Trade Difficulties Research Articles

Can traders beat the market? Evidence from insider trades

Purpose – The purpose of this paper is to investigate how insiders’ trades are executed and whether and how outside investors can mimic outperforming insiders and reap substantial portfolio returns that withstand the erosion from adjustments for both the standard factors and stock characteristics in the asset pricing literature. Design/methodology/approach – The authors design a metric for measuring insiders’ trade execution quality: the trading alpha. The authors run regression analysis to control for trade difficulty, insider reputations and the corporate role ranks of insiders and document the existence of the abnormal trading alpha. The authors further form portfolios based on the abnormal trading alpha and document a significant abnormal return that is robust to both standard asset pricing factors model and the stock characteristics adjustments. Findings – Outperforming insiders at the aggregate level resemble value investors who trade on long-term fundamental information, trade patiently and earn rents from providing liquidity. Outside investors can mimic the outperforming insiders and reap significant abnormal portfolio returns. Research limitations/implications – Data limitations on insider trades and their association/interaction with their brokers prevent us from having a conclusive investigation of the trading skill hypothesis. The authors hope to further research along the lines of the trading skill hypothesis as compared to investment style hypothesis with more detailed data about the brokers used by insiders. Practical implications – The findings can be applied for money management profession in that outsider investors can monitor the trading execution and construct portfolios based on the adjusted abnormal trading alpha. The resulting portfolio has been documented to be highly profitable after risk adjustments using standard asset pricing factors as well as stock characteristics. Social implications – Professional money managers and outsider investors should be able to benefit from the findings in this paper and use the proposed trading alpha metric to construct and rebalance real-time investment portfolios. Originality/value – Outperforming insiders at the aggregate level resemble value investors who act on long-term fundamental information, trade patiently and earn rents from providing liquidity. From the perspective of investment implications, outside investors can mimic the outperforming insiders and reap substantial portfolio returns that withstand the erosion from adjustments for both the standard factors and stock characteristics in the asset pricing literature.

Can Traders Beat the Market? Evidence from Insider Trades

Using the comprehensive trading data for the U.S. corporate insiders between 1993 and 2008, we document robust evidence that insiders as a whole achieve transaction prices superior to the volume-weighted average prices. This outperformance, expressed as a positive trading alpha, remains after we control for trade difficulty, insider reputation and the corporate role ranks of insiders. Upon analyzing the time series patterns of portfolio returns to strategies of mimicking corporate insiders with abnormal trading alphas in the extreme quartiles, we conclude that the outperforming insiders at the aggregate level resemble value investors who act on long-term fundamental information, trade patiently and earn rents from providing liquidity. Moreover, outside investors benefit from mimicking the acts of outperforming insiders in real time. The sizeable profit from this mimicking strategy withstands the erosion from adjustments for standard factors in the asset pricing literature and the adjustment for stock characteristics.

Sanitary and Phytosanitary Legislation in the Russian Federation: A General Overview in Light of the WTO SPS Agreement and EU Principles of Food Safety

AbstractThis article introduces the World Trade Organization (WTO) rules on sanitary and phytosanitary (SPS) measures and the European Union's policies and legislation that exemplify these rules. This forms the basis for examining primary Russian SPS legislation governing border controls and its relationship with legislative provisions on human, animal, and plant health and food safety. Specific Russsian primary federal laws (federal'nye zakony) covering veterinary medicine, plant health, food quality/safety, pesticides and agrochemicals, and technical regulations are compared with corresponding international conventions, norms, and standards and relevant legislation in the EU. Finally, general remarks are made about the Russian Federation's secondary legislation in the SPS area. Instances of non-compliance with international norms, found by the authors, may contribute to trade difficulties with other countries and likely will need to be addressed as part of Russia's negotiations to join the WTO and, also, to remove some of the difficulties in trade with the EU.

