Affect Market Prices Research Articles

The Two Faces of Materiality

To make out a claim for securities fraud under federal law, a plaintiff must plead and prove the misrepresentation of a material fact. The Supreme Court has repeatedly defined a material fact as one that would be important to a reasonable investor in deciding how to act in that it would change the total mix of information — although it need not necessarily change the ultimate decision of the investor as to how to vote or whether to trade. The courts have also defined a material fact as one that would affect market price — which clearly implies that it must have changed the decisions of some investors. Although these two definitions of materiality appear to conflict, they can be reconciled as alternative expressions of the same standard, the former referring to individual investors and the latter referring to investors in the aggregate. Indeed, the Supreme Court has held a fact cannot be material if it cannot matter to the ultimate outcome, suggesting that a fact cannot be material if it does not affect the behavior of a number of investors sufficient to move the market. Arguably, it would be appropriate to consider price impact in connection with the decision to certify a securities fraud action as a class action under the fraud on the market (FOTM) theory since a class action involves the claims of investors in the aggregate and since price impact need not be dispositive as to the merits of the individual claim of the lead plaintiff who may be able to recover under the individual investor standard. The Supreme Court foreclosed that option in its Amgen decision, possibly for fear that failure to determine materiality in the context of a class action might lead to a multiplicity of lawsuits. Nevertheless, the Amgen Court stated that determination of the question may be appropriate on summary judgment even though earlier decisions have emphasized that materiality is a matter of fact that should not be decided by any bright line test. Moreover, in focusing on materiality as a matter of merit, Amgen says nothing about when a court should consider other grounds for rebutting the FOTM presumption of reliance based on the likelihood that the plaintiff class includes significant numbers of atypical investors who may have been indifferent to company-specific market prices and thus may not be adequately represented in a class action.

Towards stronger measures for sustainable consumption and production policies: proposal of a new fiscal framework based on a life cycle approach

The sustainable development challenge that many economies are facing worldwide requires stronger measures because some environmental issues (e.g. global warming) are becoming exponentially worse. If we do not act at once, this negative trend has the potential to keep on radically changing the living conditions on the Earth. One of the most effective ways to address this challenge might be developing new Market Based Instruments (MBIs) by adopting a life cycle perspective. In this paper, we propose a new fiscal framework based on Value Added Tax (VAT) and life cycle thinking. This framework might have the potential to drastically change the current consumption and production patterns towards a product life cycle oriented economy. To identify the elements of a new framework enabling to improve the eco-efficiency of the current consumption and production patterns, firstly we have screened the potential of MBIs to face the sustainable development challenge in relation to the existing EU policy framework. Among MBIs, particular emphasis was given to VAT due to its potential to affect market prices. The key research advances for establishing a green VAT framework were then tracked down to outline the state-of-the-art. Moreover, how to use Life Cycle Assessment (LCA) results for differentiating VAT rates has been investigated. On this basis, a range of methodology proposals to change the current VAT framework have been outlined. A hypothetical case study has been simulated to test these proposals. Some relevant changes to the current VAT taxation system are proposed in this paper bearing in mind the LCA principles and, in a broad sense, the “getting prices right” policy. Special emphasis was given to the methodological framework needed to differentiate VAT rates according to the environmental footprint performance of products. In this context, fiscal neutrality issues related to State budgets have been also taken into account by conceptualising more cautious approaches for differentiating VAT rates. This piece of research has identified life cycle thinking as possible perspective on which basis product VAT rates might be differentiated. Further studies and a policy impact assessment procedure are needed to evaluate the actual feasibility of this new taxation framework. If the response of that assessment were positive, policy makers, companies and other stakeholders concerned should set out a suite of measures to further fine-tune, test, establish and facilitate the implementation of such green VAT framework.

Market Prices of Risk with Diverse Beliefs, Learning, and Catastrophes

We compare market prices of risk in economies with identical patterns of endowments, priors, and information flows, but two different market structures, one with complete markets, another in which consumers can trade only a single risk-free bond. We study how opportunities to speculate, uncommon priors, and learning affect market prices of risk. Two types of consumers have diverse beliefs about the law of motion for a random exogenous endowment. One type knows the true law of motion while the other type learns about it via Bayes' theorem. Less-well-informed consumers are pessimistic, initially overestimating the probability of a catastrophic state. Learning dynamics and the wealth dynamics that they drive contribute to differences in evolutions of market prices of risk across market structures.

