Efficient Pricing Research Articles

A Hawkes process analysis of high-frequency price endogeneity and market efficiency

ABSTRACT We use the Hawkes process to model the high-frequency price process of 108 stocks in the Chinese stock market, in order to understand the endogeneity of price changes and the mechanism of information processing. Using a piece-wise constant exogenous intensity, we employ non-parametric estimation, residual analysis, and Bayesian Information Criterion (BIC) to determine that a power-law kernel is the most appropriate for our data. We propose the internal branching ratio to represent endogeneity within a finite interval. The branching ratio tends to be higher after the market opens and before the market closes, with a mean value of around 0.81, suggesting significant endogeneity in price changes. In addition, we explore the relationship between branching ratios and stock characteristics using panel regression. Higher branching ratios are associated with lower levels of price efficiency at high, but not low, frequencies. Finally, the branching ratio increases over time without significant impact from COVID-19.

Equity Market Fragmentation and Capital Investment Efficiency

This study examines how equity market fragmentation affects firms’ capital investment decisions. Recent empirical research finds that market fragmentation lowers trading costs and thus improves market quality. We examine whether this increase in market quality translates into greater revelatory price efficiency, where stock prices reveal with greater precision information to managers and/or creditors about firms’ investment opportunities. Consistent with this notion, our findings reveal that the association between capital investment and investment opportunities is increasing in market fragmentation. Additional evidence suggests that (a) market fragmentation increases revelatory price efficiency at least in part by encouraging information acquisition and informed trade by equity investors and (b) the more efficient stock prices inform both managers and creditors about firms’ investment opportunities. Inferences based on difference-in-differences and instrumental variable tests are consistent with those based on our primary findings. This paper was accepted by Suraj Srinivasan, accounting. Funding: The authors are grateful to the Kenan-Flagler Business School, Cox School of Business, Smeal School of Business, and David Eccles School of Business for funding our research. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4905 .

Stock market liberalization and financial reporting quality

This study employs the Mainland-Hong Kong Stock Connect pilot program in China to investigate the influence of stock market liberalization on firm-level financial reporting quality (FRQ). First, through a staggered difference-in-difference specification strategy, we find that eligible firms experience a significant improvement in FRQ, as measured by a composite proxy of accrual earnings management, real activities manipulation, and financial report restatement. Second, cross-sectional analyses suggest that the effect is stronger when firms are headquartered in regions with weaker institutional environments, characterized by lower judicial efficiency and less developed financial markets. We also show that the impact is more pronounced when firms face less external pressure and possess more effective corporate governance before stock market liberalization. Third, further evidence highlights that augmented FRQ is associated with a reduction in regulatory compliance costs, an improvement in stock price efficiency, and a mitigation of financing constraints. Collectively, we shed new light on the role of stock market liberalization in shaping firms’ financial reporting behavior.

Matching problems in biodiversity offset markets: a case study of the New South Wales biodiversity offsets scheme

Biodiversity offset credits in New South Wales are transacted within a regulatory environment defined by detailed trading rules and many different types of biodiversity credits that can lead to thin markets and high transaction costs. This paper describes a market designed to facilitate efficient and effective transactions. The market includes a search algorithm to identify who can exchange with whom, according to the regulatory constraints, and an online exchange tool to facilitate efficient price discovery and allocation of offset contracts.

Is ESG Data Financially Viable? A Case of Stock Price Synchronicity

According to the information efficiency view, stock price synchronicity reflects the degree of integration of firm-specific information with market-level information. Stock price synchronicity is higher (lower) when there is a higher (lower) level of integration between the firm and the overall market information. As the disclosure of environmental, social and governance data provides more firm-specific, non-financial, value-relevant information to the market, stock prices reflect such information efficiently. It leads to more information efficiency and lower synchronicity of stock prices. Against this backdrop, the present study examines the relationship between ESG and its component scores and stock price synchronicity using a sample of 163 Indian companies reporting their ESG scores through the Thomson Reuters database from 2011 to 2021. The findings of the study confirmed that the ESG score and the scores of its components (except the governance score) have a significant negative impact on stock price synchronicity and a significant positive impact on idiosyncratic volatility. This is consistent with the information efficiency viewpoint, implying that ESG disclosure has value relevance in the capital market and that investors in the Indian market consider ESG information when making investment decisions.

