Three essays on market depth in futures markets

Liquidity is an important market characteristic for participants in every financial market. One of the three components of liquidity is market depth. Prior literature lacks a comprehensive analysis of depth in U.S. futures markets due to past limitations on the availability of data. However, recent innovations in data collection and dissemination provide new opportunities to investigate the depth dimension of liquidity. In this dissertation, the Chicago Mercantile Exchange (CME) Group proprietary database on depth is employed to study the dynamics of depth in the U.S. futures markets. This database allows for the analysis of depth along the entire limit order book rather than just at the first level. The first essay examines the characteristics of depth within the context of the five-deep limit order book. Results show that a large amount of depth is present in the book beyond the best level. Furthermore, the findings show that the characteristics of five-deep depth between day and night trading vary and that depth is unequal across levels within the limit order book. The second essay examines the link between the five-deep market depth and the bid-ask spread. The results suggest an inverse relation between the spread and the depth after adjusting for control factors. The third essay explores transitory volatility in relation to depth in the limit order book. Evidence supports the relation between an increase in volatility and a subsequent decrease in market depth. Overall, the results of this dissertation are consistent with limit order traders actively managing depth along the limit order book in electronic U.S. futures markets.

Three Essays on Market Depth in Futures Markets

Liquidity is an important market characteristic for participants in every financial market. One of the three components of liquidity is market depth. Prior literature lacks a comprehensive analysis of depth in U.S. futures markets due to past limitations on the availability of data. However, recent innovations in data collection and dissemination provide new opportunities to investigate the depth dimension of liquidity. In this dissertation, the Chicago Mercantile Exchange (CME) Group proprietary database on depth is employed to study the dynamics of depth in the U.S. futures markets. This database allows for the analysis of depth along the entire limit order book rather than just at the first level. The first essay examines the characteristics of depth within the context of the five-deep limit order book. Results show that a large amount of depth is present in the book beyond the best level. Furthermore, the findings show that the characteristics of five-deep depth between day and night trading vary and that depth is unequal across levels within the limit order book. The second essay examines the link between the five-deep market depth and the bid-ask spread. The results suggest an inverse relation between the spread and the depth after adjusting for control factors. The third essay explores transitory volatility in relation to depth in the limit order book. Evidence supports the relation between an increase in volatility and a subsequent decrease in market depth. Overall, the results of this dissertation are consistent with limit order traders actively managing depth along the limit order book in electronic U.S. futures markets.

Managerial work roles of health care executives in the changing environment of academic medical centers

The current U.S. health care system faces numerous environmental challenges. To compete and survive, health care organizations are developing strategies to lower costs and increase efficiency and quality. All of these strategies require rapid and precise decision making by top level managers. The purpose of this study is to determine the relationship between the environment, made up of unfavorable market conditions and limited resources, and the work roles of top level managers, specifically in the settings of academic medical centers. Managerial work roles are based on the ten work roles developed by Henry Mintzberg, in his book, The Nature of Managerial Work (1973). ^ This research utilized an integrated conceptual framework made up of systems theory in conjunction with role, attribution and contingency theories to illustrate that four most frequently performed Mintzberg's work roles are affected by the two environment dimensions. The study sample consisted of 108 chief executive officers in academic medical centers throughout the United States. The methods included qualitative methods in the form of key informants and case studies and quantitative in the form of a survey questionnaire. Research analysis involved descriptive statistics, reliability tests, correlation, principal component and multivariate analyses. ^ Results indicated that under the market condition of increased revenue based on capitation, the work roles increased. In addition, under the environment dimension of limited resources, the work roles increased when uncompensated care increased while Medicare and non-government funding decreased. ^ Based on these results, a typology of health care managers in academic medical centers was created. Managers could be typed as a strategy-formulator, relationship-builder or task delegator. Therefore, managers who ascertained their types would be able to use this knowledge to build their strengths and develop their weaknesses. Furthermore, organizations could use the typology to identify appropriate roles and responsibilities of managers for their specific needs. Consequently, this research is a valuable tool for understanding health care managerial behaviors that lead to improved decision making. At the same time, this could enhance satisfaction and performance and enable organizations to gain the competitive edge . ^

