Paying for Market Quality

One way to improve the liquidity of small stocks is to subsidize the providers of liquidity. These subsidies take many forms such as informational advantages, priority in trading with incoming order flow, and fee rebates for limit order traders. In this study, we examine another type of subsidy – directly paying liquidity providers to provide contractual improvement in liquidity. Our specific focus here is the 2002 decision by the Stockholm Stock Exchange to allow listed firms to negotiate with liquidity providers to set maximum spread widths and minimum depths. We find, for a sample of stocks that entered into such an arrangement, a significant improvement in market quality with a decline in quoted spreads and an increase in quoted depth throughout the limit order book. We also find evidence that suggests that there are improvements beyond those contracted for. In addition, both inter and intraday volatility decline following the entry of committed liquidity providers for these stocks. Traders benefit by the reduced costs as well as by the ease of finding liquidity as seen in the increased trade sizes. We also find that a firm’s stock price subsequent to entering into the agreement rises in direct proportion to the improvement in market quality Thus, we find overwhelming evidence of liquidity benefits to listed firms of entering into such contracts which suggests that firms should consider these market quality improvement opportunities as they do other capital budgeting decisions and that there are residual benefits beyond those contracted for.No keywords;

Asymmetric information, self-selection and pricing of insurance contracts: the simple no-claims case

This paper presents an optional bonus-malus contract based on a pri-ori risk classification of the underlying insurance contract. By inducing self-selection, the purchase of the bonus-malus contract can be used as a screening device. This gives an even better pricing performance than both an experience rating scheme and a classical no-claims bonus system. An application to the Danish automobile insurance market is considered

Yield Curve Estimation by Kernel Smoothing Methods

We introduce a new method for the estimation of discount functions, yield curves and forward curves from government issued coupon bonds. Our approach is nonparametric and does not assume a particular functional form for the discount function although we do show how to impose various restrictions in the estimation. Our method is based on kernel smoothing and is defined as the minimum of some localized population moment condition. The solution to the sample problem is not explicit and our estimation procedure is iterative, rather like the backfitting method of estimating additive nonparametric models. We establish the asymptotic normality of our methods using the asymptotic representation of our estimator as an infinite series with declining coefficients. The rate of convergence is standard for one dimensional nonparametric regression. We investigate the finite sample performance of our method, in comparison with other well-established methods, in a small simulation experiment.

Dispersed Trading and the Prevention of Market Failure: The Case of the Copenhagen Stock Exchange

With augmented demands on power grids resulting in longer and larger blackouts combined with heightened concerns of terrorist attacks, trading institutions and policy makers have widened their search for systems that avoid market failure during these disturbing events. We provide insight into this issue by examining trading behavior at the Copenhagen Stock Exchange during a major blackout. We find that although market quality declined, markets remained functional and some price discovery occurred during the blackout period suggesting that the NOREX structure of interlinked trading systems combined with widely dispersed trading locations may be a viable means of protection against market failure during massive power disruptions or terrorist attacks.Power failure; Fragmented markets; Market failure;

The association between social position and self-rated health in 10 deprived neighbourhoods

BACKGROUND: A number of studies have shown that poor self-rated health is more prevalent among people in poor, socially disadvantaged positions. The aim of the present study was to investigate the association between self-rated health and social position in 10 deprived neighbourhoods. METHODS: A stratified random sample of 7,934 households was selected. Of these, 641 were excluded from the study because the residents had moved, died, or were otherwise unavailable. Of the net sample of 7,293 individuals, 1,464 refused to participate, 885 were not at home, and 373 did not participate for other reasons, resulting in an average response rate of 62.7%. Multiple logistic regression models were used to estimate the associations between the number of life resources and the odds of self-rated health and also between the type of neighbourhood and the odds of self-rated health. RESULTS: The analysis shows that the number of life resources is significantly associated with having poor/very poor self-rated health for both genders. The results clearly suggest that the more life resources that an individual has, the lower the risk is of that individual reporting poor/very poor health. CONCLUSIONS: The results show a strong association between residents’ number of life resources and their self-rated health. In particular, residents in deprived rural neighbourhoods have much better self-rated health than do residents in deprived urban neighbourhoods, but further studies are needed to explain these urban/rural differences and to determine how they influence health

Unemployment and Causes of Hospital Admission Considering Different Analytical Approaches