Investigating the Service Quality Improvement Strategy at PT. Kereta Api Indonesia (PERSERO) Divre I North Sumatera, Indonesia

The public continues to place a high demand on the Indonesian train as a mode of transportation. However, the fact that there is a train does not guarantee dominance over other transportation such as planes, buses, and other modes of transportation. The rail transportation mode is lacking in making improvements through the provision of appropriate service quality that encourages the public to switch to using the train. This study aimed to identify the factors that comprise the strengths, weaknesses, opportunities, and threats as well as to design strategies to improve service quality at PT. Kereta Api Indonesia (Persero) Divre I North Sumatra. This study used a qualitative method with descriptive techniques, such as data reduction, data presentation, and the conclusion of SWOT analysis. Based on the results of this study, it can be concluded that the Internal Factors Matrix (IFAS) and External Factors Matrix (EFAS) have several strength factors, namely safety, variations in ticket prices, skills or abilities, and facilities. Meanwhile, the weakness factors are facilities and infrastructure, public services, service performance, and timeliness. Opportunity factors are consumer satisfaction, comfort, passenger capacity, and technology. Furthermore, threat factors for the company include competition among modes of transportation, more efficient price competitiveness, consumer confidence, and insurance. These findings show that the quality of service in the company PT. Kereta Api Indonesia (Persero) Divre I North Sumatra is in quadrant I with a very favorable strategic planning situation. This company also has opportunities and strengths that allow it to take advantage of existing opportunities. The strategy that must be applied in the current conditions is to promote an aggressive growth policy (Growth Oriented Strategy).

Does TQM affect Indonesian food sector production efficiently?

Globalisation Parahadi helps each nation adjust its economic policy. Every Haruus destroyer may see the future orientation, and Haru Flexic data in any applicable Kamilan data is a mandate. An integrated quality management system like Total Quality Management (TQM) must be justified to generate high-quality products and services. This study uses qualitative methods literature studies on operational method management to investigate how Total Quality Management (TQM) affects food sector production efficiency in Indonesia. Qualitative and library research approaches to creating scientific articles delays. Google Scholar's literary section or related literary review section over the last ten years 2013-2023 discusses a collection of libraries. It will then bandage prior results or discoveries from Sebi Sebiman's Law on Results or Discoveries. Harzing publishes or finishes all quoted scientific articles from data search data. The delay affects production efficiency and product quality prices. TQM improves manufacturing cost efficiency, especially in food production. This article will explain how operational management uses TQM to cut gift production costs.

The Impact of Derivatives on Spot Markets: Evidence from the Introduction of Bitcoin Futures Contracts

Cryptocurrencies provide a unique opportunity to identify how derivatives impact spot markets. They are fully fungible and trade across multiple spot exchanges at different prices, and futures contracts were selectively introduced on Bitcoin (BTC) exchange rates against the U.S. dollar (USD) in December 2017. Following the futures introduction, we find a significantly greater increase in cross-exchange price synchronicity for BTC–USD relative to other exchange rate pairs as demonstrated by an increase in price correlations and a reduction in arbitrage opportunities and volatility. We also find support for an increase in price efficiency, market quality, and liquidity. The evidence suggests that futures contracts allowed investors to circumvent arbitrage frictions associated with short-sale constraints, arbitrage risk associated with block confirmation time, and market segmentation. Overall, our analysis supports the view that the introduction of BTC–USD futures was beneficial to the Bitcoin spot market by making the underlying prices more informative. This paper was accepted by Will Cong, Special Section of Management Science: Blockchains and Crypto Economics. Funding: The authors acknowledge financial support from the Global Risk Institute. P. Augustin acknowledges financial support from the Canadian Derivatives Institute and from the Canada Research Chair Program of the Social Sciences and Humanities Research Council Canada. The paper has benefited significantly from a fellow visit of P. Augustin at the Center for Advanced Studies Foundations of Law and Finance funded by the German Research Foundation, project FOR 2774, and from a visiting position of P. Augustin at the finance department of the University of Luxembourg facilitated through the Inter Mobility Programme of the Luxembourg National Research Fund. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4900 .

