Noise Trading, Costly Arbitrage, and Asset Prices: Evidence from Closed-end Funds

If arbitrage is costly and noise traders are active, asset prices may deviate from fundamental values for long periods of time. We use a sample of 158 closed-end funds to show that noise-trader sentiment, as proxied by retail-investor flows, leads to fluctuations in the discount. Nevertheless, we reject the hypothesis that noise-trader risk is the cause of the long-run discount. Instead we find that funds which are more difficult to arbitrage have larger discounts, due to: (1) the censoring of the discount by the arbitrage bounds, and (2) the freedom of managers to increase charges when arbitrage is costly.     

Discretionary disclosure and the market reaction to restatements

This paper presents evidence that management’s disclosure choices related to a restatement are associated with the market reaction at the time the restatement is announced. The two aspects of pre-restatement disclosure choice we examine are the amount of disclosure, hypothesized to reduce information asymmetries, and the tone of disclosure, hypothesized to exacerbate the effect of subsequently-disconfirmed market expectations. Our results provide support for both hypothesized effects, controlling for characteristics that previous research has shown to affect market reaction to restatements—financial attributes of restatements, and concurrent disclosure choices such as prominence of the announcement. We also find that concurrent and prior disclosure characteristics have equivalent and complementary power in explaining market reaction to restatements, while interactive effects indicate that pre-restatement disclosure choices reduce the marginal market impact of concurrent disclosure characteristics.     

An analysis of trade-size clustering and its relation to stealth trading

NYSE and Nasdaq trades increasingly cluster on multiples of 500, 1,000, and 5,000 shares. Such clustering varies over time and across stocks, and tends to increase with the level of trading activity. Furthermore, rounded trades tend to have more persistence both in occurrence and in trade initiation. Finally, medium-sized rounded trades tend to have greater relative price impact than large rounded trades. From these observations we surmise that trade-size clustering is consistent, at least in part, with the actions of stealth traders who tend to use medium-sized rounded transactions in an attempt to disguise their trades.     

Duplication, Growth and ‘Total Return Economics’

Maintenance consumption is an expense recovered in product prices, yet also a source of taste satisfaction which must be exhausted, rather than reinvested, from the capital affording it. This riddle is solved in the duplication rules: the cost of maintenance consumption is recovered in pay and prices, but an equal flow is exhausted from the human capital of the worker earning the pay. The rules impact tradition in several ways. If output is defined in principle as value added, then it cannot also be described as consumption plus net investment without double-counting the maintenance consumption recovered in prices. Also rate of return in the stationary state is not zero, but is the rate sufficient to offset the exhaustion of individual human capital. The rules lead to new insights into economic return, and support an argument that all growth at the scale of closure is due to productivity gain rather than to thrift.     

No place to hide: The global crisis in equity markets in 2008/2009

This paper provides a broad analysis of the effect of the current financial crisis on global equity markets and their major components. We also examine the magnitude of the crisis in terms of value destruction in comparison to other market crashes. In brief, upon looking at return performance across an array of regions, countries, and sectors, broad market averages are down approximately 40% on their end of 2006 levels. While deterioration started in most markets in early to mid 2008, the crisis period of mid-September to the end of October 2008 is responsible for the lion's share of the collapse with just about all indices falling 30–40% in this short period. Financial sectors have taken a bigger hit than non-financials over the period, though they both suffered similarly during the peak of the crisis. Due to larger rises in 2007 the emerging markets drop more in 2008 than developed markets but in large part end up at the same level as the other markets. The global nature of the crisis is also apparent from the high correlations between markets and investment styles that further increased during the crisis. As a result, diversification provided little help to investors when needed most as markets dropped in tandem.     

The Influence of Ethnicity and Self-Construal on Leisure Constraints

This study examines the effects of ethnicity, participation, and self-construal on constraints to the popular leisure activity of downhill skiing, an activity that is struggling to attract ethnic minority group members in North America. A new leisure constraints model guided our study, a framework that recognizes the importance of macro- (i.e., ethnicity) and micro-level (i.e., participation, self-construal) variables on the traditional concepts of intrapersonal, interpersonal, and structural constraints. After sampling both Chinese- and Anglo-Canadian skiers and nonskiers, results indicate that ethnicity does influence leisure constraints, both alone and in interaction with self-construal.     

Structural effects in national parkgoing

Abstract

Studies of outdoor recreation commonly mobilize “individual‐level” variables, such as personal characteristics (e.g., age, sex, socioeconomic status), personality, psychological needs, life experiences, and attitudes in testing for explanations of different participation styles. Seldom is attention directed to the explanatory importance for these studies of “system‐level” or contextual variables, such as structural and cultural patterns. Structural‐effects analysis is used in this exploratory study to test the importance of a system‐level variable (social‐class structure) for the relationship between two individual‐level variables, socioeconomic status and national parkgoing. Several status variables were found to be positively associated with the frequency of the respondents’ national parkgoing. But more importantly, these relationships were materially affected by the class structures of the respondents’ home communities. Working‐class persons in a predominately middle‐class population displayed significantly higher rates of parkgoing than their class counterparts in a predominately working‐class population. Conversely, the parkgoing rates of middle‐class persons were lowered by their residence in a predominately working‐class population. These findings suggest the utility of integrating system‐level (contextual) variables and individual‐level variables in explanatory models of recreational participation.