The association between unemployment and hospital admission is known, but the causal relationship is still under discussion. The aim of the present analysis is to compare results of a cross-sectional and a cohort approach considering overall hospital admission and hospital admission due to cancer and circulatory disease. Register-based data were analysed for the period of 2006–2009. In the cross-sectional analysis, a multiple logistic regression model was conducted based on the year 2006, and cohort information from the same year onward up to 2009 was available for a Cox regression model. Social welfare compensated unemployment and both types of disease-specific hospital admission were associated to be statistically significant in the cross-sectional analysis. With regard to circulatory disease, the cohort approach suggests that social welfare compensated unemployment might lead to hospital admission due to the disease. Given the significant results in the cross-sectional analysis for hospital admission due to cancer, the unfound cohort effect might indicate a reverse causation suggesting that the disease caused joblessness, and finally social welfare compensated unemployment and not vice versa. Comparing different study designs allows for a better causal interpretation, which should be recommended in future quantitative social welfare analysis

Social ulighed i sundhed i et udsat boligområde: En undersøgelse af sammenhængen mellem selvvurderet helbred, etnicitet og social position

The purpose of this study was to investigate the association between self-rated health, ethnicity and social position in a deprived neighbourhood in Denmark where many residents have a non-western background. In the article we investigate associations between self-rated health as dependent variable and ethnicity and social position (defined by an “index for resources of living conditions”) as independent variables. The study is based on survey data collected in a geographically bounded and socially deprived neighbourhood. The analyses were conducted by logistic regression models.The results shows a strong connection between the residents “social position” and their self-rated health. In this investigation we were not able to identify any connection between ethnicity and self-rated health which indicates that ethnicity does not constitute an explanation per se for differences in self-rated health

Health-risk behaviour in deprived neighbourhoods compared with non-deprived neighbourhoods:a systematic literature review of quantitative observational studies

There has been increasing interest in neighbourhoods' influence on individuals' health-risk behaviours, such as smoking, alcohol consumption, physical activity and diet. The aim of this review was to systematically review recent studies on health-risk behaviour among adults who live in deprived neighbourhoods compared with those who live in non-deprived neighbourhoods and to summarise what kind of operationalisations of neighbourhood deprivation that were used in the studies.PRISMA guidelines for systematic reviews were followed. Systematic searches were performed in PubMed, Embase, Web of Science and Sociological Abstracts using relevant search terms, Boolean operators, and truncation, and reference lists were scanned. Quantitative observational studies that examined health-risk behaviour in deprived neighbourhoods compared with non-deprived neighbourhoods were eligible for inclusion.The inclusion criteria were met by 22 studies. The available literature showed a positive association between smoking and physical inactivity and living in deprived neighbourhoods compared with non-deprived neighbourhoods. In regard to low fruit and vegetable consumption and alcohol consumption, the results were ambiguous, and no clear differences were found. Numerous different operationalisations of neighbourhood deprivation were used in the studies.Substantial evidence indicates that future health interventions in deprived neighbourhoods should focus on smoking and physical inactivity. We suggest that alcohol interventions should be population based rather than based on the specific needs of deprived neighbourhoods. More research is needed on fruit and vegetable consumption. In future studies, the lack of a uniform operationalisation of neighbourhood deprivation must be addressed

Estimating Yield Curves by Kernel Smoothing Methods

We introduce a new method for the estimation of discount functions, yield curves and forward curves from government issued coupon bonds. Our approachis nonparametric and does not assume a particular functional form for thediscount function although we do show how to impose various restrictions inthe estimation. Our method is based on kernel smoothing and is defined asthe minimum of some localized population moment condition. The solution tothe sample problem is not explicit and our estimation procedure isiterative, rather like the backfitting method of estimating additivenonparametric models. We establish the asymptotic normality of our methodsusing the asymptotic representation of our estimator as an infinite serieswith declining coefficients. The rate of convergence is standard for onedimensional nonparametric regression

Local linear density estimation for filtered survival data, with bias correction

A class of local linear kernel density estimators based on weighted least-squares kernel estimation is considered within the framework of Aalen's multiplicative intensity model. This model includes the filtered data model that, in turn, allows for truncation and/or censoring in addition to accommodating unusual patterns of exposure as well as occurrence. It is shown that the local linear estimators corresponding to all different weightings have the same pointwise asymptotic properties. However, the weighting previously used in the literature in the i.i.d. case is seen to be far from optimal when it comes to exposure robustness, and a simple alternative weighting is to be preferred. Indeed, this weighting has, effectively, to be well chosen in a 'pilot' estimator of the survival function as well as in the main estimator itself. We also investigate multiplicative and additive bias-correction methods within our framework. The multiplicative bias-correction method proves to be the best in a simulation study comparing the performance of the considered estimators. An example concerning old-age mortality demonstrates the importance of the improvements provided