Downstream Deregulation Policy and Stability in Petroleum Products in Nigeria: A Case of South-South Region

Nigeria economy is almost singularly hinged on crude oil and therefore, highly sensitive to internal and external shocks in the oil sector. This study examined the impact of downstream oil deregulation policy on stability in petroleum products in Nigeria. Survey design was used in the methodology of the study. The hypotheses formulated were tested using ordinary least squares linear regression technique. The study revealed that the downstream oil deregulation policy promotes the availability of petroleum products in the economy. The study also revealed that local refining of petroleum products positively impacts on deregulation of the downstream oil policy in the country. It was further revealed from the findings that the removal of petroleum products subsidy and efficient pricing of petroleum products enhances the deregulation of the downstream oil policy in the Nigerian economy. It was recommended that the government should make petroleum products available through efficient liberalization of the downstream sector, remove subsidies, build more refineries or maintain the existing ones and regulate the prices of petroleum products in the country. Government should get all the four refineries working at all costs. This will help to reduce the huge amount of money spent on refined fuel importation and will be diverted to infrastructural development for the economy.

Short selling, informational efficiency, and extreme stock price adjustment

Using Chinese equity data from April 2009 to August 2020, we contribute to the literature by exploring the impact of short selling on stock prices in three aspects. First, we find that as short sellers become more active, stock price adjustments accelerate, and prices respond more swiftly to public information. Second, we investigate the trading behavior of short sellers during periods of extreme stock price fluctuations and reversals. Our empirical findings suggest that short sellers behave like contrarian traders during these periods and consequently, short sales reduce the stock price crash risk. Last, we find that in emerging markets dominated by individual investors, sentiment seems a key factor for short sellers to moderate market crashes. When the market experiences unexpected sudden plunges, short sellers become “support buyers” and reverse the previously bullish investor-dominated market sentiment, thus correcting mispricing and mitigating irrationality.

Brazilian stock-market efficiency before and after COVID-19: The roles of fractality and predictability

This paper uses multifractal detrended fluctuation analysis to evaluate price efficiency dynamics and relate them to stock price predictability in the Brazilian equity market. The main findings are (1) multifractality is confirmed before and after the coronavirus disease (COVID-19) pandemic, rejecting the random walk hypothesis; (2) stock returns are generally antipersistent, with large (small) values more likely to be followed by small (large) values; (3) after the pandemic, the efficiency of stocks traded in the Brazilian market decreases; and (4) a relation was verified between efficiency and predictability, finding the least efficient assets to be the most predictable.

Study on Dynamic Pricing Strategy for Industrial Power Users Considering Demand Response Differences in Master–Slave Game

With the deepening of power market reform, further study on power trading mechanisms has become the core issue of power market study. The development stage of the industrial electricity market requires efficient and flexible pricing mechanisms. Currently available pricing strategies are inadequate for demand response management. Therefore, this paper provides an in-depth study of the pricing mechanism in the industrial electricity market in the context of electricity market reform. It proposes a demand–response-based dynamic pricing strategy for industrial parks. The method proposes a dynamic pricing strategy for demand-side response in industrial parks based on master–slave game by establishing an exogenous model of demand-side response and incentives. Compared with the existing strategies, the strategy is more efficient and flexible, and effectively improves the economic efficiency of power trading and load regulation. Firstly, an exogenous model of demand-side response and incentive is built to characterize the demand-side response cost. The method focuses more on describing the exogenous characteristics of user incentives and response quantities. It only needs to analyze the exogenous indicators and random errors in various typical scenarios. The description of user demand-side response is more efficient. Secondly, a master–slave-game-based dynamic pricing strategy for industrial parks with demand-side response is proposed. The strategy is composed of a two-stage optimization. The primary regulation of customers is achieved by day-ahead time-of-use tariffs. The secondary regulation of customers is achieved by means of the same-day regulation of demand and purchase regarding clean electricity. The proposed two-stage price formation mechanism is more economical, more effective in load regulation, and improves the flexibility of industrial pricing. Finally, a case study is conducted on an industrial power user in a park in Liaoning Province. The results show that the proposed method is significantly better than existing methods in terms of improving the economic efficiency and load control effectiveness of the pricing strategy.

