Net Buyers Research Articles

Drug purchase price volatility in an academic medical center.

Inpatient drug purchase price trends at an 811-bed academic medical center are described. Recent highly publicized drug price increases by pharmaceutical manufacturers have generated public interest in regulatory solutions to reduce drug costs. Monitoring drug price changes through internal dashboards has been demonstrated to aid in purchasing decisions to reduce the impact of drug price changes on inpatient pharmacy drug budgets. In this research, University of Chicago Medicine created an internal dashboard to detail specific inpatient drug purchase price trends. Dashboard data input included all medications purchased through the organization's group purchasing organization over a 25-month time frame. A total of 69,245 drug purchases of 2,432 unique medications and/or dosage strengths were analyzed in the study. Within the 25-month time period, 706 medications (29%) had a net drug purchase price increase, while 898 (37%) had a net drug purchase price decrease. The range of net price percentage changes for medications with price increases was 0.01% to 733.6%; the range for medications with price decreases was 0.01% to 97.5%. Relative to previous purchase prices, drug purchase prices decreased or remained the same more often than they increased over a 25-month time frame. However, drug purchase price percentage changes were far greater for medications whose prices increased rather than decreased.

Savvy Target Insiders’ Trading Before Takeover Announcements

We contribute to the M&A literature by characterizing the information available to target insiders during the pre-public takeover negotiations. We analyze insider trading in target firms in the US between 2005 and 2018. First, we show that signing confidentiality agreements is an important information threshold. Second, insiders have a good grasp of deal success. They increase their net purchases only in deals with higher completion probability. Third, insiders guess the final offer price well, but their trading strategies additionally reflect their knowledge of deal characteristics. They prefer bidder-initiated, cash, privately negotiated, and strategic deals. Insiders combine several sources of information.

Leverage constraints and corporate financing decisions

AbstractWe examine the impact of investors’ leverage constraints on corporate financing decisions. We use mutual fund flow to capture the net buying pressure from leverage‐constrained investors’ demand for high‐beta stocks. We show that firms confronted by the constrained funds’ excessive trading pressure are more likely to issue a seasoned equity offering and conduct stock‐based mergers and acquisitions, and their managers engage in more insider sales than those facing low or little trading pressure. Our results are robust to controlling for the short‐sales constraints of mutual funds and are consistent across different stages of the business cycle.

The valuation effect of stock dividends or splits: Evidence from a catering perspective

Abstract We hypothesize that managers use stock dividends or splits to cater to gambling investors who are willing to pay a premium for stocks with lottery-like features. Using proprietary account-level trading records, we find that retail investors, particularly those with a strong gambling preference, become strong net buyers following the announcement of stock dividends, while professional investors unload their holdings. Moreover, we find that positive market reactions to stock dividends is positively associated with increases in gambling investors.

Cross-Border Credit Derivatives Linkages

This paper is a first attempt to include credit derivatives in international macro-financial analysis. We document that gross credit derivatives holdings map to bilateral portfolio investment linkages. On a net basis, our results suggest an asymmetry between sectors and between net buyers and net sellers of CDSs. When a banking system is a net buyer of protection, the protection purchased is proportional to the debt securities held. Conversely, when a banking system is a net seller, the protection sold is proportional to the securities held. For investment funds, we find no aggregate relation between net CDSs and the debt securities held. JEL Classification: F34, F21

Mutual Fund Loyalty and ESG Stock Resilience during the COVID-19 Stock Market Crash

This paper studies the trading behavior of U.S. actively managed equity mutual funds during the COVID-19 market crash. We show that Environmental, Social, and Governance (ESG) funds helped to stabilize the market by contributing to the resiliency of ESG stocks, but interestingly non-ESG funds also provided support for ESG stocks. First, ESG funds reduced net sales during the crash, controlling for fund flows. Second, all funds experiencing inflows helped to stabilize the market during the crash by increasing net purchases, but this behaviour was more pronounced for ESG funds. Third, funds experiencing outflows also played a key role contributing to the relative stability of ESG stocks as both ESG and non-ESG funds more aggressively sold their non-ESG stocks. We are able to uncover these results because we use monthly holdings data from Morningstar, instead of the commonly used quarterly data.

