The index futures markets: Is screen trading more efficient?

This article uses a nonparametric test based on the arc‐sine law (see, e.g., Feller, 1965 ), which involves comparing the theoretical distribution implied by an intraday random walk with the empirical frequency distribution of the daily high/low times, in order to address the question of whether the abandonment of pit trading has been associated with greater market efficiency. If market inefficiencies result from flaws in the market microstructure of pit trading, they ought to have been eliminated by the introduction of screen trading. If, on the other hand, the inefficiencies are a reflection of investor psychology, they are likely to have survived, unaffected by the changeover. We focus here on four cases. Both the FTSE‐100 and CAC‐40 index futures contracts were originally traded by open outcry and have moved over to electronic trading in recent years, so that we are able to compare pricing behavior before and after the changeover. The equivalent contracts in Germany and Korea, on the other hand, have been traded electronically ever since their inception. Our results overwhelmingly reject the random‐walk hypothesis both for open‐outcry and electronic‐trading data sets, suggesting there has been no increase in efficiency as a result of the introduction of screen trading. One possible explanation consistent with our results would be that the index futures market is characterized by intraday overreaction. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:337–357, 2004     

Budgeting and governing for deficit reduction in the UK public sector: act three ‘accountability and audit arrangements’

This paper explains how the UK central government has changed accountability and audit arrangements for local government in England, while retaining its approach to setting annual budgets within the context of multi-year spending reviews. It highlights how dismantling the institutions and processes that monitored outputs and outcomes for spending, such as public service agreements and comprehensive area assessment, meant that top-down accountability became focused overwhelmingly on financial conformance rather than organizational performance for local government. Supplementary reforms to increase the transparency or ‘visibility’ of public administration, and thereby enable greater bottom-up accountability, have resulted in a performance assessment system that is neither rigorous nor standardized. The overall result is a weakening of local accountability arrangements.     

Growth and welfare effects of stabilizing innovation cycles

We consider a simple model of innovation where equilibrium cycles may arise and show that, whenever actual capital accumulation falls below its balanced growth path, subsidizing innovators by taxing consumers has stabilizing effects, promotes sustained growth and increases welfare. Further, if the steady state is unstable under laissez faire, the introduction of the subsidy can make the steady state stable. Such a policy has beneficial effects as it fosters output growth along the transitional adjustment path, and increases the welfare of current and future generations.     

No Arbitrage in Discrete Time Under Portfolio Constraints

In frictionless securities markets, the characterization of the no-arbitrage condition by the existence of equivalent martingale measures in discrete time is known as the fundamental theorem of asset pricing. In the presence of convex constraints on the trading strategies, we extend this theorem under a closedness condition and a nondegeneracy assumption. We then provide connections with the superreplication problem solved in Föllmer and Kramkov (1997).     

Capital Cash Flows,APV and Valuation

This paper examines three different methods of valuing companies and projects: the adjusted present value (APV), capital cash flows (CCF) and weighted average cost of capital (WACC) methods. It develops the appropriate WACC and beta leveraging formulae appropriate for each valuation model, so that given a particular valuation model the correct APV and CCF values can be determined from the WACC value and vice versa. Further it goes on to show when the perpetuity formulae give poor estimates of the value of individual cash flows, even though the overall values are correct. The paper cautions that the APV and CCF models require more information than is currently known, such as the value of the corporate use of debt, and consequently can give misleading results, particularly in sensitivity analyses.     

Why Do We Care What Others Pay? The Effect of Other Consumers’ Prices on Inferences of Seller (Dis)Respect and Perceptions of Deservingness Violation

Comparisons to other consumers have been identified as particularly meaningful in shaping price fairness judgments, but why they should be so is not clear. The current work argues that fairness judgments reflect both the extent to which consumers receive what they believe they deserve and inferences about seller respect. We suggest that comparisons to consumers paying lower prices are a particularly potent source of unfairness because they highlight the violation of deservingness and readily communicate information about sellers’ opinions of consumers. Three experiments investigate these ideas. Implications for fairness theory and marketing are discussed.     

Spontaneous fires in insulation

Combustible liquids may self-heat in porous insulation yielding smoldering or flaming combustion. In Part I the problem is reviewed and practical measures discussed. Using two-inch cubes of insulation and a standardized procedure, Spontaneous Ignition Temperatures (SITs) ranging from 55-184 C are reported for a series of combustible liquids. The application of a self-heating parameter Z = (AIT)/(AIT-FP), where AIT is autoignition temperature and FP is closed cup flash-point (both in Celsius), is examined. The “Z” parameter gives some indication of materials that will self-heat and those that will evaporate. For Z > 1.61 ignition occurred for all the liquids tested. Evaporation usually occurred for materials with Z < 1.35. It was found that some water-reactive or peroxide-forming materials can ignite where only evaporation would be predicted from Z value considerations. An important example of a water-reactive material is ethylene oxide (EO); the importance of EO insulation fires is that under certain conditions explosive decomposition of EO contained in the equipment can be initiated. It was previously determined that ethylene oxide reacts in porous, refractory insulations forming low molecular weight polyethylene glycols. The formation rate depends on temperature and the type and condition (particularly water content) of the insulation. Unlike EO the glycols have low volatility and may accumulate over time to several times the mass of some insulations. Under certain conditions the glycols can ignite spontaneously. In Part II experiments carried out to examine this phenomenon are discussed. Where process temperatures are above the SIT (but below the AIT), cellular glass insulation will minimize the risk of insulation fires. One disadvantage, especially for thermally unstable materials such as EO, is that cellular glass has poor fire endurance properties. The use of a realistic fire endurance test to specify insulation thickness and additional measures such as stainless steel jackets are described. Alternatives to the use of cellular glass are discussed. When selecting an insulation system, it should be determined whether an insulation fire might occur and the loss potential from such an event should be evaluated.