The Vicissitudes of Public Health Policy in the Americas

The Vicissitudes of Public Health Policy in the Americas Amy Whitfield (bio) and Howard Waitzkin (bio) Marriage of Convenience: Rockefeller International Health and Revolutionary Mexico. By Anne-Emanuelle Birn. Rochester, NY: University of Rochester Press, 2006. Pp. 434. $95.00 cloth. Cold War, Deadly Fevers: Malaria Eradication in Mexico, 1955–1975. By Marcos Cueto. Baltimore: Johns Hopkins University Press, 2007. Pp. 264. $45.00 cloth. The Value of Health: History of the Pan American Health Organization. By Marcos Cueto. Rochester, NY: University of Rochester Press, 2007. Pp. 252. $29.95 cloth. Decentralizing Health Services in Mexico: A Case Study in State Reform. Edited by Núria Homedes and Antonio Ugalde. La Jolla, CA: Center for U.S.-Mexican Studies, University of California, San Diego, 2006. Pp. 332. $24.95 paper, $56.95 cloth. Fit to Be Citizens? Public Health and Race in Los Angeles, 1879–1939. By Natalia Molina. Berkeley: University of California Press, 2006. Pp. 279. $21.95 paper, $55.00 cloth. Historically, public health policies in the Americas have emerged as a result of political and economic forces rather than a narrow concern for the objective improvement of public health and the prevention of illness. Specifically, public health policies have interconnected with the needs of business and foreign policy as formulated during different historical periods. The four books reviewed here show an awareness of the nonautonomous nature of public health policies in the Americas. On the basis of these excellent books, we assess the origins and impacts of public health policies in furthering economic and political goals. Economic Impacts of Public Health Policies Public health policies in the Americas have focused on the economic benefits of preventing and eradicating disease. International health agencies [End Page 216] originated in large part from the need to create a system to stop the spread of disease, which was hindering trade. Marcos Cueto's The Value of Health provides a detailed history of the creation and continuation of the Pan American Health Organization (PAHO) and its role in the use of health policies to advance trade and economic benefits. Cueto provides a nonjudgmental look at this history that historians, Latin Americanists, and health-policy professionals can enjoy. The book is easy to read and does not require previous knowledge of Latin America or public health. Cueto uses varied resources in compiling a chronicle of the international organization, separating its history into the eras of PAHO's directors. Each director's background, including education, other organizational affiliations, and personal passions, is included as a significant part of the story. This information provides a look not only at policy directives but also at the factors contributing to the organization's choices in health-policy decisions. Cueto provides details concerning the forces that initiated the organization, specifically the system of quarantining ships to block the spread of disease that, as stated previously, limited trade and created a loss of materials. Different countries were blamed for spreading disease because of the deficient cleanliness of their ports. Medical posts, set up at ports, checked ships and immigrants, and single companies established processes to sanction and authorize ships entering these ports so as to minimize trade difficulties. Walter Wyman, the first Director of PAHO, known then as the Pan American Sanitary Board, focused on the creation of public health policies that would exert minimal adverse impacts on commerce. The policies eventually moved away from concentrating only on port activities as diseases such as bubonic plague, hookworm, and yellow fever spread throughout nations, but they still focused on the economic benefits of preventing and curing diseases. The prioritization of diseases that had to be controlled resulted from considerations of commerce. Cueto's clarification of PAHO's creation based on trade provides some background for looking at the economically motivated health policies portrayed in Natalia Molina's Fit to Be Citizens? Public Health and Race in Los Angeles, 1879–1939. Public health professionals will benefit from Molina's historical look at the treatment of Chinese, Japanese, and Mexican immigrants in Los Angeles under evolving public health policies. The book provides an outstanding historical account, which historians, particularly those focused on medical or public health history, will enjoy. Much like Cueto...

Explaining poor performance of European science: institutions versus policies

This paper offers detailed evidence of the weak performance of European science in the upper tail of scientific quality, in fast moving scientific fields, and in new fields that follow a proliferation pattern of growth, or divergent search regime. The relatively poor performance is offered as a better explanation than the European paradox for current difficulties in high technology industries and trade. The paper calls for a shift of attention, from the level of science policy to the dynamic comparative analysis of deep institutional features of scientific systems, offering a number of provocative statements on scientific institutions in European countries. Copyright , Beech Tree Publishing.