The Influence of Individual Investors on Ex-Dividend Day Returns

This study documents that individual investors increase buy-initiated trades prior to ex-dividend days and increase sell-initiated trades after the ex-day. Institutions supply liquidity to individual investors by increasing their use of sell limit orders in the cum-dividend period and increasing their usage of buy limit orders in the ex-dividend period. Stocks that experience higher net purchases from individual investors operating through discount brokers in the cum-dividend period have lower ex-day returns in the order of 25 basis points. This difference is as large as 44 basis points for high yield securities. This contrasts with the average excess ex-day return of 24 basis points. The results indicate that individual investors play an influential role in ex-dividend pricing.

English

Despite in recent years the impact of market sentiment on the performance of listing firms has gained increased attention from academics and professionals, a research question that remains uncovered deals with how the retail investor sentiment and attention might impact the IPO pricing in the primary market. This analysis proposes a stochastic frontier model approach on a sample of 412 US firms listed between 2010 and 2016. The main research questions aim at revealing the effects that the number and the sentiment of the Tweets in the 3 months prior to each IPO produce in terms of the distance between the maximum achievable price and the actual offer price of the stocks. Results show that the more favorable the sentiment, the closer the offer price is set to the maximum achievable to the benefit of the issuer; on the contrary, negative sentiments seem to play no effect on the pricing, supporting the idea that investors are net buyers of attention-grabbing news. The number of Tweets shows no effect as well. Few and good is then the desirable attention and sentiment that issuers should wish for their listing firms.   Key words: Initial public offering, sentiment, investors’ attention, underpricing, social media.

Investor behavior, stock returns and CDS spreads: evidence from foreign and domestic investors in Korea

PurposeThis study investigates the dynamic relationships among trading behaviors of different investor groups (foreigners, domestic institutions and domestic individuals), stock returns and sovereign CDS (Credit Default Swap) spreads in Korea.Design/methodology/approachWe employ the VAR (Vector autoregression) model to examine the dynamic relationships between CDS spread changes, stock returns and investors' behavior in the stock market.FindingsThe CDS spread change (stock return) declines (rises) in response to shocks to net foreign flows into the stock market on the same day. Foreigners buy stocks more intensely one day after an increase in the stock return, but they do not respond to CDS spread changes. Domestic individuals trade in the opposite direction of foreigners in response to shocks to both stock returns and CDS spread changes on the same day. Positive net stock purchases of domestic institutions (individuals) predict positive (negative) stock returns and negative (positive) CDS spread changes next day.Originality/valueThis study extends prior studies by examining how different investor groups' trading behaviors in the stock market are associated with not only the stock market but also a closely related market (CDS market). Prior empirical studies on the relation between the stock and CDS markets do not pay attention to possible heterogeneity in trading behavior across different types of investors in the stock market.

Intraday option price changes and net buying pressure

ABSTRACT We re-examine the effect of net buying pressure on options-implied volatility changes by analysing ultra-high-frequency microstructure data. Intraday relationships between option price dynamics and investors’ net demand are explained by the direction-learning hypothesis.

Optimal grid tariffs with heterogeneous prosumers

Energy consumers can invest in photovoltaic (PV) panels and become prosumers. The benefit of such an investment depends on the regulatory framework. We consider a population of heterogeneous consumers, with respect to both the cost of decentralized production and their degree of self-consumption.it is efficient to have investment by low-cost and high self-consumption profiles. We determine the optimal tariff in the presence of heterogeneous prosumers. Net metering fails to screen consumers on the self-consumption dimension. Net purchasing can lead to the efficient investment if the tariffs are non-Coasian that is fixed fees exceed the grid operator’s fixed costs.

