Self-Fulfilling Price Cycles

This paper presents a model of a self-fulfilling price cycle in an asset market. Price oscillates deterministically even though the underlying environment is stationary. The mechanism that we uncover is driven by endogenous variation in the investment horizons of the different market participants, informed and uninformed. On even days, the price is high; on odd days it is low. On even days, informed traders are willing to jettison their good assets, knowing that they can buy them back the next day, when the price is low. The anticipated drop in price more than offsets any potential loss in dividend. Because of these asset sales, the informed build up their cash holdings. Understanding that the market is flooded with good assets, the uninformed traders are willing to pay a high price. But their investment horizon is longer than that of the informed traders: their intention is to hold the assets they purchase, not to resell. On odd days, the price is low because the uninformed recognise that the informed are using their cash holdings to cherry-pick good assets from the market. Now the uninformed, like the informed, are investing short-term. Rather than buy-and-hold as they do with assets purchased on even days, on odd days the uninformed are buying to sell. Notice that, at the root of the model, there lies a credit constraint. Although the informed are flush with cash on odd days, they are not deep pockets. On each cherry that they pick out of the market, they earn a high return: buying cheap, selling dear. However they don't have enough cash to strip the market of cherries and thereby bid the price up.

Efficient Competition through Cheap Talk: Competing Auctions and Competitive Search without Ex Ante Price

We consider a frictional two-sided matching market in which one side uses public cheap talk announcements so as to attract the other side. We show that if the first-price auction is adopted as the trading protocol, then cheap talk can be perfectly informative, and the resulting market outcome is efficient, constrained only by search frictions. We also show that the performance of an alternative trading protocol in the cheap-talk environment depends on the level of price dispersion generated by the protocol: If a trading protocol compresses (spreads) the distribution of prices relative to the first-price auction, then an efficient fully revealing equilibrium always (never) exists. Our results identify the settings in which cheap talk can serve as an efficient competitive instrument, in the sense that the central insights from the literature on competing auctions and competitive search continue to hold unaltered even without ex ante price commitment.

Price Transmission and Effects of Exchange Rates on Domestic Commodity Prices via Offshore and Currency Hedging

The framework presents how trading in the foreign commodity futures market and the forward exchange market can affect the optimal spot positions of domestic commodity producers and traders. It generalizes the models of Kawai and Zilcha (1986) and Kofman and Viaene (1991) to allow both intermediate and final commodities to be traded in the international and futures markets, and the exporters/importers to face production shock, domestic factor costs and a random price. Applying mean-variance expected utility, we find that a rise in the expected exchange rate can raise both supply and demand for commodities and reduce domestic prices if the exchange rate elasticity of supply is greater than that of demand. Whether higher volatilities of exchange rate and foreign futures price can reduce the optimal spot position of domestic traders depends on the correlation between the exchange rate and the foreign futures price. Even though the forward exchange market is unbiased, and there is no correlation between commodity prices and exchange rates, the exchange rate can still affect domestic trading and prices through offshore hedging and international trade if the traders are interested in their profit in domestic currency. It illustrates how the world prices and foreign futures prices of commodities and their volatility can be transmitted to the domestic market as well as the dynamic relationship between intermediate and final goods prices. The equilibrium prices depends on trader behaviour i.e. who trades or does not trade in the foreign commodity futures and domestic forward currency markets. The empirical result applying a two-stage-least-squares approach to Thai rice and rubber prices supports the theoretical result.

Estimating the Price of ROCs

The UK government introduced the Renewable Obligation (RO), a system of tradable quotas, to encourage the installation of renewable electricity capacity. Each unit of generation from renewables created a renewable obligation certificate (ROC). Electricity generators must either; earn ROCs through their own production, purchase ROCs in the market or pay the buy-out price to comply with the quota set by the RO. A unique aspect of this regulation is that all entities holding ROCs receive a share of the buy-out fund (the sum of all compliance purchases using the buy-out price). This set-up ensures that the difference between the market price for ROCs and the buy-out price should equal the expected share of the buy-out fund, as regulated entities arbitrage these two compliance options. The expected share of the buy-out fund depends on whether enough renewable generation is available to meet the quota. This analysis tests whether variables associated with renewable generation or electricity demand are correlated with, and thus can help predict, the price of ROCs.