The relationship between private businesses and their banks

PurposeThe purpose of this paper is to show how banks have a critical role in helping SMEs by providing investment capital that businesses need and by offering sound financial advice through the growth of the company.Design/methodology/approachUsing the Forum of Private Business (FPB) Bank Report of 2004, the total sample represents responses from the FPB and customers of six participating clearing banks. Although the total sample is used to compile performance indices by the bank, the rest of this paper is based solely on the FPB sample.FindingsBusiness and their managers should improve their knowledge of financial management. Appreciation on the part of banks that SMEs' confidence in formalised process will be greater where small firms’ own representatives have set up contingencies to overcome relationship problems when trading difficulties arise.Originality/valueIt was found that in order to pursue economic competitiveness it is necessary for many SMEs to have a flexible working relationship with their banks.

Size and investment performance: a research note

This article examines the performance of actively managed Australian equity funds and the extent to which both fund size and manager size are related to risk‐adjusted returns. Larger investment managers, by definition, engage in higher trade volume. The literature documents that transaction costs and trade difficulty increase with trade size, given difficulties associated with ‘large’ trades and their potential market impact on security prices. Therefore, ceteris paribus, large orders are consistent with lower levels of efficiency in trade execution and higher transaction costs. While larger investment managers may experience material disadvantages relative to their smaller counterparts, the Australian literature to date has largely ignored the issues of asset size and the long run performance of investment offerings. This article, employing returns and fund size data that control for survivorship bias, documents that while large retail active equity funds earn higher risk‐adjusted returns (after expenses) than small funds, the difference in mean performance is not significantly different. In the institutional sphere, the study also finds no statistically significant performance differences (net of expenses) between funds on the basis of portfolio size. These findings suggest the hypothesis that performance declines with fund size is not supported empirically.

Assessing the meltdown in the telecommunications sector

The trading difficulties affecting the telecommunications sector have continued to deteriorate over the past year and a half. The purpose of this article is to update the outlook as presented in previous articles on the same general theme. What this latest version demonstrates is that there has been a widespread write‐down in the capital values of telecommunications companies of all kinds on a scale that has few, if any equals in other sectors. The article analyses the reasons for this phenomenon, concentrating upon the issue of indebtedness. Data are presented on a variety of indicators which suggest that the sector is mired in a spiral of debt, credit downgrades and bankruptcy. This has implications for the structure of the sector in the medium term, but consolidation must await signs of an upturn in the fortunes of companies in a position to act as predators rather than prey.

A Consumer Service in Interwar Britain: The Hotel Trade, 1924–1938

An examination of the fortunes of three hotel groups in the 1920s and 1930s suggests that the collapse of international demand and the growth of a middle-class motorized trade were the major influences on differential performance. While trading difficulties led to an effort to exit from unprofitable outlets or to rationalize supplies and services, opportunities for economy were restricted by customers' rising expectations of facilities and the need to protect a preeminent position in the market. Company organization appears to have contributed little, with the best performance achieved by the group with the smallest individual units and the least opportunity for structural specialization or economies.

The Impact of Preferential Rules of Origin on Trade Defletion in the Regional Trading Bloc

At the early stage of the promotion of Korea-Chile FTA, more disputes related to reducing tariff might appear; however, with the consultation going on, the trade union possibly might pay more attention to the rule of origin. The purpose of this research is to emphasize the significance of the special preference of rules of origin which aims at reduce the trade difficulties in FTA, and bring forward the way to reduce the twisted effect of trade by using rules of origin. According to the result of this successful study, the prediction of the economic effect which comes with the decline of tariff between Korea and Japan under the framework of FTA might be different according to whether the rules of origin are considered. The enlightenment of this study is that in order to maximize the economic effect of concluding FTA, a close consultation between the trade union with different preference of origin rule and the leaders of the government is very important.

Chemical control laws on polymers: A case for harmonization.

