Short Sale Constraints and Stock Returns

Stocks can be overpriced when short sale constraints bind. We study the costs of short selling equities, 1926-1933, using the publicly observable market for borrowing stock. Some stocks are sometimes expensive to short, and it appears that stocks enter the borrowing market when shorting demand is high. We find that stocks that are expensive to short or which enter the borrowing market have high valuations and low subsequent returns, consistent with the overpricing hypothesis. Size-adjusted returns are one to two percent lower per month for new entrants, and despite high costs it is profitable to short them.

Does algorithmic trading improve liquidity?

Algorithmic trading has sharply increased over the past decade. Equity market liquidity has improved as well. Are the two trends related? For a recent five-year panel of New York Stock Exchange (NYSE) stocks, we use a normalized measure of electronic message traffic (order submissions, cancellations, and executions) as a proxy for algorithmic trading, and we trace the associations between liquidity and message traffic. Based on within-stock variation, we find that algorithmic trading and liquidity are positively related. To sort out causality, we use the start of autoquoting on the NYSE as an exogenous instrument for algorithmic trading. Previously, specialists were responsible for manually disseminating the inside quote. As stocks were phased in gradually during early 2003, the manual quote was replaced by a new automated quote whenever there was a change to the NYSE limit order book. This market structure change provides quicker feedback to traders and algorithms and results in more message traffic. For large-cap stocks in particular, quoted and effective spreads narrow under autoquote and adverse selection declines, indicating that algorithmic trading does causally improve liquidity

Public Information and the Persistence of Bond Market Volatility

We examine the reaction of daily bond prices to the release of government macroeconomic news. These news releases are of interest because they are released on periodic, preannounced dates and because they cause substantial bond market volatility. The news component of volatility is not positively autocorrelated on these dates, since the news is released at a specific moment in time. We find that (1) expected returns on the short end of the bond market are significantly higher on these announcement dates, and (2) the persistence pattern of daily volatility is quite different around these days.

Do Stock Prices Really Reflect Fundamental Values? The Case of REITs

Real estate investment trust (REIT) stock prices deviate substantially from net asset values (NAV). Using REIT data since 1990, we find large positive excess returns to a strategy of buying stocks that trade at a discount to NAV, and shorting stocks trading at a premium to NAV. Estimated alphas from this strategy are between 0.9% and 1.8% per month, with little risk. Trading costs and short-sale constraints are not prohibitive and the results strengthen when we control for differences in liquidity or the extent of institutional ownership. We find that some variation in P/NAV makes sense, as premiums are positively related to recent and future NAV growth. However, there appears to be too much volatility in P/NAV, giving rise to potential profits from short-term mean reversion. The closed-end fund literature has some similar findings on stock price deviations from fundamental value, but compared to closed-end funds REITs are much larger and have much higher insider and institutional ownership. These differences suggest that REIT premiums and discounts reflect more than just small investor sentiment, which is a common explanation of why closed-end fund prices deviate from their fundamental value.

Insurance and Incentives for Medical Innovation

This paper studies the interactions between health insurance and the incentives for innovation. Although we focus on pharmaceutical innovation, our discussion applies to other industries producing novel technologies for sale in markets with subsidized demand. Standard results in the growth and productivity literatures suggest that firms in many industries may possess inadequate incentives to innovate. Standard results in the health literature suggest that health insurance leads to the overutilization of health care. Our study of innovation in the pharmaceutical industry emphasizes the interaction of these incentives. Because of the large subsidies to demand from health insurance, limits on the lifetime of patents and possibly limits on monopoly pricing may be necessary to ensure that pharmaceutical companies do not possess excess incentives for innovation.

Illinois Forest Game Investigations W-87-R-9, Quarterly Federal Aid Performance Report 1 July - 30 September 1987

Quarterly Federal Aid Performance Report W-87-R-9, 1 July - 30 September 1987; Study No. VII-D Harvest Strategies for Illinois Deer Herds, Urban Deer StudyReport issued on: September 30, 1987INHS Technical Report prepared for unspecified recipien

Airborne Doppler radar detection of low altitude windshear

As part of an integrated windshear program, the Federal Aviation Administration, jointly with NASA, is sponsoring a research effort to develop airborne sensor technology for the detection of low altitude windshear during aircraft take-off and landing. One sensor being considered is microwave Doppler radar operating at X-band or above. Using a Microburst/Clutter/Radar simulation program, a preliminary feasibility study was conducted to assess the performance of Doppler radars for this application. Preliminary results from this study are presented. Analysis show, that using bin-to-bin Automatic Gain Control (AGC), clutter filtering, limited detection range, and suitable antenna tilt management, windshear from a wet microburst can be accurately detected 10 to 65 seconds (.75 to 5 km) in front of the aircraft. Although a performance improvement can be obtained at higher frequency, the baseline X-band system that was simulated detected the presence of a windshear hazard for the dry microburst. Although this study indicates the feasibility of using an airborne Doppler radar to detect low altitude microburst windshear, further detailed studies, including future flight experiments, will be required to completely characterize the capabilities and limitations

Baryon and antibaryon production in hadron-hadron and hadron-nucleus interactions

Cascade baryon and anti-baryon yields have been measured in p+p and p+A collisions. After extraction of the projectile component in p+A interactions close similarities with A+A collisions concerning the nuclear enhancement factors are observed. In addition the importance of effects related to projectile isospin and to net baryon stopping is pointed out.Comment: 4 pages, 5 figures, Presented at Quark Matter 2002, Nantes, Franc

Resonance Production in STAR

The recent results from resonance production in central Au+Au and p+p collisions at $\sqrt{s_{\rm NN}} =$ 200 GeV from the STAR experiment at RHIC are presented and discussed.Comment: 7 pages, proceedings 19th Winter Workshop on Nuclear Dynamics, Breckenridge, Colorado, USA, February 8-15, 200

How well does NLO pQCD describe strangeness in p+pp+p collisions at s\sqrt{s}= 200 GeV in STAR?

We present measurements of the transverse momentum spectra for $\mathrm{K^{0}_{S}}$, $\Lambda$, $\Xi$ and their antiparticles in p+p collisions at $\sqrt{s}=200 GeV$. The extracted mid-rapidity yields and $$ are in agreement with previous $p+\bar{p}$ experiments while they have smaller statistical errors. We compare the measured spectra for $\mathrm{K^{0}_{S}}$ and $\Lambda$ to the latest available calculations from NLO pQCD and see good agreement for the $\mathrm{K^{0}_{S}}$ above 1.5 GeV/c.Comment: conference proceedings, Strangeness in Quark Matter 2004, 5 pages, submitted to Journal Physics G, final version submitted to journal incl. modifications requested by edito