Order Aggressiveness and Quantity: How Are They Determined in a Limit Order Market?

Dealers trading in a limit order market must choose both the order aggressiveness and the quantity for their orders. We empirically investigate how dealers jointly make these decisions in the foreign exchange market using a unique simultaneous equations model. The model uses an ordered probit model to account for the discrete nature of order aggressiveness and a censored regression model to capture the clustering of orders placed at the smallest available quantity, $1 million. We find evidence of a clear trade-off between order aggressiveness and quantity: more aggressive orders tend to be smaller in size. The increased competition (demand) suggested by increased depth on the same (opposite) side of the market leads to less (more) aggressive orders in smaller (larger) size. This holds for the depths at both the best and off-best prices, even though off-best depths are not observable to dealers.Exchange rates; Financial markets

A Structural Error-Correction Model of Best Prices and Depths in the Foreign Exchange Limit Order Market

Traders using the electronic limit order book in the foreign exchange market can watch the posted price and depth of the best quotes change over the day. The authors use a structural errorcorrection model to examine the dynamics of the relationship between the best bid price, the best ask price, and their associated depths. They incorporate measures of the market depth behind the best quotes as regressors. They report four main findings. First, best prices and their associated depths are contemporaneously related to each other. More specifically, an increase in the ask (bid) price is associated with a drop (rise) in the ask (bid) depth. This suggests that sell traders avoid the adverse-selection risk of selling in a rising market. Second, when the spread-the error-correction term-widens, the bid price rises and the ask price drops, returning the spread to its long-term equilibrium value. Further, the best depth on both sides of the market drops, due to increased market uncertainty. Third, the lagged best depth impacts the price discovery on both sides of the market, with the effect being strongest on the same side of the market. Fourth, changes in the depth behind the best quotes impact both the best prices and quantities, even though those changes are unobservable to market participants.Exchange rates; Financial markets

Order Submission: The Choice between Limit and Market Orders

Most financial markets allow investors to submit both limit and market orders, but it is not always clear what affects the choice of order type. The authors empirically investigate how the time between order submissions, changes in the state of the order book, and price uncertainty influence the rate of submission of limit and market orders. The authors measure the expected time (duration) between the submissions of orders of each type using an asymmetric autoregressive conditional duration model. They find that the execution of market orders, as well as changes in the level of price uncertainty and market depth, impact the submissions of both best limit orders and market orders. After correcting for these factors, the authors also find differences in behaviour around market openings, closings, and unexpected events that may be related to changes in information flows at these times. In general, traders use more market (limit) orders at times when execution risk for limit orders is highest or the risk of unexpected price movements is highest.Exchange rate; Financial institution; Market structure and pricing

Demographic Trends and Consumer Demand for Agricultural Products

Food consumption patterns affected by macro-level population characteristics are examined with respect to projected demographic trends. Standard demand models based on price and income are enhanced to reflect impacts of total population, household size, and regional population distribution. These models provide baseline information for illustrating effects on food demand under different social-demographic scenarios, such as changes in population size, regional migration pat terns, and changes in household size, composition, and income growth, rates. Likely demographic projections show a greater proportional effect of total population, household size, and regional shifts on food demand than income for some commodities and for total food demand. Food consumption data are based on the USDA Nationwide Food Consumption Survey, 1977-78

The Effect of Voluntary Disclosure on Firm Risk and Firm Value: Evidence from Management Earnings Forecasts

This study investigates whether the voluntary disclosure of management earnings forecasts influences investors’ assessment of firm risk and firm value. We find a significant negative relationship between the issuance of management earnings forecasts and a variety of measures of firm risk (idiosyncratic risk, stock return volatility, beta, and bid-ask spreads), with more frequent, more precise and more accurate earnings forecasts further decreasing firm risk. Our results therefore suggest that information quality is an important determinant of both diversifiable risk and nondiversifiable systematic risk. We also demonstrate that management earnings forecasts are positively associated with firm value as captured by Tobin’s Q while more frequent, precise and accurate forecasts further enhance valuation premiums. Finally, we find that management earnings forecasts impact firm value not only through a reduction in firm risk, but also through changing investors\u27 perceptions about future cash flows. Our results are robust to various sensitivity checks. Overall, releasing high-quality management earnings forecasts is associated with important capital market benefits

Traditional and Non-Traditional Explanations of Food Consumption: The Case of Beef

Changes in the consumption of many foods, particularly beef, underlie the recent interest in isolating factors explaining these trends. This study focuses on three orienting explanations for differential beef consumption--microeconomic, social structural, and risk reduction perspectives. Consumption is defined by past and anticipated future utilization of beef, as well as present beef consumption relative to possible substitutes. While the microeconomic model is the most useful for isolating an individual\u27s beef intake, it is clear that consumption behavior is dependent on more than income and supply factors. Social structural and risk reduction perspectives increase by 83 percent the R² found through inclusion of economic variables alone. Wagner\u27s criteria for examining the complementarity of theoretical perspectives, including their similarity in predicting behavioral outcomes, was applied to the three consumption explanations. Disparate outcomes are observed in projections of future beef consumption using the microeconomic explanation relative to social structural and risk reduction perspectives

Midwest Consumers’ Beliefs and Attitudes Regarding Agricultural Biotechnology: An Executive Summary

As part of a project investigating the social, economic, and ethical issues related to the application of biotechnology to food production and to the adoption or rejection of genetically modified organisms (GMOs), we conducted a survey using a questionnaire mailed to a randomly selected sample of consumers in five Midwestern states—Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin. This report highlights the responses of the 458 respondents to that completed and returned questionnaire

Genome-wide Analyses Identify KIF5A as a Novel ALS Gene

To identify novel genes associated with ALS, we undertook two lines of investigation. We carried out a genome-wide association study comparing 20,806 ALS cases and 59,804 controls. Independently, we performed a rare variant burden analysis comparing 1,138 index familial ALS cases and 19,494 controls. Through both approaches, we identified kinesin family member 5A (KIF5A) as a novel gene associated with ALS. Interestingly, mutations predominantly in the N-terminal motor domain of KIF5A are causative for two neurodegenerative diseases: hereditary spastic paraplegia (SPG10) and Charcot-Marie-Tooth type 2 (CMT2). In contrast, ALS-associated mutations are primarily located at the C-terminal cargo-binding tail domain and patients harboring loss-of-function mutations displayed an extended survival relative to typical ALS cases. Taken together, these results broaden the phenotype spectrum resulting from mutations in KIF5A and strengthen the role of cytoskeletal defects in the pathogenesis of ALS.Peer reviewe