Do behavioral needs influence the trading activity of individual investors? Evidence from repeated natural experiments

Multiple natural experiments of large jackpot lotteries in Taiwan are used to document a substitution effect between individual investor trading and lottery buying. We establish five key findings. First, when the jackpot exceeds 500 million Taiwan dollars (about 15 million U.S. dollars), the number of shares traded by individual investors decreases by about 7% among stocks with high individual trading fraction, low market capitalization, high past returns, and high past turnover. Second, our approach reveals that the substitution effect is stronger among stocks with lottery features, with a decline in trading of about 9% among stocks with high return volatility and skewness. Third, the magnitude of the documented substitution effect increases monotonically with the jackpot. Fourth, firm-level trading activity reacts negatively to lottery drawings, and is statistically significant for a sizable number of firms. Finally, the aggregate number of shares traded by individual investors declines by 6% with lottery offerings. We attribute the substitution effect exemplified here to behavioral trading needs of individual investors, such as entertainment, sensation seeking, and gambling, and it appears consistent with the wider predictions of behavioral economics and finance.postprintThe 2010 International Symposium on Financial Engineering and Risk Management (FERM 2010), Taipei, Taiwan, 10-12 June 2010

Governance through trading: does institutional trading discipline empire building and earnings management?

Accounting Session 1: Earnings ManagementThe Conference program's website is located at http://areas.kenan-flagler.unc.edu/conferences/2013cfea/Pages/Final%20Schedule.aspxThis paper empirically identifies an important external corporate governance mechanism through which the institutional trading improves firm values and disciplines managers from conducting value-destroying activities. We propose a reward-punishment intensity (RPI) measure, and show that it is positively related to firm’s subsequent Tobin’s Q. Importantly, we find that firms with higher RPI exhibit less subsequent empire building and earnings management. Furthermore, we show that the exogenous liquidity shock of Decimalization augments the governance effect of institutional trading. We also find that the discipline effect is more pronounced for firms with moderate institutional ownership concentration, higher managers’ wealth-performance sensitivity, and higher trading liquidity, which further supports the governance role of the RPI. The results are robust to using a subsample containing firms with reduced institutional ownership and to using two instrumental variables.postprin

Financial inclusion for stability: access to bank deposits and the deposit growth during the Global Financial Crisis

Title on paper: Financial Inclusion for Stability: Access to Bank Deposits and the Deposit Growth during the Global Financial CrisisSession: 66 -Asset PricingIn crisis times, depositors get anxious, can run on banks, and withdraw their deposits. Correlated deposit withdrawals of bank deposits could be mitigated if bank deposits are more diversified, i.e. held by more individuals. This paper examines the link between a broader access to bank deposits prior to the 2008 crisis and the dynamics of bank deposit growth in the crisis, while controlling for relevant covariates. Employing the proxies of Honohan (2008) for access to deposits and of Demirguc-Kunt and Klapper (2012) for the use of bank deposits, the authors find that greater access to bank deposits can make the deposit funding base of banks more resilient in times of financial stress. Policy efforts to enhance financial stability should thus focus not only on macroprudential regulation, but also recognize the positive effect of broader access to bank deposits on financial stability.postprin

Does short selling discipline overinvestment?

We explore the disciplining effect of short selling on overinvestment. Firms with more stock lending supply have higher abnormal announcement stock returns of acquiring firms, lower subsequent abnormal capital investments, and longer spells between large investments, and higher subsequent Tobin’s Q and ROA. Alleviating the endogeneity concern, our multivariate difference-in-difference analysis shows that this disciplinary force of lending supply is more effective for firms in the Regulation SHO-PILOT Program. We identify two mechanisms through which short selling disciplines managers: managers’ wealth-performance sensitivity and likelihood of hostile takeovers. Additionally, the disciplinary force only exists for non-financial-constrained firms and nonall-cash M&A deals.postprin

Proposal for optical parity state re-encoder

We propose a re-encoder to generate a refreshed parity encoded state from an existing parity encoded state. This is the simplest case of the scheme by Gilchrist et al. (Phys. Rev. A 75, 052328). We show that it is possible to demonstrate with existing technology parity encoded quantum gates and teleportation.Comment: 8 pages, 4 figure

Does short selling discipline managerial empire building?