Earnings Metrics, Motivated Reasoning and Market Efficiency

An enduring issue in financial reporting is whether and how salient summary measures of firm performance (“earnings metrics”) affect market price efficiency. In laboratory markets, we test the effects of salient earnings metrics, which vary in how they combine persistent and transitory elements, on investor information search, beliefs about value, offers to trade, and market price efficiency. We find that including transitory elements in salient earnings metrics causes traders to search unnecessarily for further information about these elements and to overestimate their effect on fundamental value relative to a rational benchmark. In contrast, separately displaying persistent elements in earnings increases the accuracy of traders’ value estimates. Prices generally reflect traders’ beliefs about value, and prices are most efficient when transitory elements are excluded from earnings metrics entirely. Our study contributes to research on salience effects in financial reporting by showing that including transitory elements in salient earnings metrics causes inefficient information search and biased beliefs about value that can aggregate to affect market prices. We also contribute to research in experimental markets by showing that redundant disclosure is not always beneficial; redundant disclosure of transitory earnings elements, in particular, appears to have negative consequences for investor behavior and market efficiency.

Discrimination of Korean Cattle (Hanwoo) with Imported Beef from USA Based on the SNP Markers

Due to the large amount of beef imported from the USA to Korea, Korean consumers have become increasingly interested in the country of origin since it can affect market prices. Previously, Bos indicus and Bos taurus-specific markers were developed for the purpose of cattle breed identification, specifically discrimination of Australian beef. In this study, six SNP markers derived from Illumina 50K bovine SNP chip data were used for the discrimination between Korean cattle (Hanwoo) and imported beef from USA. PCR-RFLP genotyping methods were also developed, which indicates that these markers can be applied relatively easily compared to other markers. Taking into account a discrimination rate of 55% based on MC1R marker between Hanwoo and imported beef from USA, two additional markers, SNPs 23803 and 34776, were ideal and resulted in probability of identification of 0.942 and probability of misjudgment of 0.03. Therefore, the markers developed in this study can greatly contribute to the correct discrimination between beef from USA and Hanwoo beef.

Longshots, Overconfidence and Efficiency on the Iowa Electronic Market

A basic proposition of behavioral finance is that individual decision-making biases affect financial markets. We examine this proposition using data from the Iowa Electronic Market (IEM), a real money market conducted for teaching and research purposes. We ask whether the longshot bias or an overconfidence bias affects market prices. In our market context, these two biases yield opposing predictions. The IEM is ideal for answering these questions because it mixes many desirable research features from betting markets (where the longshot bias is observed) with a closer parallel to naturally occurring financial markets (where researchers look for evidence of overconfidence). While the longshot bias affects many sports betting markets robustly, no such bias appears here. Nor does overconfidence influence prices at short horizons. If there is a bias, it results from overconfident traders at long horizons. While the markets incorporate information efficiently at short horizons, non-market data indicate some long-horizon inefficiency. When markets appear inefficient, we calculate Sharpe ratios for static trading strategies and document returns for dynamic trading strategies to show the economic content of the inefficiencies.

Identification of Differentially Expressed Genes Between Preadipocytes and Adipocytes Using Affymetrix Bovine Genome Array

Adipocytes are differentiated from preadipocytes and have large capacity for storing fats inside cells. In cattle, intramuscular fat (IMF) content is one of the major determinants for meat quality and also highly affects market prices, especially in Japan and Korea. In order to profiling differentially expressed genes between intramuscular fibroblast-like cells (preadipocytes) and their differentiated adipocytes, we have established intramuscular fibroblast-like cells from M. longissimus thoracis in Korean cattle (Hanwoo). The differentially expressed genes were selected by comparing these two types of cells ug thecommercially available 23kese two types of cells ug theco. The results indan ced that 206 arecomelements were differentially expressed. Of these, 67 and 94 ks wn genes were up and d wn regulaced, respectively, in adipocytes ug ng both 2-fold difference and Welch's t-test as the cut-off points. The differentially expressed genes identified in this study can be used as good markers for improving meat quality traits with further verification of their biological functions, especially IMF contents in cattle.

Policy interactions, risk and price formation in carbon markets

Carbon pricing is an important mechanism for providing companies with incentives to invest in carbon abatement. Price formation in carbon markets involves a complex interplay between policy targets, dynamic technology costs, and market rules. Carbon pricing may under-deliver investment due to R&D externalities, requiring additional policies which themselves affect market prices. Also, abatement costs depend on the extent of technology deployment due to learning-by-doing. This paper introduces an analytical framework based on marginal abatement cost (MAC) curves with the aim of providing an intuitive understanding of the key dynamics and risk factors in carbon markets. The framework extends the usual static MAC representation of the market to incorporate policy interactions and some technology cost dynamics. The analysis indicates that supporting large-scale deployment of mature abatement technologies suppresses the marginal cost of abatement, sometimes to zero, whilst increasing total abatement costs. However, support for early stage R&D may reduce both total abatement cost and carbon price risk. An important aspect of the analysis is in elevating risk management considerations into energy policy formation, as the results of the stochastic modelling indicate wide distributions for the emergence of carbon prices and public costs around the policy expectations.

