The dog that did not bark: Insider trading and crashes

This paper documents that at the individual stock level insiders sales peak many months before a large drop in the stock price, while insiders purchases peak only the month before a large jump. We provide a theoretical explanation for this phenomenon based on trading constraints and asymmetric information. We test our hypothesis against competing stories such as patterns of insider trading driven by earnings announcement dates, or insiders timing their trades to evade prosecution. Finally we provide new evidence regarding crashes and the degree of information asymmetry.

The use of derivatives in the Spanish mutual fund industry

We study the use of derivatives in the Spanish mutual fund industry. The picture that emerges from our analysis is rather negative. In general, the use of derivatives does not improve the performance of the funds. In only one out of eight categories we find some (very weak and not robust) evidence of superior performance. In most of the cases users significantly underperform non users. Furthermore, users do not seem to exhibit superior timing or selectivity skills either, but rather the contrary. This bad performance is only partially explained by the larger fees funds using derivatives charge. Moreover,we do not find evidence of derivatives being used for hedging purposes. We do find evidence of derivatives being used for speculation. But users in only one category exhibit skills as speculators. Finally, we find evidence of derivatives being used to manage the funds cash inflows and outflows more efficiently.

Firms vs. insiders as traders of last resort

We explore the role of corporate insiders vs. firms as traders of last resort. We develop a simple model of insider trading in which insiders provide price support, as well as liquidity, in security markets. Consistent with the model predictions we find that in the US markets insiders trading activities have a clear impact on return distributions. Furthermore, we provide empirical evidence on insiders transactions and firm transactions affecting returns in a different manner. In particular, while insiders transactions (both purchases and sales) have a strong impact on skewness in the short run and to a lesser extent in short run volatility, company repurchases only have a clear impact on volatility, both in the short and the long run. We provide explanations for this asymmetry.

Speculative securities

A speculative security is an asset whose payoff depends on a random shock uncorrelated with economic fundamentals (a sunspot) about which some traders have superior information. In this paper we show that agents may find it desirable to trade such a security in spite of the fact that it is a poorer hedge against their endowment risks as the time oftrade, and has an associated adverse selection cost. In the specific institutional setting of innovation of futures contracts, we show that a futures exchange may not have an incentive to introduce a speculative security even when all traders favor it.

Constraints and non-existence of rational expectations equilibria

In this article we show that in the presence of trading constraints, such as short sale constraints, the standard definition of a Rational Expectations Equilibrium allows for equilibrium prices that reveal information unknown to any active trader in the market. We propose a new definition of the Rational Expectations Equilibrium that incorporates a stronger measurability condition than measurability with respect to the join of the information sets of the agents and give an example of non-existence of equilibrium. The example is robust to perturbations on the data of the economy and the introduction of new assets.

Pension plan funding and stock market efficiency

The paper argues that the market signifficantly overvalues firms with severely underfunded pension plans. These companies earn lower stock returns than firms with healthier pension plans for at least five years after the first emergence of the underfunding. The low returns are not explained by risk, price momentum, earnings momentum, or accruals. Further, the evidence suggests that investors do not anticipate the impact of the pension liability on future earnings, and they are surprised when the negative implications of underfunding ultimately materialize. Finally, underfunded firms have poor operating performance, and they earn low returns, although they are value companies.

Una modelización de los años de vida ajustados por la calidad como utilidades esperadas

En el presente trabajo, los a\~nos de vida ajustados por la calidad(AVAC), son caracterizados como funciones de utilidad von Newman--Morgenstern.Esta caracterizaci\'on se efect\'ua para dos problemas de elecci\'on: laelecci\'on entre loter{\'\i}as definidas sobre estados de salud cr\'onicosy la elecci\'on entre loter{\'\i}as definidas sobre estados de saludtemporales. En el primer caso, deducimos las mismas condiciones que Pliskinet al. (1980), s\'olo que siguiendo un camino m\'as directo. En el segundocaso, una vez establecida una condici\'on de independencia aditiva basadaen Fishburn (1970), inferimos una nueva condici\'on en la literatura sobreAVAC que denominamos \underline{condici\'on de simetr{\'\i}a}.

Portable alphas from pension mispricing

We introduce a new dynamic trading strategy based on the systematic misspricing of U.S. companies sponsoring Defined Benefit pension plans. This portfolio produces an average return of 1.51% monthly between 1989 and 2004, with a Sharpe Ratio of 0.26. The returns of the strategy are not explained by those of primary assets. These returns are not related to those of benchmarks in the alternative investments industry either. Hence, we are in the presence of a "pure alpha" strategy that can be ported into a large variety of portfolios to significantly enhance their performance.