All industrial countries, and several emerging and developing countries, have established regulations to control chemical substances, with a view toward limiting the risks to workers and the public, as well as reducing the impact on the environment. However, the lack of harmonization among such international schemes is creating international trade difficulties. In this context, polymers, and particularly specialty polymers, are a unique case. Polymers are less easily characterized than other substances, and parameters used by governments to control them may vary greatly, leading to national regulations that are significantly dissimilar, or even incompatible. This paper reviews chemical control laws on polymers, identifies the major differences between them, and suggests model legislation for polymers that would reduce barriers to international trade in polymers while maintaining a high degree of human and environmental protection.

The Cost of Institutional Equity Trades

Presented are an overview of the findings from the recent literature on the cost of U.S. equity trades for institutional investors and new evidence on trading costs from a large sample of institutional trades. The findings discussed have important implications for policymakers and investors: Implicit trading costs are economically significant; equity trading costs vary considerably and vary systematically with trade difficulty and order-placement strategy; and whether a trade price represents “best execution” depends on detailed data for the trade's entire order-submission process, especially information on pretrade decision variables, such as the trading horizon.

Moneyless Business Exchange: Practitioners’ Attitudes to Business-to- Business Barter in Australia

In recent years, domestic business-to-business barter has become institutionalized as an alternative marketing exchange system in Australia, and elsewhere. This article reports the findings of a survey of 164 members of Australia’s largest trade exchange, Bartercard. There are few, if any, published empirical studies on this topic. This study is exploratory. Most firms surveyed are small firms in the services sectors. Although Bartercard has an extensive membership, trading within the system is limited with most members trading less than once per week and with barter transactions contributing less than 5% of their annual gross sales. The main benefits of membership include new customers and increased sales and networking opportunities. The main limitations include the limited functionality of the trade dollar, limited trading opportunities, and practical trading difficulties. In selling, there appears to be no differential between the cash and trade prices, whereas trade “dollars” are discounted in purchasing. Participants acknowledge that business-to-business barter will remain and grow regardless of cyclical macroeconomic changes.

Institutional Trading and Soft Dollars

This paper examines the release of trades to the brokerage industry; proprietary data on the trades of 33 institutions totaling $124 billion allow us to distinguish between trades directed to soft dollar brokers and those directed to brokers for pure execution purposes. We find that institutions' choice of brokers depends largely on trade difficulty and on the investment style of the institution. We estimate a shadow price for soft dollar rebates by examining the execution cost of trades executed by soft dollar brokers to comparable trades executed by other brokers. Our estimates put the incremental cost of soft dollar execution at 23 basis points per trade, representing approximately one-third of the total costs of the average trade. If, in addition to controlling for trade characteristics, we also control for institution-specific differences in execution costs, we find that soft dollar trades cost approximately 11 basis points (or about 17%) more than non-soft-dollar trades.

Transactions costs and investment style: an inter-exchange analysis of institutional equity trades

This paper examines the magnitude and determinants of transactions costs for a sample of institutional traders with different investment styles. Using order-level data for recent equity transactions totaling $83 billion, we find that trading costs are economically significant and increase with trade difficulty. In addition, costs vary with traderspecific factors such as investment style and order submission strategy, as well as stock-specific factors such as exchange listing. We find evidence that institutional trades in exchange-listed stocks have lower costs than in comparable Nasdaq stocks.

Introduction: Shifting Perspectives on Development

Of the 5.3 billion people in the world, 4 billion live in the low and middle income economies. About 1.5 billion people still lack basic health care and more than 1 billion adults are illiterate. The gap between rich and poor countries in the world remains and in many cases has widened. An average person in Tanzania earns $140 compared to $37,930 in Switzerland. The debt and trade difficulties in Latin America and Africa have led to declining standards of living in the 1980s for much of the population in these areas, particularly women. In many countries, women are often the most vulnerable group. They face acute health problems, have much lower levels of literacy and lack access to basic resources as well as legal rights. Among women, only one out of two is literate in Asia and only one out of three in Sub‐Saharan Africa.