Does stock market rescue affect investment efficiency in the real sector?

During China's stock market crash in 2015, the government purchased the stocks of over 1000 firms. We investigate how this government rescue affects investment efficiency and show that rescued firms experience a significant decrease in investment-q sensitivity. This rescue has an adverse impact on price efficiency and impedes managers from learning information for investment decisions. The learning channel is the main mechanism through which the rescue has a real effect. Our findings indicate that programs intended to stabilize the stock market could adversely affect the real efficiency, providing new insight into the consequences of government purchases.

Thwarting code-reuse and side-channel attacks in embedded systems

Embedded devices are increasingly present in our everyday life. They often process critical information, and hence, rely on cryptographic protocols to achieve security. However, embedded devices remain particularly vulnerable to attackers seeking to hijack their operation and extract sensitive information by exploiting side channels and code reuse. Code-Reuse Attack (CRAs) can steer the execution of a program to malicious outcomes, altering existing on-board code without direct access to the device memory. Moreover, Side-Channel Attacks (SCAs) may reveal secret information to the attacker based on mere observation of the device. Thwarting CRAs and SCAs against embedded devices is especially challenging because embedded devices are usually resource constrained. Fine-grained code diversification can hinder CRAs by introducing uncertainty to the binary code; while software mechanisms can thwart timing or power SCAs. The resilience to either attack may come at the price of the overall efficiency. Moreover, a unified approach that preserves these mitigations against both CRAs and SCAs is not available. In this paper, we propose a novel SecDivCon approach that tackles this challenge. SecDivCon is a combinatorial compiler-based approach that combines software diversification against CRAs with software mitigations against SCAs. SecDivCon restricts the performance overhead introduced by the generated code that thwarts the attacks and hence, offers a secure-by-design approach enabling control over the performance-security trade-off. Our experiments, using 16 benchmark programs, show that SCA-aware diversification is effective against CRAs, while preserving SCA mitigation properties at a low, controllable overhead. Given the combinatorial nature of our approach, SecDivCon is suitable for small, performance-critical functions that are sensitive to SCAs. SecDivCon may be used as a building block to whole-program code diversification or in a re-randomization scheme of cryptographic code.

Road map for sustainable and effective carbon pricing: bridging the gap of realities and ambitions.

An increase in policy ambition is needed to close the gaps related to climate change mitigation and those required to meet the targets of Paris Agreement. This article examines the contemporary situation of carbon pricing and suggests how carbon costs would help countries adopt comprehensive climate policies. This paper explores the carbon pricing imitative across different regions and the associated issues and proposes how to format holistic, ambitious approaches for effective implementation of carbon pricing. The carbon taxes and emission trading programs are the primary tools for implementation costs. Carbon taxes, fuel taxes, subsidies for fossil energy, and emission trading systems (ETSs) all contribute to these costs. Different countries have adopted different approaches to adopt and mitigate the adverse effect of carbon emissions, but coordinated and integrated efforts are needed. This paper emphasizes the effective carbon pricing and integrating role of finance departments in climate policy; new synergies can be developed to boost government agencies' ability to implement climate policy. Governments may increase their involvement in carbon pricing beyond direct carbon pricing if they implement efficient carbon pricing. Governments, international organizations, and civil society can all play a role in pushing for effective carbon prices to encourage more ambitious targets. Furthermore, the article stresses the need for open communication and a proper understanding of carbon pricing potential to implement climate policy.

Where does ex‐dividend trading occur: An examination of trading venues around dividends

AbstractWe examine the fragmentation of trading around the ex‐dividend date. We argue that the taker‐maker and dark trading venues provide potential dividend capture traders a more favorable platform than the maker‐taker venue(s) given the price improvement, lower queues, and lower net transaction costs. Our evidence indicates that taker‐maker (dark) venue market share decreases (increases) on cum‐dividend days but reverts to normal levels on the ex‐dividend day. Additionally, we find fragmented trading impacts the ex‐dividend price change and improves price efficiency. Finally, we find evidence that retail trades are associated with potential dividend‐capture trading.

