Transparency Proposals for European Sovereign Bond Markets

The debate over the possible extension of transparency regulation in Europe to include sovereign bonds has opened up a number of other issues in need of serious consideration. One such issue is the appropriateness of the entire infrastructure supporting the trading of European sovereign bonds. In recent years sovereign issuers have supported the development of an electronic inter-dealer market but have remained unconcerned with the opacity of dealer-to-customer trading. The degree of segmentation in this market is high relative to what exists in nearly all other financial markets. This paper explores why European sovereign bond markets have developed in such a segmented way and considers how this structure could be altered to improve transparency without adversely affecting liquidity, efficiency or the benefits enjoyed by primary dealers and issuers. It is suggested that the structure of the market could be improved greatly if the largest and most active investors were permitted access to the inter-dealer electronic trading platforms. This would solve a number of market imperfections and increase the proportion of market activity that is conducted in a transparent way. The paper argues that sovereign issuers in Europe have the means to provide incentives that would influence dealers to support reduced segmentation. Some practical examples of how this could be achieved are provided and the potential benefits are outlined.

Performing meta-analysis with incomplete statistical information in clinical trials

Background: Results from clinical trials are usually summarized in the form of sampling distributions. When full information (mean, SEM) about these distributions is given, performing meta-analysis is straightforward. However, when some of the sampling distributions only have mean values, a challenging issue is to decide how to use such distributions in meta-analysis. Currently, the most common approaches are either ignoring such trials or for each trial with a missing SEM, finding a similar trial and taking its SEM value as the missing SEM. Both approaches have drawbacks. As an alternative, this paper develops and tests two new methods, the first being the prognostic method and the second being the interval method, to estimate any missing SEMs from a set of sampling distributions with full information. A merging method is also proposed to handle clinical trials with partial information to simulate meta-analysis.

The impact of equity markets and corporate governance on labour market flexibility

Drawing from various literatures, this article explores links between equity markets and labour market flexibility. Various data sources are used to test relationships for a set of OECD countries, controlling for other likely influences on flexibility such as government and industrial relations institutions. The results are generally supportive as regards employment flexibility: equity market trading activity is associated with shorter job tenure, higher activity rates, and greater employment change over the cycle. However, the relationship between equity markets and pay flexibility is less statistically robust to the addition of controls.

Factor markets in England before the Black Death

Modern English factor markets originated during the two centuries of active commercialization that preceded the Black Death. An active labour market was established by the late twelfth century. Evolution of a land market followed the legal reforms of the 1170s and 1180s, which created legally secure and defensible property rights in land. These rights stimulated growth of a capital market, since land became a security against which credit could be obtained. Nevertheless, none of these nascent factor markets functioned unconstrained and each became embedded in legal, tenurial, and institutional complexities and rigidities which it took later generations centuries to reform.

On the Sources of Private Information in FX Markets

We investigate the source of information advantage in inter-dealer FX trading using data on trades and counterparty identities. In liquid dollar exchange rates, information is concentrated among dealers that trade most frequently and specialize their activity in a particular rate. In cross-rates, traders that engage in triangular arbitrage are best informed. Better-informed traders are also located on larger trading floors. In cross-rates, the ability to forecast flows explains all of the advantage of the triangular arbitrageurs. In liquid dollar rates, specialist traders can forecast both order flow and the component of exchange rate changes that is uncorrelated with flow.

Endogenous Two-Sided Markets with Repeated Transactions

We consider homogeneous two-sided markets, in which connected buyer-seller pairs bargain and trade repeatedly. In this infinite market game with exogenous matching probabilities and a common discount factor, we prove the existence of equilibria in stationary strategies. The equilibrium payoffs are given implicitly as a solution to a system of linear equations. Then, we endogenize the matching mechanism in a link formation stage that precedes the market game. When agents are sufficiently patient and link costs are low, we provide an algorithm to construct minimally connected networks that are pairwise stable with respect to the expected payoffs in the trading stage. The constructed networks are essentially efficient and consist of components with a constant buyer-seller ratio. The latter ratio increases (decreases) for a buyer (seller) that deletes one of her links in a pairwise stable component.