Significant Price Effects Research Articles

SEC Cybersecurity Guidelines: Insights into the Utility of Risk Factor Disclosures for Investors

In October 2011, the SEC issued new guidelines for disclosure of cybersecurity risks. Some firms responded to these guidelines by issuing new risk factor disclosures. This paper examines the guidelines and cybersecurity disclosures in the context of existing laws governing securities regulation. It then examines empirical results from firm disclosures following the new guidelines. Evidence shows a relatively small proportion of firms chose to modify their risk factor disclosures, with most firms choosing not to disclose any specific cybersecurity risk. Moreover, disclosing firms generally experienced significant negative stock market price effects on account of new disclosures. Rather than viewing disclosure a positive signal of management attentiveness, investors apparently viewed it as a cautionary sign.

The price impact of block transactions in the Netherlands

In this paper, the authors analyse the stock price effects of block transactions and the disclosure thereof for Dutch firms. The authors measure a significant positive price effect for block purchases directly around the transaction date, but not for block sales. The authors do not measure a significant price effect for the disclosures of block transactions. The authors find two opposing effects about the agency role of large shareholders. In particular, while the authors find that the market reacts positively to the entrance of a new block holder, the authors also measure a negative reaction to the purchase of large blocks.

How price-effects accrue with product experience and expertise

Attempting to understand how blind and sight-based judgements are variously mediated by degrees of experience and expertise, this study asks two questions. First: with increasing product familiarity, when do our associative processes begin to twin price with quality so that ultimately the price-cue is employed as a proxy for genuine quality? Second: how might the strength of this price-cue association vary across bands of relative expertise? To address these questions, we report on a blind-versus-sighted cheddar cheese tasting-room experiment to model reported utility in the presence of price information. Eight cheeses are tasted by 127 subjects and regression models estimate significant price-effects across bands of both (1) self-confessed expertise (novice, intermediate, expert) and (2) consumption experience (measured over years). In both instances of increasing expertise and experience, sight-based assessments become more correlated with price. This confirms a process of cue-conditioning. Thus, while cheaper cheddars are preferred by novices, when in the presence of price information, more experienced subjects express increasing preference for more expensive cheddars. With increasing years of experience (though not expertise) price information receptivity also appears to be built into how we taste blind; suggesting some alternate process of acquired price learning.

Price Effects of the Minimum Wage: A Survey Data Analysis for theGerman Construction Sector

AbstractUtilizing the link between employment and price changes as a result of minimum wages, we use firm‐level data to evaluate the effect of minimum wage introduction in theGerman construction sector. In EastGermany we find significant positive price effects that exclude the possibility of rising employment. Rather, the results indicate the existence of a competitive sector‐specific labour market, and thus declining employment. In contrast, we cannot find any significant price reaction forWestGermany. This suggests that the implemented minimum wage inWestGermany is too low in comparison to the predominantly paid wages and is hence not binding.

Exceeding Expectations: Economic Forecasts and Underreaction to Macroeconomic Announcements

Existing research relies on the assumption of rational behavior and argues that only unexpected macroeconomic news may affect stock prices. Unlike these papers, we find significant stock price effects of expected components of macroeconomic announcements, which are revealed by survey forecasts of market participants. Since economic forecasts are systematically biased towards the values of previous announcements, we hypothesize that the historical information embedded in these forecasts may impact stock prices. Our results confirm this hypothesis and suggest that some investors trade on historical macroeconomic announcements.

Price and volume effects associated with scheduled changes in constituents of index: study of NIFTY index in India

This paper examines price and liquidity effects associated with scheduled index reorganisation in NIFTY surrounding its announcement and effective days. The results show that there are no significant abnormal positive returns associated with index inclusion surrounding announcement day. Significant positive abnormal returns associated with inclusion are present on effective day but fails to sustain. Significant negative price effect associated with exclusion of stocks is observed through the announcement window and indicates that exclusion from index is treated as negative. Negative price effect is observed for exclusion closer to and on effective day but that also does not sustain. No significant and sustainable change in trading volume is associated with index reorganisation. Increase in volume associated with inclusion and exclusion of securities is found on effective day, which can be attributed to index funds and ETF activity. Results of this study offers evidence for price pressure and against liqui...

Corporate social responsibility and firm performance in South Africa

Corporate Social Responsibility (CSR) can be viewed from two different perspectives: that of the business; and that of the individual investor (Socially Responsible Investing, SRI). In this study regression analysis as well as an event study was used to examine the link between CSR and firm performance. The results suggested that in the short-term there were no significant price effects on the SRI shares. In contrast, the returns of SRI portfolios over the sample period seemed to be superior to those of conventional firms. The regression analysis found that generally the SRI coefficients were insignificant; however using one of the models during the fifteen year sample period, SRI constituents attained a ROE that was 11.18% higher (as well as a ROA that was 1.824% lower) than conventional firms. When the period was restricted to 2004-2009 it was found that social performance was positively - and sometimes significantly - correlated with ROE.

Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

Another look at the holiday effect

This article provides further evidence on the holiday effect by analysing stock market behaviour on the days a public holiday is not accompanied by a stock market break. Indeed, since 2003, when the trading calendar of Portuguese stock market was harmonized with the remaining Euronext national markets, on several occasions Portuguese national holidays were not weekdays on which the stock market was closed. Moreover, we adopted a bottom-up approach that allows us to search for size effects and industry effects. Our results show a statistically significant negative liquidity effect and an economically and statistically significant positive price effect during Portuguese-specific national holidays relative to a typical trading day. Return-related impact effects are driven by the smaller-sized stocks and robust to the recent crisis period. These results suggest the prevalence of a mood effect, by which those nondistracted traders’ positive feelings translate into a buying pressure, or reluctance to sell, that...

A Meta-Study of Merger Retrospectives in the United States

Over the last decade, merger retrospectives have become increasingly popular. However, it is far from clear what implications can be drawn from these analyses, because the results suffer from a sample selection problem. This paper uses models of the Federal Trade Commission’s enforcement activity to estimate challenge probabilities and address the selection issue. Although the small size of the meta-study panel limits the statistical interpretation of the results, general observations are possible. First, significant price effects appear in the matters with very high challenge probabilities. When challenge probabilities are moderate, roughly 30-60 percent, retrospective results generate price effects in half the studies. For low challenge probabilities, no price effects are observed in the retrospectives related to collusion theories. Positive effects are noted for retrospectives in some consumer goods markets, but theoretical analysis implies these results are questionable. Although retrospectives, interpreted in light of the likely competitive concern, can serve as a test for merger policy, policy predictions also serve as a test of the credibility of the retrospectives.

The Dynamics of Trading in Commodity Futures

We examine weekly trading imbalances for speculators and small investors in the commodity futures market and their price and volatility effects over the period 1986-2012. First, speculators behave like short term momentum traders and long-term contrarians. Their imbalances are positively autocorrelated and positively cross-autocorrelated with small investor imbalances, consistent with their ‘riding the wave’ caused by small traders. Speculators sell (buy) to a greater extent after their long (short) positions have become larger, especially when volatility is elevated: this is consistent with their being risk averse. Small trader imbalances also follow speculator imbalances of a given sign, and display mean reversion and volatility aversion, but both are weaker than for speculators. Second, imbalances have positive and significant permanent price effects, which are larger for speculators. Further analysis suggests that the price impact of speculator imbalances is smaller when they act as suppliers of liquidity to hedgers. Finally, price volatility is related positively to lagged small trader imbalances, supportive of noise trader effects, and negatively to the lagged variability of speculator imbalances, which is inconsistent with speculator activity promoting futures market volatility. Our results are broadly similar in extreme market conditions. The picture that emerges from our analysis is that speculators are risk averse, short-term oriented, liquidity providers with trades that are, in general, not destabilizing. Our work contributes to the debate on the effects of trading, especially by speculators, and the need for new regulatory initiatives.

An Econometric Analysis of Correlated Discrete Event Impact on the Price of Natural Gas: The Nord Stream’s Effect on European Markets

In this paper I provide an econometric analysis of correlated discrete event impact on the price of natural gas, namely the Nord Stream’s effect on the European natural gas market. The Nord Stream is a rare large scale event with the potential to induce significant price effects in commodity markets and reshape price dynamics. I collect data from several sources, conduct a series of data transformation techniques, idiosyncratic econometric tests and develop several univariate Arch and Garch estimation models and determine that the implementation of the Nord Stream does in fact have an impact on the price of European natural gas. My research substantiates that the Nord Stream’s effect is priced into European markets during the period between the Nord Stream receiving final approval from the Finnish government on 12th February 2010 and the opening of the 1st pipeline on 11th November 2011. Whilst accounting for the trend, during this period the price of European natural gas is 3.3071% lower. This result is reinforced by a Chow breakpoint test that implies a structural break occurs in the pricing of European natural gas on 12th February 2010. The model also significantly implies that outside of the trend ceteris paribus that a 10% increase in the price of Brent crude oil corresponds to a 1.93% decrease in the price of European natural gas and that a 10% increase in the price of North-Western European coal corresponds to a 3.01427% increase in the price of European natural gas.

Rental price and sustainability ratings: which sustainability criteria are really paying back?