Anelasticidad de la zona estable euroasiática y de la zona europea occidental

La teoria de inversión en su forma estocastica ha sido aplicada a dos conjuntos de coeficientes de atenuación de las ondas de Rayleigh correspondientes a la zona estable Euroasiatica y a la zona Europea Occidental. Los resultados obtenidos muestran que las propiedades anelásticas bajo dichas zonas son distintas. Europa Occidental se halla caracterizada por valores mas bajos de los factores especificos de calidad de las ondas de cizalla(Qbeta) que los correspondientes a la zona Estable Euroasiática. Las profundiades a las que los valores de Qbeta decrecen más rápidamente son alrededorde 60 km para Europa Occidental y de 40 km para la zona Estable Euroasiática. La comparación con un estudio de atenuación en el Océano Atlántico muestra que los coeficientes de atenuación correspondientes a la zona Europea Occidental pueden ser considerados representativos para dicha zona.

Neuroprotective role of PrPC against kainate-induced epileptic seizures and cell death depends on the modulation of JNK3 activation by GluR6/7-PSD-95 binding

Cellular prion protein (PrPC) is a glycosyl-phosphatidylinositol¿anchored glycoprotein. When mutated or misfolded, the pathogenic form (PrPSC) induces transmissible spongiform encephalopathies. In contrast, PrPC has a number of physiological functions in several neural processes. Several lines of evidence implicate PrPC in synaptic transmission and neuroprotection since its absence results in an increase in neuronal excitability and enhanced excitotoxicity in vitro and in vivo. Furthermore, PrPC has been implicated in the inhibition of N-methyl-D-aspartic acid (NMDA)¿mediated neurotransmission, and prion protein gene (Prnp) knockout mice show enhanced neuronal death in response to NMDA and kainate (KA). In this study, we demonstrate that neurotoxicity induced by KA in Prnp knockout mice depends on the c-Jun N-terminal kinase 3 (JNK3) pathway since Prnpo/oJnk3o/o mice were not affected by KA. Pharmacological blockage of JNK3 activity impaired PrPC-dependent neurotoxicity. Furthermore, our results indicate that JNK3 activation depends on the interaction of PrPC with postsynaptic density 95 protein (PSD-95) and glutamate receptor 6/7 (GluR6/7). Indeed, GluR6¿PSD-95 interaction after KA injections was favored by the absence of PrPC. Finally, neurotoxicity in Prnp knockout mice was reversed by an AMPA/KA inhibitor (6,7-dinitroquinoxaline-2,3-dione) and the GluR6 antagonist NS-102. We conclude that the protection afforded by PrPC against KA is due to its ability to modulate GluR6/7-mediated neurotransmission and hence JNK3 activation.

Involvement of Dab1 in APP processing and [beta]-amyloid deposition in sporadic Creutzfeldt-Jakob patients.

Alzheimer"s disease and prion pathologies (e.g., Creutzfeldt-Jakob disease) display profound neural lesions associated with aberrant protein processing and extracellular amyloid deposits. For APP processing, emerging data suggest that the adaptor protein Dab1 plays a relevant role in regulating its intracellular trafficking and secretase-mediated proteolysis. Although some data have been presented, a putative relationship between human prion diseases and Dab1/APP interactions is lacking. Therefore, we have studied the putative relation between Dab1, APP processing and Aβ deposition, targets in sCJD cases. Our biochemical results categorized two groups of sCJD cases, which also correlated with PrPsc types 1 and 2 respectively. One group, with PrPsc type 1 showed increased Dab1 phosphorylation, and lower βCTF production with an absence of Aβ deposition. The second sCJD group, which carried PrPsc type 2, showed lower levels of Dab1 phosphorylation and βCTF production, similar to control cases. Relevant Aβ deposition in the second sCJD group was measured. Thus, a direct correlation between Dab1 phosphorylation, Aβ deposition and PrPsc type in human sCJD is presented for the first time.

