The diminished effect of index rebalances

The author revisits the strategy of trading S&P 500 index re-compositions under the pre- and post-crisis financial environments, proving that the return structure has significantly changed. The results show for the first time, that there are currently no tradable abnormal returns between announcement and event dates in the post-crisis sample period, indicating smoother rebalancing mechanisms by bank’s client facing desks and better services for passive end-investors. The newly added firms inflate the S&P 500 index by less than 10 basis points per year. The results could be attributed to improved execution algorithms used by the banks, and potentially to the new regulatory reforms in the sector, which prevents financial institutions from taking large trading positions with their balance sheets

Checkpoints in a Yeast Differentiation Pathway Coordinate Signaling during Hyperosmotic Stress

All eukaryotes have the ability to detect and respond to environmental and hormonal signals. In many cases these signals evoke cellular changes that are incompatible and must therefore be orchestrated by the responding cell. In the yeast Saccharomyces cerevisiae, hyperosmotic stress and mating pheromones initiate signaling cascades that each terminate with a MAP kinase, Hog1 and Fus3, respectively. Despite sharing components, these pathways are initiated by distinct inputs and produce distinct cellular behaviors. To understand how these responses are coordinated, we monitored the pheromone response during hyperosmotic conditions. We show that hyperosmotic stress limits pheromone signaling in at least three ways. First, stress delays the expression of pheromone-induced genes. Second, stress promotes the phosphorylation of a protein kinase, Rck2, and thereby inhibits pheromone-induced protein translation. Third, stress promotes the phosphorylation of a shared pathway component, Ste50, and thereby dampens pheromone-induced MAPK activation. Whereas all three mechanisms are dependent on an increase in osmolarity, only the phosphorylation events require Hog1. These findings reveal how an environmental stress signal is able to postpone responsiveness to a competing differentiation signal, by acting on multiple pathway components, in a coordinated manner

Ser/Thr/Tyr Protein Phosphorylation in the Archaeon Halobacterium salinarum—A Representative of the Third Domain of Life

In the quest for the origin and evolution of protein phosphorylation, the major regulatory post-translational modification in eukaryotes, the members of archaea, the “third domain of life”, play a protagonistic role. A plethora of studies have demonstrated that archaeal proteins are subject to post-translational modification by covalent phosphorylation, but little is known concerning the identities of the proteins affected, the impact on their functionality, the physiological roles of archaeal protein phosphorylation/dephosphorylation, and the protein kinases/phosphatases involved. These limited studies led to the initial hypothesis that archaea, similarly to other prokaryotes, use mainly histidine/aspartate phosphorylation, in their two-component systems representing a paradigm of prokaryotic signal transduction, while eukaryotes mostly use Ser/Thr/Tyr phosphorylation for creating highly sophisticated regulatory networks. In antithesis to the above hypothesis, several studies showed that Ser/Thr/Tyr phosphorylation is also common in the bacterial cell, and here we present the first genome-wide phosphoproteomic analysis of the model organism of archaea, Halobacterium salinarum, proving the existence/conservation of Ser/Thr/Tyr phosphorylation in the “third domain” of life, allowing a better understanding of the origin and evolution of the so-called “Nature's premier” mechanism for regulating the functional properties of proteins

How Does Investors' Legal Protection Affect Productivity and Growth?

This paper analyzes the implications of investors' legal protection on aggregate productivity and growth. We have two main results. First, that better investors' legal protection can mitigate agency problems between investors and innovators and therefore expand the range of high-tech projects that can be financed by non-bank investors. Second, investors' legal protection shifts investment resources from less productive (medium-tech) to highly productive (high-tech) projects and therefore enhances economic growth. These results stem from two forces. On one hand, private investors' moral hazard problems (in which entrepreneurs shift investors' resources to their own benefit), and on the other hand innovators' risk of project termination by banks due to wrong signals about projects' probability of success. Our results are consistent with recent empirical studies that show a high correlation between legal investors' protection and the structure of the financial system as well as the economic performance at industry and macroeconomic levels

Financial Globalization and Economic Policies

We review the large literature on various economic policies that could help developing economies effectively manage the process of financial globalization. Our central findings indicate that policies promoting financial sector development, institutional quality and trade openness appear to help developing countries derive the benefits of globalization. Similarly, sound macroeconomic policies are an important prerequisite for ensuring that financial integration is beneficial. However, our analysis also suggests that the relationship between financial integration and economic policies is a complex one and that there are unavoidable tensions inherent in evaluating the risks and benefits associated with financial globalization. In light of these tensions, structural and macroeconomic policies often need to be tailored to take into account country specific circumstances to improve the risk-benefit tradeoffs of financial integration. Ultimately, it is essential to see financial integration not just as an isolated policy goal but as part of a broader package of reforms and supportive macroeconomic policies

Structure and Development of Financial Institutions and Links with Trust: Cross-Country Evidence

We explore the links between trust and a broad range of financial structure and development measures. Our base sample is a cross section of 48 countries and the analysis covers the period 1980-1994. We use a new World Bank data set that provides the most comprehensive coverage of financial development and structure to this date. We find that trust is correlated with financial depth and efficiency as well as with stock market development. Results hold when using an instrumental variable approach, and they are robust to changes in specification when using a formal Sala-i-Martín sensitivity analysis