Given the centrality of the price mechanism to resource allocation in market economies, the effect of sustainable construction on real estate prices has become an increasingly important empirical issue for market participants and policy makers in the real estate sector. Drawing upon a sample of approximately 2500 residential building units in Switzerland, this study assesses the effects of buildings’ sustainability on their rental prices. In contrast to the vast majority of previous studies that have focused on the price effects of eco-labels, this study investigates the effects of individual sustainability attributes. Overall, we find a positive relationship between the environmental performance of residential buildings and their rental levels. Sustainable building characteristics, especially those which enhance the water efficiency, the health and comfort level and the building’s safety and security, have significant positive price effects. It is argued that the unexpected negative relationship between energy performance and rental prices is attributed to the bundling of energy costs and rents in Swiss lease structures.

THE PRICE SENSITIVITY OF MEDICARE BENEFICIARIES: A REGRESSION DISCONTINUITY APPROACH

We use 4 years of data from the retiree health benefits program of the University of Michigan to estimate the effect of price on the health plan choices of Medicare beneficiaries. During the period of our analysis, changes in the University's premium contribution rules led to substantial price changes. A key feature of this 'natural experiment' is that individuals who had retired before a certain date were exempted from having to pay any premium contributions. This 'grandfathering' creates quasi-experimental variation that is ideal for estimating the effect of price. Using regression discontinuity methods, we compare the plan choices of individuals who retired just after the grandfathering cutoff date and were therefore exposed to significant price changes to the choices of a 'control group' of individuals who retired just before that date and therefore did not experience the price changes. The results indicate a statistically significant effect of price, with a $10 increase in monthly premium contributions leading to a 2 to 3 percentage point decrease in a plan's market share.

Are prescribing doctors sensitive to the price that their patients have to pay in the Spanish National Health System?

BackgroundThis study aims to design an empirical test on the sensitivity of the prescribing doctors to the price afforded for the patient, and to apply it to the population data of primary care dispensations for cardiovascular disease and mental illness in the Spanish National Health System (NHS). Implications for drug policies are discussed.MethodsWe used population data of 17 therapeutic groups of cardiovascular and mental illness drugs aggregated by health areas to obtain 1424 observations ((8 cardiovascular groups * 70 areas) + (9 psychotropics groups * 96 areas)). All drugs are free for pensioners. For non-pensioner patients 10 of the 17 therapeutic groups have a reduced copayment (RC) status of only 10% of the price with a ceiling of €2.64 per pack, while the remaining 7 groups have a full copayment (FC) rate of 40%. Differences in the average price among dispensations for pensioners and non-pensioners were modelled with multilevel regression models to test the following hypothesis: 1) in FC drugs there is a significant positive difference between the average prices of drugs prescribed to pensioners and non-pensioners; 2) in RC drugs there is no significant price differential between pensioner and non-pensioner patients; 3) the price differential of FC drugs prescribed to pensioners and non-pensioners is greater the higher the price of the drugs.ResultsThe average monthly price of dispensations to pensioners and non-pensioners does not differ for RC drugs, but for FC drugs pensioners get more expensive dispensations than non-pensioners (estimated difference of €9.74 by DDD and month). There is a positive and significant effect of the drug price on the differential price between pensioners and non-pensioners. For FC drugs, each additional euro of the drug price increases the differential by nearly half a euro (0.492). We did not find any significant differences in the intensity of the price effect among FC therapeutic groups.ConclusionsDoctors working in the Spanish NHS seem to be sensitive to the price that can be afforded by patients when they fill in prescriptions, although alternative hypothesis could also explain the results found.

Does local news matter to investors?

PurposeRecent research on local bias provides evidence that investors' portfolios include a non‐negligible allocation to stocks in firms that are geographically proximate to the investors. The reasons postulated for local bias include familiarity with firms, “word‐of‐mouth” communication effects, and ability to exploit local news. The purpose of this paper is to investigate the value‐relevance of local news, specifically earnings announcement surprises, in the context of the well‐documented local bias in investors' portfolios.Design/methodology/approachUsing a hand‐collected panel dataset spanning 15 years of quarterly earnings announcements of publicly traded firms, abnormal stock returns engendered by earnings surprises based on local newspaper announcements are compared to those from earnings surprises based on financial analysts' forecasts (I/B/E/S).FindingsIn contrast to the case, when both sources of earnings surprises are negative, the authors find a statistically significant differential stock price effect in a sample where local firms' earnings announcements in the local newspaper signal positive earnings surprises, but the earnings surprise based on financial analysts' forecasts is negative. This result remains after controlling for time‐ and firm‐fixed effects. In additional tests, the authors establish that the result is predicated on a local firm's earnings announcement being reported in the local newspaper.Originality/valueThe paper's findings suggest that the results of empirical research on the information content of earnings surprises based solely on analysts' forecasts should be interpreted with caution. It was found that the stock price impact of earnings surprises is also significantly influenced by local newspaper reports of the announced quarterly earnings of local firms.

