Currency Orders and Exchange Rate Dynamics: An Explanation for the Predictive Success of Technical Analysis

This paper documents clustering in currency stop‐loss and take‐profit orders, and uses that clustering to provide an explanation for two familiar predictions from technical analysis: (1) trends tend to reverse course at predictable support and resistance levels, and (2) trends tend to be unusually rapid after rates cross such levels. The data are the first available on individual currency stop‐loss and take‐profit orders. Take‐profit orders cluster particularly strongly at round numbers, which could explain the first prediction. Stop‐loss orders cluster strongly just beyond round numbers, which could explain the second prediction.     

PRICE AND QUANTITY QUOTES ON NASDAQ: A STUDY OF DEALER QUOTATION BEHAVIOR

We show that the majority of quotes posted by NASDAQ dealers are noncompetitive and only 19.5% (18.4%) of bid (ask) quotes are at the inside. The percentage of dealer quotes that are at the inside is higher for stocks with wider spreads, fewer market makers, and more frequent trading, and lower for stocks with larger trade sizes and higher return volatility. These results support our conjecture that dealers have greater incentives to be at the inside for stocks with larger market‐making revenues and smaller costs. Dealers post large depths when their quotes are at the inside and frequently quote the minimum required depth when they are not at the inside. The latter quotation behavior leads to the negative intertemporal correlation between dealer spread and depth.     

Rings of Steel,Rings of Concrete and Rings of Confidence: Designing out Terrorism in Central London pre and post September 11th

This article is a reaction to the rapid changes many urban areas are undertaking in attempts to counter the contemporary terrorist threat since the devastating events of September 11th. The response of central London authorities both pre‐ and post‐ September 11th is used as the lens through which to view attempts to reduce the real and perceived threat of terrorist attack through the adoption of territorial approaches to security, both physical and technological, which are increasingly being utilized at ever‐expanding spatial scales. It argues that this situation all too often produces a scenario of ‘splintered urbanism’ as security rings are thrown up around carefully selected sections of cities deemed most at risk. It further argues for a balance to be struck between competing concerns for freedom of access, mobility and other democratic freedoms, and the need for cities to adopt increasingly militarized security perspectives in their counter‐terrorism efforts. Cet article présente une réaction aux rapides changements que de nombreuses zones urbaines entreprennent afin de contrer la menace terroriste actuelle depuis les ravages du 11 septembre. La réponse des autorités du centre de Londres, à la fois avant et après cette date, sert ainsi de loupe permettant d'observer les efforts de minimisation de cette menace d'agression, tant subjective que réelle. Il s'agit de démarches territoriales à l'égard de la sécurité (matérielle et technologique) appliquées de plus en plus souvent à des échelles spatiales sans cesse élargies. De cette situation, naît trop souvent un scénario ‘d'urbanisme fragmenté’, les anneaux de sécuritéétant jetés autour de portions soigneusement sélectionnées de villes jugées le plus en danger. L'article défend la nécessité de trouver un équilibre entre les préoccupations opposées que sont les liberté d'accès, mobilité ou autres libertés démocratiques et le besoin des villes d'adopter des perspectives sécuritaires de plus en plus militarisées dans leurs tentatives contre le terrorisme.     

The older the more valuable: Divergence between utility and dollar values of life as one ages

While the utility value of life may decrease monotonically with age, the dollar value may increase dramatically until a fairly old age (by ten-fold to age 60 for one plausible set of parameters). Crucial for this result is a high enough real rate of interest (e.g. 4–5%) which makes accumulation desirable, leading to a lower marginal utility of money when one gets older, explaining the divergence. This divergence raises perplexing questions as to which value of life should be used and whether the old should be taxed and the young subsidized.I am grateful to Ross Parish for stimulation and to Keith McLaren and an anonymous referee for helpful comments.     

TRADING COSTS AND QUOTE CLUSTERING ON THE NYSE AND NASDAQ AFTER DECIMALIZATION

We examine execution costs and quote clustering on the New York Stock Exchange (NYSE) and NASDAQ using 517 matching pairs of stocks after decimalization. We find that the mean spread of NASDAQ stocks is greater than the mean spread of NYSE stocks when spreads are equally weighted across stocks, and the difference is greater for smaller stocks. In contrast, the mean NASDAQ spread is narrower than the mean NYSE spread when spreads are volume weighted, and the difference is statistically significant for large stocks. Both NYSE and NASDAQ stocks exhibit high degrees of quote clustering on nickels and dimes, and quote clustering has a significant effect on spreads in both markets.     

No arbitrage and closure results for trading cones with transaction costs

In this paper, we consider trading with proportional transaction costs as in Schachermayer’s paper (Schachermayer in Math. Finance 14:19–48, 2004). We give a necessary and sufficient condition for , the cone of claims attainable from zero endowment, to be closed. Then we show how to define a revised set of trading prices in such a way that, firstly, the corresponding cone of claims attainable for zero endowment, , does obey the fundamental theorem of asset pricing and, secondly, if is arbitrage-free then it is the closure of . We then conclude by showing how to represent claims.