The Conference program's website is located at http://www.fma.org/Tokyo/TokyoProgramPrelim.htmSession 20 - Monitors and Governance QualityThis paper explores the discipline effect of short selling on managerial empire building. Employing short-selling data from 2002-2011, we document a negative association between the stock lending supply and the subsequent abnormal capital investment. We also find a positive association between the lending supply and the mergers and acquisitions announcement returns of acquiring firms. Firms with higher lending supplies also have higher Tobin’s Q in the subsequent year. In addition, the discipline effect is stronger for firms with higher managers’ wealth-performance sensitivity and with lower financial constraints, and for stock-financing acquisition deals. Alleviating the endogeneity concern, our multivariate difference-in-difference analysis shows that the lending supply is a more effective discipline force for firms that are in the Regulation SHO-Pilot Program during 2005 to 2007.postprin

Could the compact remnant of SN 1987A be a quark star?

The standard model for Type II supernovae explosions, confirmed by the detection of neutrinos emitted during the supernova explosion, predicts the formation of a compact object, usually assumed to be a neutron star. However, the lack of detection of a neutron star or pulsar formed in the SN 1987A still remains an unsolved mystery. In this paper, we suggest that the newly formed neutron star at the center of SN 1987A may undergo a phase transition after the neutrino trapping timescale (∼10 s). Consequently the compact remnant of SN 1987A may be a strange quark star, which has a softer equation of state than that of neutron star matter. Such a phase transition can induce stellar collapse and result in large amplitude stellar oscillations.We use a three-dimensional Newtonian hydrodynamic code to study the time evolution of the temperature and density at the neutrinosphere. Extremely intense pulsating neutrino fluxes, with submillisecond period and with neutrino energy (greater than 30 MeV), can be emitted because the oscillations of the temperature and density are out of phase almost 180◦. If this is true we predict that the current X-ray emission from the compact remnant of SN 1987A will be lower than 1034 erg s−1, and it should be a thermal bremsstrahlung spectrum for a bare strange star with a surface temperature of around ∼107 K.published_or_final_versio

Multiple-image encryption by compressive holography

We present multiple-image encryption (MIE) based on compressive holography. In the encryption, a holographic technique is employed to record multiple images simultaneously to form a hologram. The two-dimensional Fourier data of the hologram are then compressed by nonuniform sampling, which gives rise to compressive encryption. Decryption of individual images is cast into a minimization problem. The minimization retains the sparsity of recovered images in the wavelet basis. Meanwhile, total variation regularization is used to preserve edges in the reconstruction. Experiments have been conducted using holograms acquired by optical scanning holography as an example. Computer simulations of multiple images are subsequently demonstrated to illustrate the feasibility of the MIE scheme.published_or_final_versio

Blind sectional image reconstruction for optical scanning holography

Optical scanning holography is a powerful holographic recording technique in which only a single twodimensional scan is needed to record three-dimensional information. As in standard digital holography, for the reconstruction of a sectional image, the resulting data must then be postprocessed to obtain sectional content. We propose a blind sectional image reconstruction technique to automate the data processing. This reconstruction uses edge information to determine the appropriate Fresnel zone plates automatically and applies inverse imaging to recover the sectional images with significant suppression of the defocus noise. The experimental data used to verify the algorithm are measured from a physical implementation of the optical scanning holography system. © 2009 Optical Society of America.published_or_final_versio

GIVE: portable genome browsers for personal websites.

Growing popularity and diversity of genomic data demand portable and versatile genome browsers. Here, we present an open source programming library called GIVE that facilitates the creation of personalized genome browsers without requiring a system administrator. By inserting HTML tags, one can add to a personal webpage interactive visualization of multiple types of genomics data, including genome annotation, "linear" quantitative data, and genome interaction data. GIVE includes a graphical interface called HUG (HTML Universal Generator) that automatically generates HTML code for displaying user chosen data, which can be copy-pasted into user's personal website or saved and shared with collaborators. GIVE is available at: https://www.givengine.org/