The divergence of liquidity commonality in the cross-section of stocks

This paper demonstrates that the cross-sectional variation of liquidity commonality has increased over the period 1963–2005. The divergence of systematic liquidity can be explained by patterns in institutional ownership over the sample period. We document that our findings are associated with similar patterns in systematic risk. Our analysis also indicates that the ability to diversify systematic risk and aggregate liquidity shocks by holding large-cap stocks has declined. The evidence suggests that the fragility of the US equity market to unanticipated events has increased over the past few decades.     

Interactions between network operators,content producers and internet intermediaries: Empirical implications of network neutrality

Economically the net neutrality debate focuses on the question whether services of different quality should be subject to price discrimination. The debate strongly affects the interaction between the players that are involved in the provision of online content. The authors analyse this interaction and find important synergies between suppliers along the value chain. The revenues of all players depend on investment in networks which determines the quality of content. The benefits of policies that support net neutrality are unequally distributed among the different players. This might explain diverging policy approaches in the USA and Europe.     

How does European termination rate regulation impact mobile operator performance?

This paper presents an empirical study of the impacts of mobile termination rate (MTR) regulation on European mobile operator performance. It examines the effects of both glide path and asymmetric regulation on incumbents as well as new entrants to this market using a dynamic econometric model accounting for internal and cross performance effects. The study provides strong supportive evidence for current MTR regulation in Europe.     

The collapse of the Soviet Ministries: Economic and legal transformation

Facing a free-falling economy, the presidents of the Commonwealth of Independent States (formerly the Soviet Union), led by Russian President Boris Yeltsin, began to administer shock therapy in order to transform their economy into a market-driven economy as soon as possible. On January 1, 1992, a series of decrees by Yeltsin freed almost all prices, privatized ownership of most land, permitted privatization of collective farms, motivated privatization of all small enterprises, and enabled the transfer of almost all state enterprises into joint stock companies. A few days later, other Commonwealth states, such as the Ukraine and Byelorussia, adopted similar measures. As a result, five full years after the far-reaching concept of perestroika was put forth by Mikhail Gorbachev, 1992 seems to be the year of the acid test of the market economy in the Commonwealth. In the meantime, over 80 ministries, which had controlled the Soviet economy, collapsed. What do these changes mean to the international executive in terms of risk, opportunity, and strategy?     

The effects of randomizing the opening time on the performance of a stock market under stress

To tackle challenges from derivatives trading and illiquidity, reduce manipulation and improve price discovery, many exchanges have started opening at random times. We investigate how randomization has affected the performance of the Tel Aviv Stock Exchange at trade opening and at the expiration of stock-index derivatives. Randomization has improved price discovery and reduced excess volatility and price distortion, especially on expiration dates. Although preopening prices do not converge to full information values, post-randomization, opening prices on expiration days are at least as accurate as on other days. Spot market trading systems significantly impact the effects of derivatives on spot prices.     

ACTIVITY SELECTION UNDER CONDITIONS OF RISK AND INSTABILITY: CONSIDERATION OF FREQUENCY

The terms ‘instability’ and ‘risk’ are sometimes used interchangeably in the literature. Some make the argument that instability will shift the firm's supply curve to the left if the producer is risk-averse Risk, however, is associated with the unpredictable residuals, or deviations from the producer's revenue expectations. The inherent instability of these returns does not necessarily imply an added exposure to risk as long as the producer forms his expectations based on the entire information set available to him when constructing the mathematical model representing his judgement on the variables' future behaviour. The producer may also respond to the relative instability of the returns generated by an enterprise even if risk, as defined above, is perceived to be non-existent. The existence of prediction errors exposes the producer to conditions of choice under risk while the predictable component exposes the producer to conditions of choice under instability. His preferences with regard to risk and instability may be quite different. The purpose of this paper is to extend the traditional planning model under risk to account for the producer's attitude toward the predicted instability of returns over time, and to illustrate the effect that this attitude will have upon his production plans.     

Competition in telecommunication networks with call externalities

This paper describes a model involving two interconnected networks offering different degrees of quality. In these networks, there are call externalities enabling consumers to assess the quality of the calls they send and receive. Networks compete in two-part tariffs. Our aim is to show that the “profit neutrality” result no longer applies due to network asymmetry and call externalities. In the case of non reciprocal access charges, call externalities generate private incentives enabling each competitor to charge low access prices. This reduces the risk of tacit collusion as competitors are free to negotiate their access charges.      

Financialization in the American Pharmaceutical Industry: A Veblenian Approach

Thorstein Veblen’s theory of the business enterprise holds that business interests come to dominate industrial interests, with pecuniary returns being the dominant mindset under which economic activity is conducted. Under moneymanager capitalism, this is reflected in the increasing importance of profits from financial channels and the accumulation of intangible rent-generating assets to serve as the basis for capitalization — a process known as financialization. I examine this process of intangible asset accumulation within the context of the American pharmaceutical industry using Veblen’s theory of the business enterprise as a lens. I show that intangible assets have come to dominate productive capital on pharmaceutical enterprise balance sheets, suggesting that pharmaceutical profits are accumulated through rent-seeking channels rather than productive ones, in line with Veblen’s theory, and provide evidence of the financialization of this industry.