der GAP; unter anderem die Notwendigkeit, dass die Produzenten durch ein geeignetes Instrument zur Preisstabilisierung geschützt werden.     

Option Delisting of Stocks That Continue Trading: An Examination of Welfare Effects

This paper addresses the resulting effects from the delisting of options on underlying stocks that continue to trade. The evidence generally supports the argument that options in this sample are delisted as a result of financial difficulty and/or a lack of interest. An insignificant average abnormal return and a small significantly negative average standardized abnormal return are observed around the delisting date, but the average price effect is determined to be considerably less than the normal discrete trading intervals at which stocks trade on exchanges. There are no effects found on volatility measures directly attributable to option delisting.     

Implied Risk Aversion Parameter from Option Prices

This paper estimates the representative investor's coefficient of relative risk aversion using option price data. Estimation is carried out using the method of simulated moments. Employing the following assumptions: a) agents have constant proportional risk averse preferences, b) complete markets exist, and c) asset returns are distributed lognormally, an objective function is constructed within the equivalent martingale measure framework. Unlike the case of equity markets, the implied risk aversion parameter from option prices is quite low and stays between zero and one.     

Economics and urban transportation policy in the United States

This article examines the role that economics can play in analysing problems with urban transportation in the United States. The specific problems addressed are failing infrastructure, financially weak public transit, environmental impacts of motor vehicles, motorvehicle accidents, and traffic congestion. Simple quantitative analyses, even though approximate, can help to focus attention on the most promising classes of policies. Those classes involve some technological measures and some narrowly targeted behavioral changes, but not the widespread curtailment of motor vehicle use.     

Editor's Introduction

From May 19 to May 21, 2005, the Business History Conferenceheld its annual meeting in Minneapolis, Minnesota. The programcommittee of Steven W. Usselman (chair), Tracey Deutsch, HelenShapiro, Steven Tolliday, and JoAnne Yates put together a marvelousprogram. The local arrangements