Generators' bidding behavior in the NYISO day-ahead wholesale electricity market

This paper proposes a statistical and econometric model to analyze the generators' bidding behavior in the NYISO day-ahead wholesale electricity market. The generator level bidding data show very strong persistence in generators' grouping choices over time. Using dynamic random effect ordered probit model, we find that persistence is characterized by positive state dependence and unobserved heterogeneity and state dependence is more important than unobserved heterogeneity. The finding of true state dependence suggests a scope for economic policy intervention. If NYISO can implement an effective policy to switch generators from higher price groups to lower price groups, the effect is likely to be lasting. As a result, the market price can be lowered in the long-run. Generators' offered capacity is estimated by a two-stage sample selection model. The estimated results show that generators in higher-priced groups tend to withhold their capacity strategically to push up market prices. It further confirms the importance of an effective policy to turn generators into lower price groups in order to mitigate unexpected price spikes. The simulated market prices based on our estimated aggregate supply curve can replicate most volatility of actual DA market prices. Applying our models to different demand assumptions, we find that demand conditions can affect market prices significantly. It validates the importance of introducing demand side management during the restructure of electricity industry.

Letter from the Editor-in-Chief: Time in international business

Issue 40.4 consists of eight articles, seven of which were acceptedfor publication by former JIBS Editor-in-Chief Arie Y. Lewin andone under my watch. While each of the articles makes importantcontributions to our knowledge of international business (IB)studies, I would like to highlight those that are related to time.TIME IN IBEconomists think of time in terms of statics, comparative staticsand dynamics. Static analyses focus on equilibrium situations (e.g.,the price where quantity demanded equals quantity supplied).Comparative statics focuses on pre- vs post-situations when anexogenous change affects behavior and outcomes (e.g., changes inincome or tastes affect market price). Dynamic analyses trace thepath or processes for beginnings, transitions and endings, whetheralone or in a coevolutionary framework.Much, and perhaps most, IB research either ignores time orfocuses solely on the comparative statics of predicting how achange in the business environment (or government policies) attime ‘‘t’’ affects MNE strategies and performance at time ‘‘t

Reinforcement Learning on a Futures Market Simulator

In recent years, it becomes vigorous to forecast a market by using machine learning methods. Since they assume that each trader's individual decisions do not affect market prices at all, most existing works use a past market data set. Meanwhile there is an attempt to analyze economic phenomena by constructing a virtual market simulator, where human and artificial traders really make trades. Since prices in the market are determined by every trader's decisions, it is more realistic and the assumption cannot be applied any more. In this work, we design and evaluate several reinforcement learners on a futures market simulator U-Mart (Unreal Market as an Artificial Research Testbed). After that, we compare our learner to the previous champions of U-Mart competitions.

An inconsistency in SEC disclosure requirements? The case of the “insignificant” private target

Although the SEC's main charge is to ensure the disclosure of material information, it has not always consistently defined materiality. We show that acquisitions of privately-held targets classified as “insignificant” by the SEC appreciably affect market prices, and therefore are material by the SEC's definition. We find significant returns in transactions with targets as small as 2% – compared with the SEC's disclosure threshold of 20% – of the acquirer. Further, an average of 19 undisclosed private acquisitions per year exceed the median IPO value in the same year for our sample period. However, because the SEC deems these transactions insignificant, information like target financial statements remains undisclosed to the market. Disclosure rules regarding target financial statements thus create a regulatory disconnect, in which information that is material is nevertheless deemed “insignificant” and therefore not disclosed.

Feedback and the success of irrational investors

We provide a model in which irrational investors trade based upon considerations that have no inherent connection to fundamentals. However, trading activity affects market prices, and because of feedback from security prices to cash flows, the irrational trades influence underlying cash flows. As a result, irrational investors can, in some situations, earn abnormal (i.e., risk-adjusted) profits that can exceed the abnormal profits of rational informed investors. Although the trading of irrational investors cause prices to deviate from fundamental values, stock prices follow a random walk.