Penalizing Cartels: The Case for Basing Penalties on Price Overcharge

In this paper we set out the welfare economics based case for imposing cartel penalties on the cartel overcharge rather than on the more conventional bases of revenue or profits (illegal gains). To do this we undertake a systematic comparison of a penalty based on the cartel overcharge with three other penalty regimes: fixed penalties; penalties based on revenue, and penalties based on profits. Our analysis is the first to compare these regimes in terms of their impact on both (i) the prices charged by those cartels that do form; and (ii) the number of stable cartels that form (deterrence). We show that the class of penalties based on profits is identical to the class of fixed penalties in all welfare-relevant respects. For the other three types of penalty we show that, for those cartels that do form, penalties based on the overcharge produce lower prices than those based on profit) while penalties based on revenue produce the highest prices. Further, in conjunction with the above result, our analysis of cartel stability (and thus deterrence), shows that penalties based on the overcharge out-perform those based on profits, which in turn out-perform those based on revenue in terms of their impact on each of the following welfare criteria: (a) average overcharge; (b) average consumer surplus; (c) average total welfare.

Fractional Integration of the Price-Dividend Ratio in a Present-Value Model of Stock Prices

We re-examine the dynamics of returns and dividend growth within the present-value framework of stock prices. We find that the finite sample order of integration of returns is approximately equal to the order of integration of the first-differenced price-dividend ratio. As such, the traditional return forecasting regressions based on the price-dividend ratio are invalid. Moreover, the nonstationary long memory behaviour of the price-dividend ratio induces antipersistence in returns. This suggests that expected returns should be modelled as an AFIRMA process and we show this improves the forecast ability of the present-value model in-sample and out-of-sample.

Dirigent domain-containing protein is part of the machinery required for formation of the lignin-based Casparian strip in the root.

The endodermis acts as a "second skin" in plant roots by providing the cellular control necessary for the selective entry of water and solutes into the vascular system. To enable such control, Casparian strips span the cell wall of adjacent endodermal cells to form a tight junction that blocks extracellular diffusion across the endodermis. This junction is composed of lignin that is polymerized by oxidative coupling of monolignols through the action of a NADPH oxidase and peroxidases. Casparian strip domain proteins (CASPs) correctly position this biosynthetic machinery by forming a protein scaffold in the plasma membrane at the site where the Casparian strip forms. Here, we show that the dirigent-domain containing protein, enhanced suberin1 (ESB1), is part of this machinery, playing an essential role in the correct formation of Casparian strips. ESB1 is localized to Casparian strips in a CASP-dependent manner, and in the absence of ESB1, disordered and defective Casparian strips are formed. In addition, loss of ESB1 disrupts the localization of the CASP1 protein at the casparian strip domain, suggesting a reciprocal requirement for both ESB1 and CASPs in forming the casparian strip domain.

Inter-regional redistribution through infrastructure investment: tactical or programmatic?

In this paper we analyze the effects of both tactical and programmatic politics on the inter-regional allocation of infrastructure investment. We use a panel of data for the Spanish electoral districts during the period 1964-2004 to estimate an equation where investment depends both on economic and political variables. The results show that tactical politics do matter since, after controlling for economic traits, the districts with more ‘Political power’ still receive more investment. These districts are those where the incumbents’ Vote margin of victory/ defeat in the past election is low, where the Marginal seat price is low, where there is Partisan alignment between the executives at the central and regional layers of government, and where there are Pivotal regional parties which are influential in the formation of the central executive. However, the results also show that programmatic politics matter, since inter-regional redistribution (measured as the elasticity of investment to per capita income) is shown to increase with the arrival of the Democracy and EU Funds, with Left governments, and to decrease the higher is the correlation between a measure of ‘Political power’ and per capita income.