Regulation of GABA(A) and glutamate receptor expression, synaptic facilitation and long-term potentiation in the hippocampus of prion mutant mice

Background: Prionopathies are characterized by spongiform brain degeneration, myoclonia, dementia, and periodic electroencephalographic (EEG) disturbances. The hallmark of prioniopathies is the presence of an abnormal conformational isoform (PrP(sc)) of the natural cellular prion protein (PrP(c)) encoded by the Prnp gene. Although several roles have been attributed to PrP(c), its putative functions in neuronal excitability are unknown. Although early studies of the behavior of Prnp knockout mice described minor changes, later studies report altered behavior. To date, most functional PrP(c) studies on synaptic plasticity have been performed in vitro. To our knowledge, only one electrophysiological study has been performed in vivo in anesthetized mice, by Curtis and coworkers. They reported no significant differences in paired-pulse facilitation or LTP in the CA1 region after Schaffer collateral/commissural pathway stimulation. Principal Findings: Here we explore the role of PrP(c) expression in neurotransmission and neural excitability using wild-type, Prnp -/- and PrP(c)-overexpressing mice (Tg20 strain). By correlating histopathology with electrophysiology in living behaving mice, we demonstrate that both Prnp -/- mice but, more relevantly Tg20 mice show increased susceptibility to KA, leading to significant cell death in the hippocampus. This finding correlates with enhanced synaptic facilitation in paired-pulse experiments and hippocampal LTP in living behaving mutant mice. Gene expression profiling using Illumina microarrays and Ingenuity pathways analysis showed that 129 genes involved in canonical pathways such as Ubiquitination or Neurotransmission were co-regulated in Prnp -/- and Tg20 mice. Lastly, RT-qPCR of neurotransmission-related genes indicated that subunits of GABA(A) and AMPA-kainate receptors are co-regulated in both Prnp -/- and Tg20 mice. Conclusions/Significance: Present results demonstrate that PrP(c) is necessary for the proper homeostatic functioning of hippocampal circuits, because of its relationships with GABA(A) and AMPA-Kainate neurotransmission. New PrP(c) functions have recently been described, which point to PrP(c) as a target for putative therapies in Alzheimer's disease. However, our results indicate that a "gain of function" strategy in Alzheimer's disease, or a "loss of function" in prionopathies, may impair PrP(c) function, with devastating effects. In conclusion, we believe that present data should be taken into account in the development of future therapies.

Neuroprotective role of PrPC against kainate-induced epileptic seizures and cell death depends on the modulation of JNK3 activation by GluR6/7-PSD-95 binding

Cellular prion protein (PrPC) is a glycosyl-phosphatidylinositol¿anchored glycoprotein. When mutated or misfolded, the pathogenic form (PrPSC) induces transmissible spongiform encephalopathies. In contrast, PrPC has a number of physiological functions in several neural processes. Several lines of evidence implicate PrPC in synaptic transmission and neuroprotection since its absence results in an increase in neuronal excitability and enhanced excitotoxicity in vitro and in vivo. Furthermore, PrPC has been implicated in the inhibition of N-methyl-D-aspartic acid (NMDA)¿mediated neurotransmission, and prion protein gene (Prnp) knockout mice show enhanced neuronal death in response to NMDA and kainate (KA). In this study, we demonstrate that neurotoxicity induced by KA in Prnp knockout mice depends on the c-Jun N-terminal kinase 3 (JNK3) pathway since Prnpo/oJnk3o/o mice were not affected by KA. Pharmacological blockage of JNK3 activity impaired PrPC-dependent neurotoxicity. Furthermore, our results indicate that JNK3 activation depends on the interaction of PrPC with postsynaptic density 95 protein (PSD-95) and glutamate receptor 6/7 (GluR6/7). Indeed, GluR6¿PSD-95 interaction after KA injections was favored by the absence of PrPC. Finally, neurotoxicity in Prnp knockout mice was reversed by an AMPA/KA inhibitor (6,7-dinitroquinoxaline-2,3-dione) and the GluR6 antagonist NS-102. We conclude that the protection afforded by PrPC against KA is due to its ability to modulate GluR6/7-mediated neurotransmission and hence JNK3 activation.

From Galilean-invariant to relativistic wave equations

Through an imaginary change of coordinates in the Galilei algebra in 4 space dimensions and making use of an original idea of Dirac and Lvy-Leblond, we are able to obtain the relativistic equations of Dirac and of Bargmann and Wigner starting with the (Galilean-invariant) Schrdinger equation.

Self-sustained spatiotemporal oscillations induced by membrane-bulk coupling

We propose a novel mechanism leading to spatiotemporal oscillations in extended systems that does not rely on local bulk instabilities. Instead, oscillations arise from the interaction of two subsystems of different spatial dimensionality. Specifically, we show that coupling a passive diffusive bulk of dimension d with an excitable membrane of dimension d-1 produces a self-sustained oscillatory behavior. An analytical explanation of the phenomenon is provided for d=1. Moreover, in-phase and antiphase synchronization of oscillations are found numerically in one and two dimensions. This novel dynamic instability could be used by biological systems such as cells, where the dynamics on the cellular membrane is necessarily different from that of the cytoplasmic bulk.