Big city days: Race and labor in early Miami, 1914--1925

The purpose of this study was to recast Miami's social history during the first three decades of the twentieth century through an examination of working class life. The thesis attempts to fill a gap in the literature while also expanding on the advances made in race and class studies of the United States. Through an analysis of local newspapers, minutes of a carpenter's union, and other archival sources, the thesis demonstrates how white workers obtained a virtual monopoly in skilled jobs over black workers, particularly in the construction industry, and exacted economic pressure on business through the threat of work stoppages. Driven by the concern to maintain smooth and steady growth amidst a vibrant tourist economy, business reluctantly worked with labor to maintain harmonious market conditions. Blacks, however, were able to gain certain privileges in the labor market through challenging the rigid system of segregation and notions of what constituted skilled labor. The findings demonstrate that Miami's labor unions shaped the city's social, cultural, and political landscape but the extent of their power was limited by booster discourse and the city's dependence on tourism. ^

Demographic effects of thatch harvest and implications for sustainable use of irapai palm (Lepidocaryum tenue, Mart.), by riverine communities in the Peruvian Amazon

Lepidocaryum tenue Mart. (Arecaceae) is a small, understory palm of terra firme forests of the western and central Amazon basin. Known as irapai, it is used for roof thatch by Amazonian peoples who collect its leaves from the wild and generate income from its fronds and articles fabricated from them. Increasing demand has caused local concern that populations are declining. Cultivation attempts have been unsuccessful. The purpose of this study was to investigate market conditions and quantify population dynamics and demographic responses of harvested and unharvested irapai growing near Iquitos, Peru. ^ Ethnobotanical research included participant surveys to determine movement of thatch tiles, called crisnejas, through Moronacocha Port. I also conducted a seed germination trial, and for four years studied five populations growing in communities with similar topography and soils but different land tenure and management strategies. Stage, survival, leaf production, and reproductive transitions were used to calculate ramet demographic rates and develop population projection matrices. ^ Weavers made an average of 20–30 crisnejas per day (90–130 leaves each), and earned US$0.09 to 0.70 each (US$1.80 to 21.00 per day). Average crisnejas per month sold per vendor was 2,955 with a profit range of US$0.05 to 0.32 per crisneja. Wholesalers worked with capital outlay from US$100 to 400, and an estimated ten to twenty vendors could be found at a given time. Consumers paid between US$0.23 to 1.20 per crisneja. Although differences in demographic rates by location existed, most were not significant enough to attribute to management. ^ After 60 months, mean seed germination rate was 19.5% in all media (37.9% in peat). Seedling survival was less than two percent after twelve months. Annual palm mortality was three percent, and occurred disproportionately in small (<50 cm) palms. Small palms grew more in height. Unharvested palms grew less than harvested palms. Large palms (≥50 cm) produced more leaves, were more likely to reproduce, and collectors harvested them more frequently. Reproductive potentials (sexual and asexual) were low. Population growth rates were greater than or not significantly different from 1.0, indicating populations maintained or increased in size. Current levels of irapai harvest appear sustainable. DNA analysis of stems and recruits is recommended to understand population composition and stage-specific asexual fecundity. ^

Three essays on the interrelationships among financial restatements, corporate governance, market microstructure and the firm's rate of return

The increase in the number of financial restatements in recent years has resulted in a significant decrease in the amount of market capitalization for restated companies. Prior literature did not differentiate between single and multiple restatements announcements. This research investigated the inter-relationships among multiple financial restatements, corporate governance, market microstructure and the firm’s rate of return in the form of three essays by differentiating between single and multiple restatement announcement companies. First essay examined the stock performance of companies announcing the financial restatement multiple times. The postulation is that prior research overestimates the abnormal return by not separating single restatement companies from multiple restatement companies. This study investigated how market penalizes the companies that announce restatement more than once. Differentiating the restatement announcement data based on number of restatement announcements, the results supported the non persistence hypothesis that the market has no memory and negative abnormal returns obtained after each of the restatement announcements are completely random. Second essay examined the multiple restatement announcements and its perceived resultant information asymmetry around the announcement day. This study examined the pattern of information asymmetry for these announcements in terms of whether the bid-ask spread widens around the announcement day. The empirical analysis supported the hypotheses that the spread does widen not only around the first restatement announcement day but around every subsequent announcement days as well. The third essay empirically examined the financial and corporate governance characteristics of single and multiple restatement announcements companies. The analysis showed that corporate governance variables influence the occurrence of multiple restatement announcements and can distinguish multiple restatements announcement companies from single restatement announcement companies.

A study of stock market fluctuations and their relation to business conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubblelike deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the nonfundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.