Biofilm formation by staphylococci on fresh, fresh-frozen and processed human and bovine bone grafts.

Biofilm formation is a multi-step process influenced by surface properties. We investigated early and mature biofilm of Staphylococcus aureus on 4 different biological calcium phosphate (CaP) bone grafts used for filling bone defects. We investigated standardised cylinders of fresh and fresh-frozen human bone grafts were harvested from femoral heads; processed humanand bovine bone grafts were obtained preformed. Biofilm formation was done in tryptic soy broth (TSB) using S. aureus (ATCC 29213) with static conditions. Biofilm density after 3 h (early biofilm) and 24 h (mature biofilm) was investigated by sonication and microcalorimetry. After 3 h, bacterial density was highest on fresh-frozenandfresh bone grafts. After 24 h, biofilm density was lowest on freshbone grafts (p < 0.001) compared to the other 3 materials, which did not differ quantitatively (p > 0.05). The lowest increase in bacterial density was detected on fresh bone grafts (p < 0.001). Despite normal shaped colonies, we found additional small colonies on the surface of the fresh and fresh-frozen samples by sonication. This was also apparent in microcalorimetric heat-flow curves. The four investigated CaP bone grafts showed minor structural differences in architecture but marked differences concerning serum coverage and the content of bone marrow, fibrous tissue and bone cells. These variations resulted in a decreased biofilm density on freshand fresh-frozenbone grafts after 24 h, despite an increased early biofilm formation and might also be responsible for the variations in colony morphology (small colonies). Detection of small colony variants by microcalorimetry might be a new approach to improve the understanding of biofilm formation.

Targeting mTORC2 inhibits colon cancer cell proliferation in vitro and tumor formation in vivo.

The mammalian target of rapamycin (mTOR), which exists in two functionally distinct complexes, mTORC1 and mTORC2 plays an important role in tumor growth. Whereas the role of mTORC1 has been well characterized in this process, little is known about the functions of mTORC2 in cancer progression. In this study, we explored the specific role of mTORC2 in colon cancer using a short hairpin RNA expression system to silence the mTORC2-associated protein rictor. We found that downregulation of rictor in HT29 and LS174T colon cancer cells significantly reduced cell proliferation. Knockdown of rictor also resulted in a G1 arrest as observed by cell cycle analysis. We further observed that LS174T cells deficient for rictor failed to form tumors in a nude mice xenograft model. Taken together, these results show that the inhibition of mTORC2 reduces colon cancer cell proliferation in vitro and tumor xenograft formation in vivo. They also suggest that specifically targeting mTORC2 may provide a novel treatment strategy for colorectal cancer.

Lamella formation and emigration from the water by a laboratory colony of Biomphalaria glabrata (SAY) in flow-through system

Lamella formation and emigration from the water were investigated in juvenile Biomphalaria glabrata reared at two temperatures in aquaria with a constant water flow. Most snails (97.4%) reared at the lower temperature (21- C) formed lamella at the shell aperture and emigrated from the water, whereas only 10.1% did so at 25- C. Eighty percent of emigrations at 21- C occurred within a period of 15 days, 70-85 days after hatching. A comparison of the studies done so far indicates that the phenomenon may be affected by the ageing of snail colonies kept in the laboratory and their geographic origin, rather than the rearing conditions. This hypothesis, however, requires experimental confirmation.

Agency cost of government ownership: a study of voluntary audit comitte formation in China

In this paper, we investigate the agency costs of government ownership and their impact on corporate governance and firm value. China is used as a laboratory because of the prevalent state shareholdings in exchange-listed firms. In this context, we specifically consider the trade-offs involved in the voluntary formation of an audit committee when the controlling shareholder is the state. The decision to improve corporate governance (in this case, introduce an audit committee) is shown to be value relevant and a function of existing agency relationships and non-trivial implementation costs. Our findings are robust to the level of pyramid groups, the ownership-control wedge, and financial leverage. The research adds to the debate regarding the effect of government shareholdings on corporate culture and performance - a topic that hastaken on renewed importance in recent times.