The Microstructure of the Bond Market in the 20th Century

Bonds are traded in OTC markets, where opacity and fragmentation imply large transaction costs for retail investors. Is there something special about bonds, in contrast to stocks, that precludes trading in transparent, limit-order markets? Historical experience suggests this is not the case. Before WWII, there was an active market in corporate and municipal bonds on the NYSE. Activity dropped dramatically, in the late 1920s for municipals and in the mid 1940s for corporate, as trading migrated to the OTC market. This migration occurred simultaneously with an increase in the role of institutional investors, which fare better than retail investors in OTC market. Based on current and historical high frequency data, we find that, for retail investors, trading costs in municipal bonds were half as large in 1926-1927 as they are now. The difference in transactions costs is likely to reflect the difference in market structures.

Mutual Fund Flows and Performance in Rational Markets

We develop a simple rational model of active portfolio management that provides a natural benchmark against which to evaluate observed relationship between returns and fund flows. We show that many effects widely regarded as anomalous are consistent with this simple explanation. In the model, investments with active managers do not outperform passive benchmarks because of the competitive market for capital provision, combined with decreasing returns to scale in active portfolio management. Consequently, past performance cannot be used to predict future returns, or to infer the average skill level of active managers. The lack of persistence in active manager returns does not imply that differential ability across managers is nonexistent or unrewarded, that gathering information about performance is socially wasteful, or that chasing performance is pointless. A strong relationship between past performance and the ow of funds exists in our model, indeed this is the market mechanism that ensures that no predictability in performance exists. Calibrating the model to the fund flows and survivorship rates, we nd these features of the data are consistent with the vast majority (80%) of active managers having at least enough skill to make back their fees.

Financial Intermediation and the Costs of Trading in an Opaque Market

Municipal bonds trade in opaque, decentralized broker-dealer markets in which price information is costly to gather. Whether dealers in such a market operate competitively is an empirical issue, but a difficult one to study. Data in such markets is generally not centrally recorded. We analyze a comprehensive database of all trades between broker-dealers in municipal bonds and their customers. The data is only released to the public with a substancial lag, and thus the market was relativela opaque to the traders themselves during our sample period. We find that dealers earn lower average markups on larger trades, even though larger trades lead the dealers to bear more risk of losses. We formulate and estimate a simple structural bargaining model that allows us to estimate mesures of dealer bargaining power and it relate it to the characteristics of the trades. The results suggest dealers exercise substancial market power. Our mesures of market power decrease in trade size and increase in variables that indicate the complexity of the trade for the dealer.Municipal Bonds, Fixed Income Dealer, Transaction Costs, Liquidity, Transparency, Market Power

Isolation and characterization of microsatellites in the lichen Buellia frigida (Physciaceae), an Antarctic endemic

Premise of the study: Microsatellite markers were characterized for an Antarctic endemic, Buellia frigida, to investigate population structure and origin of Antarctic lichens. Methods and Results: Five primer sets were characterized. All loci were polymorphic with eight to 16 alleles per locus in a sample of 59 lichens. Conclusions: The microsatellite markers potentially provide insight into population structure and gene flow of B. frigida

Financial Expertise as an Arms Race

We show that firms intermediating trade have incentives to overinvest in financial expertise. In our model, expertise improves firms’ ability to estimate value when trading a security. Expertise creates asymmetric information, which, under normal circumstances, works to the advantage of the expert as it deters opportunistic bargaining by counterparties. This advantage is neutralized in equilibrium, however, by offsetting investments by competitors. Moreover, when volatility rises the adverse selection created by expertise triggers breakdowns in liquidity, destroying gains to trade and thus the benefits that firms hope to gain through high levels of expertise

Information Spillovers and Performance Persistence for Hedge Funds

We present a simple model that rationalizes performance persistence in hedge fund limited partnerships. In contrast to the model for mutual funds of Berk and Green (2004), the learning in our model pertains to profitability associated with an innovative trading strategy or emerging sector, rather than ability specific to the fund manager. As a result of potential information spillovers, which would increase competition if informed investors were to partner with non-incumbent managers, incumbent managers will let informed investors benefit from increases in estimated profitability following high returns realized with the trading strategy or in the sector

A Deep Multicolor Survey I. Imaging Observations and Catalog of Stellar Objects

We have used the KPNO 4-meter Mayall telescope to image 0.83 square degrees of sky in six fields at high galactic latitude in six filters spanning 3000-10000\AA\ to magnitude limits ranging from 22.1 to 23.8. We have assembled a catalog of 21,375 stellar objects detected in the fields for use primarily in conducting a multicolor search for quasars. This paper describes the data reduction techniques used on the CCD data, the methods used to construct the stellar object catalog, and the simulations performed to understand its completeness and contamination.Comment: To Appear in ApJ Supplement, 1996. 168k uuencoded gunzipped tarred tex file (requires aas2pp4.sty and tighten.sty) and 4 PostScript figures. Also available at http://astro.as.arizona.edu/~pathall/astro.html#preprint

What is the Best Soybean Row Width? A U.S. Perspective

What is the best row width for soybeans? That seemingly simple question has been the subject of debate and research for about 80 years - ever since people stopped thinking of soybeans as a hay crop and started considering it a grain crop

Improving dissertation assessment

During the last decade, there have been increasing calls for higher education to improve standards, increase the quality of assessment, and for greater accountability of lecturers. It is recognised that consistency in assessment is even more important where assessment is through one large piece of work, such as a dissertation, and where the assessment outcome will have a significant impact on the final grade of students. Dissertation modules typically pose further problems for assessment consistency due to the large number of students and the resultant need for large numbers of lecturers to participate in its assessment. This paper synthesises the initial literature findings from an on-going research project that aims to identify good practices for dissertation assessment, in an attempt to improve the quality and consistency of assessment

Valuation and Return Dynamics of New Ventures

We develop and analyze a model of a multi-stage investment project that captures many features of R&D ventures and start-up companies. An important feature these problems share is that the firm learns about the potential profitability of the project throughout its life, but that research and development effort itself is only resolved through additional investment by the firm. In addition, the risks associated with the ultimate cash flows the firm realizes on completion of the project have a systematic component, while the purely technical risks are idiosyncratic. Our model captures these different sources of risk, and allows us to study their interaction in determining the risk premia earned by the venture during development. Our results show that the systematic risk, and the required risk premium, of the venture are highest early in its life, and decrease as it approaches completion, despite the idiosyncratic nature of the technical risk.