Codex Alimentarius Approach to Pesticide Residue Standards

To protect consumers' health, most countries have maximum legal limits for pesticide residues in foods. Trade difficulties can arise when limits differ between countries. The Codex Alimentarius Commission was established in 1962 to implement the Joint FAO/WHO Food Standards Programme, the purpose of which is to protect consumer health and ensure fair practices in international food trade. The Codex Committee on Pesticide Residues (CCPR), an intergovernmental body which advises the Commission on matters related to pesticide residues, is responsible for establishing maximum residue limits (MRLs) for pesticides in foods and feeds that move in international trade. Codex MRLs are based on residue data obtained mainly from supervised trials that reflect approved pesticide use in accordance with "good agricultural practice." MRLs must be toxicologically acceptable in terms of estimated pesticide intake by consumers. CCPR Working Groups examine problems related to establishing and implementing MRLs, including sampling and methods of analysis. Despite time and effort expended, acceptance and application of Codex MRLs face many problems in international trade.

The Total Cost of Transactions on the NYSE

ABSTRACTThis paper develops a measure of execution costs (market impact) of transactions on the NYSE. The measure is the volume‐weighted average price over the trading day. It yields results that are less biased than measures that use single prices, such as closes. The paper then applies this measure to a data set containing more than 14,000 actual trades. We show that total transaction costs, commission plus market impact costs, average twenty‐three basis points of principal value for our sample. Commission costs, averaging eighteen basis points, are considerably higher than execution costs, which average five basis points. They vary slightly across brokers and significantly across money managers. Though brokers do not incur consistently high or low transaction costs, money managers experience persistently high or lost costs. Finally, the paper explores the possible tradeoff between commission expenditures and market impact costs. Paying higher commissions does not yield commensurately lower execution costs, even after adjusting for trade difficulty. We cannot determine whether other valuable brokerage services are being purchased with higher commission payments or whether some money managers really are inefficient consumers of brokerage trading services.

The Total Cost of Transactions on the NYSE

This paper develops a measure of execution costs (market impact) of transactions on the NYSE. The measure is the volume-weighted average price over the trading day. It yields results that are less biased than measures that use single prices, such as closes. The paper then applies this measure to a data set containing more than 14,000 actual trades. We show that total transaction costs, commission plus market impact costs, average twenty-three basis points of principal value for our sample. Commission costs, averaging eighteen basis points, are considerably higher than execution costs, which average five basis points. They vary slightly across brokers and significantly across money managers. Though brokers do not incur consistently high or low transaction costs, money managers experience persistently high or lost costs. Finally, the paper explores the possible tradeoff between commission expenditures and market impact costs. Paying higher commissions does not yield commensurately lower execution costs, even after adjusting for trade difficulty. We cannot determine whether other valuable brokerage services are being purchased with higher commission payments or whether some money managers really are inefficient consumers of brokerage trading services.

Children's Books from Cuba: Dull and Dogmatic

Despite the well-known successes of Castro's Cuban Revolutioneducation and health services have been made available to all sections of the population, illiteracy has been eradicated, life expectancy is greater now for the average Cuban than it was in 1959, birth rates and infant mortality rates have declinedserious problems still remain in Cuba today. The Cuban economy remains fragile and to a high degree dependent on the Soviet Union and protests by discontented Cubans continue to plague Fidel Castro's government. In addition to these obvious problems, one can not help but be impressed by the dismal quality of literature available to young readers in Castro's Cuba. An examination of books for young readers published in Cuba in the 1980's reveals a constant supply of spiritless, moralistic stories that insist on teaching children what adults consider good behavior as well as an inordinate amount of blatant political propaganda. Most of these books lack interesting themes, coherent plots and/or honest characters. One must indeed feel sorry for Cuban children who are denied the pleasure and understanding of well-written fiction and the sense of discovery of interesting nonfiction. The following is a representative sample of recent Cuban books written by some of Cuba's most distinguished contemporary authors for young readers. (Due to the current trade difficulties between the United States and Cuba, these books are not readily available in the U.S.)