International day-of-the-week effects: An empirical examination of iShares

Ample evidence suggests that day-of-the-week patterns exist in US and foreign equity returns. We extend the evidence on the day-of-the-week effect in equity returns by examining the return patterns of iShares for 17 countries and Standard and Poor's Depository Receipts (SPDRs) to establish whether previously observed predictabilities in equity returns are reflected in iShares' returns. We utilize a split sample to examine return patterns and develop trading rules using the initial subsample. We then test those trading rules out of sample. Empirical results reveal that iShares exhibit day-of-the-week return patterns that can be exploited by informed traders.     

Demutualization and Public Offerings of Financial Exchanges

The recent merger of the New York Stock Exchange with Archipelago, a publicly listed electronic exchange, can be viewed as the final phase of a wave of organizational transformation that has swept across most of the world's major financial exchanges in the last ten years. Until the early 1990s, almost all stock and derivatives exchanges were organized as non‐profit, mutual organizations owned by their members. But starting with the demutualization of the Stockholm Stock Exchange in 1993, the number of stock exchanges that have adopted a for‐profit, publicly listed organizational form has grown steadily. At the same time, the largest derivative exchanges such as the Chicago Mercantile Exchange, the London International Financial Futures and Options Exchange, the Chicago Board of Trade, and Eurex are either already publicly listed or are part of publicly listed parent companies. In this article, after discussing the forces that are driving such change, the authors offer some early evidence on the profitability and stock market performance of listed exchanges. As the authors note, deregulation together with new developments in information technology have caused latent conflicts of interest within the mutual form of organization to become debilitating ones. And, as if to confirm the superiority of the new organizational form, the authors report that conversions to for‐profit status and public ownership have led to significant increases in operating performance and share values. But, as the authors also note, these results are preliminary, and the demutualization and listing of exchanges creates a new challenge for exchanges as self‐regulating institutions: managing the conflicts that may arise between the owners and those who transact on the exchange. The authors expect the next wave of transformation to produce both geographical consolidation as well as mergers/acquisitions across product lines (e.g. merger of leading equities and derivatives exchanges). In equities trading, given that North America is already dominated by the NYSE and Nasdaq, the most interesting arena will continue to be Europe, where one or two large exchanges are likely to emerge. The emergence of such megaexchanges, with scale comparable to that of U.S. exchanges, could have a significant impact on the corporate capital‐raising process and cost of capital.     

Cost-based Phillips Curve forecasts of inflation

It is a well-established idea that prices are a function of marginal cost, yet estimating a reliable measure of marginal cost is difficult to do. Stock and Watson (1999) use the Phillips Curve to forecast inflation for a variety of existing activity variables that researchers commonly use to proxy for marginal cost. This paper uses a similar type of approach to examine the performance of a new candidate for the activity variable, which is marginal cost measured following the theoretical methodology of Bils (1987), which we find to be simple yet powerful when implemented empirically. We then use the Phillips Curve to conduct pseudo out-of-sample inflation forecasts for the US using: output, unemployment, hours, the labor share, the capacity utilization rate, and the new measure of marginal cost. For almost all cases, forecast errors are lowest in the regressions with the new marginal cost variable, indicating that this new measure is an improvement over previous attempts to proxy for marginal cost.     

The Microsoft challenge

In 1996, the Microsoft Corporation introduced a new giving programme to members of the University of Washington. Rather than simply donating in cash or kind, it offered to match any funds donated by faculty members to graduate students. The response to the programme was overwhelming initially. However, the organisers changed the rules of the challenge and over time, donations went down. Finally, the company indicated that it wanted to wind down the programme. This case offers unique data and perspective on how to use a challenge as part of a fundraising strategy. Copyright © 2001 Henry Stewart Publications     

ADR holdings of US-based emerging market funds

What motivates investors to hold American Depositary Receipts (ADRs) rather than the underlying stock of US listed foreign firms? We analyze the investment allocation decision of actively-managed emerging market mutual fund managers. Although legal provisions are typically assumed to affect ADR and its underlying domestic shares equally, investors holding ADRs may have a higher level of legal protection as these securities are issued and traded in the US. We find that ADRs are the preferred mode of holdings if the local market of the issuer has weak investor protection, low liquidity and high transaction costs.     

Implementation in Economic Environments with Incomplete Information: The Use of Multi-Stage Games

This paper shows that, in economic environments with incomplete information, incentive compatibility and a preference reversal condition are sufficient for implementation in sequential equilibrium.Journal of Economic LiteratureClassification Numbers: C72, D71, D82.     

An Economic Model of Whistle-Blower Policy

"Whistle-blowing" is an increasingly common element of regulatoryenforcement programs and one that is encouraged by recent legislationin the United States and elsewhere. We examine how responsiveregulators should be to whistle-blower tip-offs and how severeshould penalties be for wrongdoers detected in this way. Competingpsychological theories as to what motivates employees to becomewhistle-blowers are operationalized as alternative behavioralheuristics. Optimal policy depends upon the motives attributedto whistle-blowers—which of the theories you subscribeto—but is not in general characterized by maximal penaltiesnor routine pursuit of complaints, even when pursuit is costless.(JEL K42, K32)     

Anti-branding on the internet

Anti-brand web sites are online spaces that focus negative attention on a specific targeted brand. Although anti-consumption movements on the internet have been gaining in numbers and in strength, research has not fully uncovered the nature of such sites and their impact on brand value and consumer anti-consumption. We present a conceptual framework describing online anti-branding and investigate causal relationships in two empirical studies. Study 1 investigates the brand value's impact on likelihood of the presence of anti-brand sites. Strong brands are more likely to have anti-brand sites. Study 2 is a content analysis of a representative sample of anti-brand sites that assesses the nature of the language used by such sites. Anti-brand sites use three types of language — market, ideological and transactional speech. The study finds that market speech is most prevalent and relates to brand value.