Distributional impacts of the rice tariffication policy in the Philippines

In March 2019, the government of the Philippines promulgated a bill called the Rice Tariffication Law (RTL). It has dramatically changed the policy landscape in the rice sector and generated heated debates on how it would affect food security and poverty. This study explores the welfare effects of this reform across different types of households. We rely on the IRRI Global Rice Model to simulate the domestic price effects of the reform (Balié and Valera, 2020) and the Family Income and Expenditure Survey (FIES) to study the welfare impact of these price changes. Our results show that the RTL reduces consumer and producer rice prices, which affects households on the production and the consumption sides. Because a large majority of households are net buyers of rice and the policy reform reduces rice prices, most households benefit from the reform. Overall, the effects of the reform on poverty are beneficial. The poorest quintiles are positively affected, while the richest quintiles are unaffected or slightly worse-off. Spatially, the poorest regions also benefit the most. However, the rice growers who are net sellers are negatively impacted. The government should seek to mitigate the negative effects on non-competitive rice growers. Investments in public goods and services are a promising option to ease the emergence of on-farm and off-farm businesses as more profitable alternatives to rice production.

Institutional trading in firms rumored to be takeover targets

In this paper we examine institutional trading in proximity to takeover rumors by combining the ANcerno dataset of transaction-level institutional trades with a unique sample of takeover rumor ‘scoops’. We find that institutions are net buyers in firms which subsequently become subject to takeover speculation and that institutional trading predicts which rumored firms will eventually receive takeover bids. Segregating funds according to their propensity to trade, we show that those less likely to purchase rumored targets by chance over the pre-rumor period are more likely to identify firms which will receive bid proposals and that they trade more profitably over both the pre- and post-rumor periods. We test for the presence of informed trading in a variety of ways and conclude that institutional investors appear to trade on material private information which identifies the firms soon to be the target of takeover speculation.

Effect of bed net colour and shape preferences on bed net usage: a secondary data analysis of the 2017 Malawi Malaria Indicator Survey

BackgroundMalaria remains a significant cause of morbidity and mortality in the paediatric population in Malawi. Insecticide-treated bed nets are a key vector malaria control intervention, however, advancement towards universal access is progressing slowly. Malawi Malaria indicator surveys (MMIS) show diverse user preferences of bed net shape and colour. The objective of this work was to understand if bed net shape and colour preferences affect usage.MethodsThis is a secondary analysis of data from households that participated in the 2016–2017 MMIS. The main outcome variable was net usage defined, at net level, whether someone slept under a particular net on the night before the survey. The main exposure variables were preference attributes, whether a particular net is of a preferred colour or shape as defined by the household respondent. Both bivariate and multivariate logistic regression analyses were done to determine the association between the exposure and outcome variables.ResultsA total of 3729 households with 16,755 individuals were included in this analysis. There were a total 7710 bed nets in households that participated in the survey of which 5435 (70.5%) of these nets had someone sleep under them the previous night before the survey. Bed nets that are of a preferred shape have 3.55 times higher odds of being used than those not preferred [AOR 3.55 (95% CI 2.98, 4.23; p value < 0.001)]. Bed nets that are of a preferred colour have 1.61 times higher odds of being used than those that are not of a preferred colour [AOR 1.61 (95% CI 1.41, 1.84; p value < 0.001].ConclusionsThe results indicate that if a bed net is of a preferred colour or shape, it is more likely to be used. Bed net purchase by malaria stakeholders need to balance more factors on top of preferences such as price and efficacy.

Energy management platform for integrated battery-based energy storage – solar PV system: a case study

This study develops an energy management platform for battery-based energy storage (BES) and solar photovoltaic (PV) generation connected at the low-voltage distribution network. The sewage treatment plant of Gujarat International Finance Tec-City located in the Gujarat state is considered as a testbed. The contribution of this case study is twofold: (i) Formulation and lab-scale implementation of an optimal scheduling algorithm to charge/discharge BES while minimising the net energy purchase cost. (ii) Development of a fuzzy logic-based speed control strategy for aeration blower to enhance the process efficiency. A stochastic optimisation problem was formulated as mixed-integer linear programming to achieve the charging and discharging schedules of BES. The simulation study on speed control of aeration blower was carried out to demonstrate the air injection control for optimal dissolved oxygen level in the aeration basin at the testbed. Simulation results of the case study and lab-scale hardware realisation (through real-time digital simulator interfaced with modular hardware) were presented to validate the demand- and supply-side energy management platform.