An empirical analysis of the global audit market: International Financial Reporting Standards-related changes and differences within the Big 4 global networks

Ongoing debates within the professional and academic communities have raised a number of questions specific to the international audit market. This dissertation consists of three related essays that address such issues. First, I examine whether the propensity to switch between auditors of different sizes (i.e., Big 4 versus non-Big 4) changes as adoption of International Financial Reporting Standards (IFRS) becomes a more common phenomenon, arguing that smaller auditors have an opportunity to invest in necessary skills and training needed to enter this market. Findings suggest that clients are relatively less (more) likely to switch to (away from) a Big 4 auditor if the client's adoption of IFRS occurs in more recent years. ^ In the second essay, I draw on these inferences and test whether the change in audit fees in the year of IFRS adoption changes over time. As the market becomes less concentrated, larger auditors becomes less able to demand a premium for their services. Consistent with my arguments, results suggest that the change in audit service fees declines over time, although this effect seems concentrated among the Big 4. I also find that this effect is partially attributable to a differential effect of the auditors' experience in pricing audit services related to IFRS based on the period in which adoption occurs. The results of these two essays offer important implications to policy debates on the costs and benefits of IFRS adoption. ^ In the third essay, I differentiate Big 4 auditors into three classifications—Parent firms, Brand Name affiliates, and Local affiliates—and test for differences in audit fee premiums (relative to non-Big 4 auditors) and audit quality. Results suggest that there is significant heterogeneity between the three classifications based on both of these characteristics, which is an important consideration for future research. Overall, this dissertation provides additional insights into a variety of aspects of the global audit market.^

Three Essays on the Interrelationships Among Financial Restatements, Corporate Governance, Market Microstructure and the Firm's Rate of Return

The increase in the number of financial restatements in recent years has resulted in a significant decrease in the amount of market capitalization for restated companies. Prior literature does not differentiate between single and multiple restatements announcements. This research investigates the inter-relationships among multiple financial restatements, corporate governance, market microstructure and the firm's rate of return in the form of three essays by differentiating between single and multiple restatement announcement companies. First essay examines the stock performance of companies announcing the financial restatement multiple times. The postulation is that prior research overestimates the abnormal return by not separating single restatement companies from multiple restatement companies. This study investigates how market penalizes the companies that announce restatement more than once. Differentiating the restatement announcement data based on number of restatement announcements, the results support for non persistence hypothesis that the market has no memory and negative abnormal returns obtained after each of the restatement announcements are completely random. Second essay examines the multiple restatement announcements and its perceived resultant information asymmetry around the announcement day. This study examines the pattern of information asymmetry for these announcements in terms of whether the bid-ask spread widens around the announcement day. The empirical analysis supports the hypotheses that the spread does widen not only around the first restatement announcement day but around every subsequent announcement days as well. The third essay empirically examines the financial and corporate governance characteristics of single and multiple restatement announcements companies. The analysis shows that corporate governance variables influence the occurrence of multiple restatement announcements and can distinguish multiple restatements announcement companies from single restatement announcement companies.

A Study of Stock Market Fluctuations and their Relations to Business Conditions

Most research on stock prices is based on the present value model or the more general consumption-based model. When applied to real economic data, both of them are found unable to account for both the stock price level and its volatility. Three essays here attempt to both build a more realistic model, and to check whether there is still room for bubbles in explaining fluctuations in stock prices. In the second chapter, several innovations are simultaneously incorporated into the traditional present value model in order to produce more accurate model-based fundamental prices. These innovations comprise replacing with broad dividends the more narrow traditional dividends that are more commonly used, a nonlinear artificial neural network (ANN) forecasting procedure for these broad dividends instead of the more common linear forecasting models for narrow traditional dividends, and a stochastic discount rate in place of the constant discount rate. Empirical results show that the model described above predicts fundamental prices better, compared with alternative models using linear forecasting process, narrow dividends, or a constant discount factor. Nonetheless, actual prices are still largely detached from fundamental prices. The bubble-like deviations are found to coincide with business cycles. The third chapter examines possible cointegration of stock prices with fundamentals and non-fundamentals. The output gap is introduced to form the non-fundamental part of stock prices. I use a trivariate Vector Autoregression (TVAR) model and a single equation model to run cointegration tests between these three variables. Neither of the cointegration tests shows strong evidence of explosive behavior in the DJIA and S&P 500 data. Then, I applied a sup augmented Dickey-Fuller test to check for the existence of periodically collapsing bubbles in stock prices. Such bubbles are found in S&P data during the late 1990s. Employing econometric tests from the third chapter, I continue in the fourth chapter to examine whether bubbles exist in stock prices of conventional economic sectors on the New York Stock Exchange. The ‘old economy’ as a whole is not found to have bubbles. But, periodically collapsing bubbles are found in Material and Telecommunication Services sectors, and the Real Estate industry group.