Intraday Analysis of Market Integration: Dutch Blue Chips traded in Amsterdam and New York

Market integration is studied for Dutch stocks cross-listed at the NYSE. Trading starts in Amsterdam and ends in New York with a one-hour overlap. Both markets are not perfectly integrated in that they can be viewed as one market with the well-documented U-shape in volatility, volume and spread. Increased values for the hour of overlap suggest informed trading. Zooming in on this hour, markets are integrated in that price discovery on both sides of the Atlantic reflects the same underlying, new information. Not consistent across all stocks is the origin of this information, Amsterdam, New York or both

Are small firms really sub-optimal?: compensating factor differentials in small Dutch manufacturing firms

Onderzoek naar de vraag waarom er zoveel kleine bedrijven kunnen bestaan, ondanks de heersende opvatting dat dit bedrijven zijn die op sub-optimale schaal presteren. Kleine bedrijven blijken productiefactoren verschillend te belonen en toe te passen ten opzichte van grote bedrijven, en langs deze weg bedrijfsgroottenadelen te compenseren. Uit een steekproef onder 7.000 Nederlandse industriële bedrijven blijkt dat deze strategie van compenserende factordifferentialen toegepast wordt in Europa. Enerzijds lijkt deze strategie te leiden tot een nettoverlies voor de economie. Anderzijds suggereren de positieve relaties tussen bedrijfsleeftijd en werknemerscompensatie, en bedrijfsleeftijd en productiviteit dat er minstens een tendens is dat het inefficiënte bedrijf van vandaag het efficiënte bedrijf van de toekomst kan worden.

Splitting Orders in Fragmented Markets; evidence from cross-listed stocks

A number of recent theoretical studies have explored trading in fragmented markets, e.g. Biais et al. (2000), a phenomenon increasingly witnessed in modern markets. The key assumption generating the results is that there is at least one liquidity demander exploiting access to all markets by optimally splitting orders across markets. This paper seeks to test this assumnption in a natural experiment involving Dutch stocks that are traded both in Amsterdam and New York. The results confirm the presence of rational, order splitting traders. This explains the increased volume and relatively large and persistent price changes for the overlapping period

Are small firms really sub-optimal?: compensating factor differentials in small dutch manufacturing firms

The advent of a growing share of small firms in modern economies raises some intriguing questions. The most intriguing question undoubtedly is why so many smaller firms, which have traditionally been classified as sub-optimal scale firms, can exist. We suggest that, through pursuing a strategy of compensating factor differentials, that is by remunerating and deploying factors of production differently than their larger counterparts, small firms are able to compensate for size-inherent cost disadvantages. Using a sample of over seven thousand Dutch manufacturing firms, we find considerable evidence that such a strategy of compensating factor differentials is pursued within a European context. When viewed through a static lens, the existence of such a strategy, while making small and sub-optimal scale firms viable, suggests that they impose a net welfare loss on the economy. However, when viewed through a dynamic lens, the findings of a positive relationship between firm age and employee compensation as well as firm age and firm productivity suggest that there may be at least a tendency for the inefficient firm of today to become the efficient firm of tomorrow. 5 Are Small Firms Really Sub-Optimal

Some new evidence on the determinants of large- and small-firm innovation

Empirical analyses presented by Acs and Audretsch suggest differences in the market structure determinants of innovation between large and small firms in U.S. manufacturing. The evidence they offer is ambiguous. By using data for a different country (The Netherlands), a different measure of innovation and a different aggregation level, we offer new evidence, allowing a revaluation of the findings for the U.S. material. Moreover, the influence of the market structure determinants does not appear to differ between a period of sluggish growth (1983) and one of relatively high growth (1989)

Value at Risk as a Diagnostic Tool for Corporates: The Airline Industry

textabstractIn recent years the Value at Risk (VaR) concept for measuring downside risk has been widely studied. VaR basically is a summary statistic that quantifies the exposure of an asset or portfolio to market risk, or the risk that a position declines in value with adverse market price changes. Three parties have been particularly interested: financial institutions, regulators and corporates. In this paper, we focus on VaR use for corporates. This field is relatively unexplored. We show how VaR can be helpful to study market value risk -- proxied by share price risk. We develop a methodology to decompose the overall VaR into components that are attributable to underlying external risk factors and a residual idiosyncratic component. Apart from developing theoretical results, we study the airline industry to show what practical results our 'Component VaR framework' can yield. Like any multinational company, an airline faces significant exposures to external risk factors, e.g. commodity prices, interest rates and exchange rates. In our opinion, Component VaR analysis can enrich discussions in the company on financial risk management and shareholder value

Value at Risk as a Diagnostic Tool for Corporates: The Airline Industry

In recent years the Value at Risk (VaR) concept for measuringdownside risk has been widelystudied. VaR basically is a summary statistic that quantifies theexposure of an asset or portfolio tomarket risk, or the risk that a position declines in value withadverse market price changes. Threeparties have been particularly interested: financial institutions,regulators and corporates. In this paper, we focus on VaR use for corporates. This field isrelatively unexplored. We showhow VaR can be helpful to study market value risk -- proxied by shareprice risk. We develop amethodology to decompose the overall VaR into components that areattributable to underlyingexternal risk factors and a residual idiosyncratic component.Apart from developing theoretical results, we study the airlineindustry to show what practicalresults our 'Component VaR framework' can yield. Like anymultinational company, an airlinefaces significant exposures to external risk factors, e.g. commodityprices, interest rates andexchange rates. In our opinion, Component VaR analysis can enrichdiscussions in the company onfinancial risk management and shareholder value.