The effect of liquidity and arbitrage on the price efficiency of Chinese ETFs

AbstractWe study the potential factors that determine the large and persistent price deviations in Chinese equity exchange‐traded funds (ETFs). Our results suggest that ETF liquidity and arbitrage activity are positively correlated with ETF price efficiency, and the relation is more pronounced with higher institutional ownership. We also evaluate the effect of two exogenous shocks in the Chinese market. Using a policy change that added market makers to ETFs on the Shenzhen Stock Exchange (SZSE) and Shanghai Stock Exchange (SSE), we find that market makers improve price efficiency and that the impact is stronger for ETFs with lower liquidity. We also exploit a change in trading rules on the SZSE and show that the relaxation of arbitrage restrictions improves price efficiency. Altogether, these findings provide evidence that lack of liquidity, due to the unique market structure and regulations of the Chinese market, contributes to price inefficiency of Chinese ETFs.

Recent Progress in Nickel and Silica Containing Catalysts for CO2 Hydrogenation to CH4

The recent unusual weather changes occurring in different parts of the world are caused by global warming, a consequence of the release of extreme amounts of greenhouse gases into the atmosphere. Carbon dioxide (CO2) is one of these greenhouse gasses, which can be captured and reused to generate fuel through the methanation process. Nickel- and silica-based catalysts have been recognized as promising catalysts due to their efficiency, availability, and low prices. However, these catalysts suffer from metal sintering at high temperatures. Researchers have achieved remarkable improvements through altering conventional synthesis methods, supports, metal loading amounts, and promoters. The modified routes have enhanced stability and activity while the supports offer large surface areas, dispersion, and strong metal–support interactions. Nickel loading affects the formed structure and catalytic activity, whereas doping causes CO2 conversion at low temperatures and forms basic sites. This review aims to discuss the CO2 methanation process over Ni- and SiO2-based catalysts, in particular the silica-supported Ni metal in previously reported research works and point out directions for potential future work.

Environmental performance of the Chinese cement enterprise: An empirical analysis using a text-based directional vector

Cement industry is both energy-intensive and pollution-intensive, imposing significant negative externalities on sustainability. However, previous studies have not sufficiently focused on China's cement industry; thus, there is a lack of information on efficiency and cost, limiting policy effectiveness. Using a directional-distance-function-based model and firm-level data, this study measures the technical efficiency and shadow price of SO2 and PM in China's cement industry from 1998 to 2010. In response to the debates on the selection of directional vector, this is the first study that proposes a new directional vector determined via text analysis. We use the five-year plans as a breakthrough point to construct a corpus, establish a lexicon, and introduce a text analysis in order to reveal the policy preference, and finally, solve this directional vector. Through this improvement, we highlight the inherent meanings of the directional vector and provide a new insight into the directional-distance-function-based method. We solve this new directional vector to be (0.98, −0.13, −0.13), implying that the preference for economic growth is significantly greater than that for environmental protection. The conditional median marginal abatement costs of SO2 and PM are estimated to be 29,070 and 1374 yuan/ton, respectively. The annual trends of technical efficiency and shadow price are depicted, and the heterogeneities of regions, provinces, cities, and pollutants are revealed.

Price discovery and triangular arbitrage in currency markets

Price discovery is the process by which markets incorporate the relevant information to arrive at the efficient price of an asset. We study the price discovery process in JPY/EUR cross-rates and the rates derived from exchanges of JPY/USD and USD/EUR indirectly. The results highlight the role of the USD as a vehicle currency in enhancing price efficiency through the triangular arbitrage. During financial crisis periods, the implied JPY/EUR rates have even more contribution to price discovery than direct rates. We show the dominant price discovery of implied JPY/EUR rates relates to the lower transaction cost. Upon the release of macroeconomic announcements in Japan and Europe zone, the trading cost advantage enhances price discovery of implied rates even more. The more contribution to price discovery of implied rates predicts the higher future volatility of direct JPY/EUR rates, indicating the slower response of direct rates to the information shock and the subsequent adjustment resulting in higher variations in the direct rates.