Do Mutual Fund Managers Time Market Sentiment?

This paper examines whether fund managers can adjust the exposure of portfolio to time market sentiment, thus expanding the new dimension of the study of mutual fund managers’ timing ability. Using the data of Chinese open-end equity funds from January 2010 to December 2019, based on the CICSI sentiment index developed by Yi and Mao (2009), we find strong evidence that Chinese mutual fund managers have sentiment ability during the sample period. In addition, the funds with positive sentiment timing ability outperforms those without such by 2.20% per year, and the longer the fund survives, the more likely for it to have sentiment timing ability. Our findings remain robust even after controlling the impact of bull and bear market on China’s A-share market in 2015, market timing, volatility timing and liquidity timing, and after using three new sentiment indicators to verify the finding, three indicators being the net buying amount of northward capital, the net buying amount of financing, and the net ratio of limit up.

Foreign Investors’ Abnormal Trading Behavior in the Time of COVID-19

This study investigates the behavior of foreign investors in the Stock Exchange of Thailand (SET) in the time of coronavirus disease 2019 (COVID-19) as to whether trading is abnormal, what strategy is followed, whether herd behavior is present, and whether the actions destabilize the market. Foreign investors' trading behavior is measured by net buying volume divided by market capitalization, whereas the stock market behavior is measured by logged return on the SET index portfolio. The data are daily from Tuesday, August 28, 2018, to Monday, May 18, 2020. The study extends the conditional-regression model in an event-study framework and extracts the unobserved abnormal trading behavior using the Kalman filtering technique. It then applies vector autoregressions and impulse responses to test for the investors' chosen strategy, herd behavior, and market destabilization. The results show that foreign investors' abnormal trading volume is negative and significant. An analysis of the abnormal trading volume with stock returns reveals that foreign investors are not positive-feedback investors, but rather, they self-herd. Although foreign investors' abnormal trading does not destabilize the market, it induces stock-return volatility of a similar size to normal trade. The methodology is new; the findings are useful for researchers, local authorities, and investors.

Advertising, investor attention, and stock prices: Evidence from a natural experiment

AbstractI test whether advertising affects stock prices through an investor attention channel. I use corporate sponsorships of college football bowl games as a natural experiment that provides variation in advertising exposure that is unrelated to firm fundamentals. Sponsoring firms' stocks experience large increases in investor attention, abnormally high turnover, and temporary price pressure that is related to bowl games' TV‐ratings and score differentials. Retail investors are net buyers of sponsors' stocks, whereas institutional investors initially remain neutral and then start selling, ultimately driving a reversal toward fundamental values. These findings shed light on who wins/loses when advertising attracts investor attention.

The impact of net buying pressure on index options prices

AbstractThis study examines whether the demand for options, as measured by the net buying pressure of index options, explains the implied volatility structure created by options prices. We decompose the buying pressure into the direction‐motivated (i.e., delta‐informed) and the volatility‐motivated (i.e., vega‐informed) demand for options. After controlling for options traders' hedging demand, we find that both delta‐ and vega‐informed trading play significant roles in explaining changes in implied volatility. Foreign institutions are more directionally informed in index options trading than their domestic counterparts are. Domestic investors effectively implement volatility trading using put options.

Insider trading in rumored takeover targets

AbstractWe examine insider trading surrounding takeover rumors in a sample of 1,642 publicly traded US firms. Using difference‐in‐differences regressions, we find that insider net purchases increase within the year prior to the first publication of a takeover rumor, particularly when rumor articles are either accurate (lead to a takeover announcement) or informative (provide substantial justification for the rumor's publication). Moreover, we find abnormal insider trading to be a significant predictor of takeover announcements occurring within the following year. Finally, passive net purchasing (i.e., selling less rather than buying more) is more pronounced among managing insiders than among non‐managing insiders.