The impact of Energy Performance Certificates on the rental and capital values of commercial property assets

This paper focuses on the effect of energy performance ratings on appraised capital values, rental values and equivalent yields of UK commercial property assets. The study is based on a cross-section of 708 commercial property assets. Incorporating a range of potential confounding factors such as unexpired lease term, vacancy rate and tenant credit risk, we use hedonic regression procedures to estimate the effect of EPC rating on rental and capital values. The study finds no evidence of a significant relationship between environmental and/or energy performance and rental and capital values. A small subset of 24 BREEAM-rated assets is also tested for significant price effects but a statistically significant effect is only confirmed for equivalent yields. Similarly, there was no evidence that the EPC rating had any effect on Market Rent or Market Value with only minor effects of EPC ratings on equivalent yields. The preliminary conclusion is that energy labelling is not yet having the effects on Market Values and Market Rents that would be expected if high EPC ratings were associated with substantial cost savings that are fully reflected in capital values and/or were readily available and taken into account by prospective tenants and buyers.

Crowdsourcing with all-pay auctions: A field experiment on Taskcn

We investigate the effects of various design features of all-pay auction crowdsourcing sites by conducting a fieldexperiment on Taskcn, one of the largest crowdsourcingsites in China where all-pay auction mechanisms are used. Specifically, we study the effects of price, reserve price inthe form of the early entry of high-quality answers (shillanswers), and reputation systems on answer quantity andquality by posting translation and programming tasks on Taskcn. We find significant price effects on both thenumber of submissions and answer quality, and that taskswith shill answers have pronounced lower answer quality, which are consistent with our theoretical predictions. Inaddition, monetary incentives and the existence of shillanswers have different effects on users with differingexperience and expertise levels.

How (much) do food prices contribute to obesity in Russia?

High BMI and obesity contribute to the Russian health crisis. Previous studies have shown that weight status varies along socioeconomic lines but remains largely unaffected by economic shocks over time. This study is the first that explicitly analyses the impact of food prices on adult BMI and obesity in the Russian Federation. Using panel data from the Russia Longitudinal Monitoring Survey from 1994 to 2005, that included 10,551 urban respondents over 18 years, a reduced form weight demand function is estimated. Controlling for individual heterogeneity by a fixed-effects model, price-weight elasticities are derived. The main result is that food prices are not the essential determinants of BMI and obesity in Russia. Elasticities of BMI with respect to single food prices are low and show absolute values smaller than 0.01. However, some products like chicken meat, milk, onions and butter show significant price effects on body mass. A 20% increase in the price of chicken meat would cause a reduction in body weight of 112 g on average. In contrast to the United States, it is mainly high-income households that show significant weight reactions to food prices in Russia. Separate regressions by gender showed significant effects of milk and butter prices on male BMI and of onion prices on female BMI. The risk of being obese is even less affected by price.

The Short-Term Impact Of Super Bowl Advertising On Stock Prices: An Exploratory Event Study

<p class="MsoNormal" style="text-align: justify; margin: 0in 0.5in 0pt; mso-pagination: none;"><em style="mso-bidi-font-style: normal;"><span style="font-size: 10pt;"><span style="font-family: Times New Roman;">Advertisers are under pressure to demonstrate the financial effectiveness of their advertising.<span style="mso-spacerun: yes;">  </span>Event study methodology utilizing measurement and comparison of stock prices may be one way to address this concern.<span style="mso-spacerun: yes;">  </span>In this study, our results suggest that while advertising in the Super Bowl does not have a significant positive impact on a firm’s stock price the day after the Super Bowl, when considering windows from two to four days before and after there is a significant positive stock price effect.<span style="mso-spacerun: yes;">  </span>Additionally, we found the current method advertisers use to judge the effectiveness of Super Bowl advertising (i.e. likeability with the USA Today poll and Advertising Age poll) had no significant relationship with financial effectiveness as measured by stock price.<span style="mso-spacerun: yes;">  </span>This suggests that the methods marketers use to judge Super Bowl advertising effectiveness may not be good measures of success in financial terms.<span style="mso-spacerun: yes;">  </span>Finally, our results suggest that if a firm does choose to advertise in the Super Bowl, they may want to pick the second quarter for their ad and that they need to maximize pre-Super Bowl publicity due to the impact on stock price before the Super Bowl. </span></span></em></p>