Choosing Benchmarks vs. Choosing Strategies

A crucial ingredient in evaluating execution quality is the choice of benchmark: evaluate execution prices relative to what? In this article, we discuss two popular benchmarks: comparing execution prices to VWAP and comparing execution prices to a pre-trade price. We show that if the executions evaluated affect the market VWAP, then the VWAP benchmark may lead to sub-optimal decisions. Traders, for example, may adopt a more costly execution strategy. When analyzing execution quality, therefore, the VWAP benchmark lets you down when you need it most: in evaluating difficult orders that may affect market prices. Our recommendation is to consistently use a pre-trade benchmark in evaluating different execution strategies (or traders or venues). <b>TOPICS:</b>Statistical methods, equity portfolio management, portfolio construction

An Inconsistency in SEC Disclosure Requirements? The Case of the 'Insignificant' Private Target

Although the SEC's main charge is to ensure the disclosure of information, the SEC has not always consistently defined materiality. We show that acquisitions of privately-held targets classified as insignificant by the SEC appreciably affect market prices, and therefore are material by the SEC's definition. We find significant returns in transactions with targets as small as 2% -- compared with the SEC's disclosure threshold of 20% -- of the acquirer. Further, an average of 19 undisclosed private acquisitions per year exceed the median IPO value in the same year for our sample period. However, because the SEC deems these transactions insignificant, information like target financial statements remains undisclosed to the market. Disclosure rules regarding target financial statements thus create a regulatory disconnect, in which information that is material is insignificant and therefore not disclosed.

Hava Durumu Borsa Getirisini Etkiler Mi? İmkb Örneği

Although man has been considered as homoeconomicus in economics, literature especially observes market anomalies such as day of the week effects, January effect, holiday effect etc. Stock markets can give evidence that it could be possibly reversed. Market anomalies in stock markets should be related to investors’ trading strategies, which are based on their psychologies along with other factors. The fact that some weather variables affect investor’s performance and mood can also affect market prices substantially. In this study it is being investigated if the cloudy days cause a change in Istanbul Stock Exchange 100 Index (ISE 100 Index) returns and the weak form efficiency for ISE can represent a different approach. It has been found that cloudy days do not cause a change in ISE 100 Index returns and also found evidence of weak form efficiency for Turkish stock market Key words: Weather Effect, ISE, Causality, Unit Root Test.

An Alternative Futures Hedge for Minor Currencies

In a world of trade among nations using different currencies, every exchange of goods, services, or assets taking place between economic actors of different nations requires an accompanying currency transaction. If foreign exchange rates were fixed, this would be little more than a formality and not a potential source of market distortion. In the current world, however, the currency exchange rates are often very volatile and can affect market prices when viewed from outside the economy. Individuals with risk-averse preferences seek to minimize the potential losses possible from their currency positions through the use of currency hedging tools. When a nation‘s currency hedging instrument (e.g. a currency futures contract) is traded in liquid market, it is easy to hedge the risk posed by holding a foreign currency position. In these market situations, currency futures contracts can be purchased for hedging the currency position. However, when a nation‘s currency hedging instrument is not traded in liquid markets, it is impossible to hedge the risk by the direct hedging. Hence, a proxy for the currencies of small economies (i.e. minor currencies) must be found. This study examines five nations‘ currencies, the Fiji Dollar, Cyprus Pound, Maltese Lira, Taiwanese Dollar, and South Korea Won in order to determine an effective currency futures hedge for the three minor currencies in the above list : the Fiji Dollar, the Cyprus Pound, and the Maltese Lira. The results of this study‘s tests indicate that multiple futures contract hedge proposed in this study is an appropriate hedging tool for both the Fiji Dollar and the Cyprus Pound. In the case of the Maltese Lira, the results are less conclusive and suggest that the selection of the appropriate futures contracts should be improved.

Weather Effect: An Evidence from Turkish Stock Exchange

Market anomalies in stock markets should be related to investors' trading strategies, which are based on their psychologies along with other factors. The fact that some weather variables affect investor's performance and mood can also affect market prices substantially. In this study it is being investigated if the cloudy days cause Istanbul Stock Exchange 100 Index (ISE 100 Index) returns and the weak form efficiency for ISE a different approach. It has been found that cloudy days do not cause ISE 100 Index returns and also found evidence of weak form efficiency for Turkish stock market.

Behavioral finance and asset prices: Where do we stand?

This paper contains a survey of the anomalies identified in the behavioral finance literature, with a particular focus on those which might affect market prices. The anomalies are grouped in five categories, namely (i) decision heuristics, (ii) emotional and visceral factors, (iii) choice bracketing, (iv) unknown preferences, and (v) reference dependence. These anomalies are discussed against the background of the assumptions normally maintained in the standard approach based on expected utility maximization, in order to highlight the difference between the mainstream and the behavioral finance approaches.

Feedback and the Success of Irrational Investors

We provide a model in which irrational investors trade based upon considerations that are not inherently related to fundamentals. However, because trading activity affects market prices, and because of feedback from security prices to cash flows, the irrational trades influence underlying cash flows. As a result, irrational investors can, in some situations, earn positive expected profits. These expected profits are not market compensation for bearing risk, and can exceed the expected profits of rational informed investors. The trades of irrational investors can distort real investment choices and lower ex ante firm values, even though stocks prices follow a random walk.