346 research outputs found
Quantum prices
Many retailers practice an extreme form of discrete pricing defined as quantum prices: differentiated products are priced using few and sparse price buckets. To show this, online data was collected for 350,000 products from over 65 fashion retailers in the U.S. and the U.K. This pricing strategy is observed within categories and across categories (i.e., similar or even disparately distinct products like jeans and bags have an identical price), as well as in product introductions, where new products come in at previous price buckets. Normalized indices indicate substantial price clustering after controlling for popular prices, convenient prices, assortment size, or digit endings. Quantum prices have implications for price adjustments through product shares, markdown prices, and for the law-of-one-price. A behavioral model of price salience and recall is discussed
The US stock market leads the Federal funds rate and Treasury bond yields
Using a recently introduced method to quantify the time varying lead-lag
dependencies between pairs of economic time series (the thermal optimal path
method), we test two fundamental tenets of the theory of fixed income: (i) the
stock market variations and the yield changes should be anti-correlated; (ii)
the change in central bank rates, as a proxy of the monetary policy of the
central bank, should be a predictor of the future stock market direction. Using
both monthly and weekly data, we found very similar lead-lag dependence between
the S&P500 stock market index and the yields of bonds inside two groups: bond
yields of short-term maturities (Federal funds rate (FFR), 3M, 6M, 1Y, 2Y, and
3Y) and bond yields of long-term maturities (5Y, 7Y, 10Y, and 20Y). In all
cases, we observe the opposite of (i) and (ii). First, the stock market and
yields move in the same direction. Second, the stock market leads the yields,
including and especially the FFR. Moreover, we find that the short-term yields
in the first group lead the long-term yields in the second group before the
financial crisis that started mid-2007 and the inverse relationship holds
afterwards. These results suggest that the Federal Reserve is increasingly
mindful of the stock market behavior, seen at key to the recovery and health of
the economy. Long-term investors seem also to have been more reactive and
mindful of the signals provided by the financial stock markets than the Federal
Reserve itself after the start of the financial crisis. The lead of the S&P500
stock market index over the bond yields of all maturities is confirmed by the
traditional lagged cross-correlation analysis.Comment: 12 pages, 7 figures, 1 tabl
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