Trials, tricks and transparency: how disclosure rules affect clinical knowledge

Scandals of selective reporting of clinical trial results by pharmaceutical firms have underlined the need for more transparency in clinical trials. We provide a theoretical framework which reproduces incentives for selective reporting and yields three key implications concerning regulation. First, a compulsory clinical trial registry complemented through a voluntary clinical trial results database can implement full transparency (the existence of all trials as well as their results is known). Second, full transparency comes at a price. It has a deterrence effect on the incentives to conduct clinical trials, as it reduces the firms'gains from trials. Third, in principle, a voluntary clinical trial results database without a compulsory registry is a superior regulatory tool; but we provide some qualified support for additional compulsory registries when medical decision-makers cannot anticipate correctly the drug companies' decisions whether to conduct trials. Keywords: pharmaceutical firms, strategic information transmission, clinical trials, registries, results databases, scientific knowledge JEL classification: D72, I18, L15

A nonlinear threshold model for the dependence of extremes of stationary sequences

One of the main implications of the efficient market hypothesis (EMH) is that expected future returns on financial assets are not predictable if investors are risk neutral. In this paper we argue that financial time series offer more information than that this hypothesis seems to supply. In particular we postulate that runs of very large returns can be predictable for small time periods. In order to prove this we propose a TAR(3,1)-GARCH(1,1) model that is able to describe two different types of extreme events: a first type generated by large uncertainty regimes where runs of extremes are not predictable and a second type where extremes come from isolated dread/joy events. This model is new in the literature in nonlinear processes. Its novelty resides on two features of the model that make it different from previous TAR methodologies. The regimes are motivated by the occurrence of extreme values and the threshold variable is defined by the shock affecting the process in the preceding period. In this way this model is able to uncover dependence and clustering of extremes in high as well as in low volatility periods. This model is tested with data from General Motors stocks prices corresponding to two crises that had a substantial impact in financial markets worldwide; the Black Monday of October 1987 and September 11th, 2001. By analyzing the periods around these crises we find evidence of statistical significance of our model and thereby of predictability of extremes for September 11th but not for Black Monday. These findings support the hypotheses of a big negative event producing runs of negative returns in the first case, and of the burst of a worldwide stock market bubble in the second example. JEL classification: C12; C15; C22; C51 Keywords and Phrases: asymmetries, crises, extreme values, hypothesis testing, leverage effect, nonlinearities, threshold models

Market effects of foreign exchange coordinated intervention

In this article we develop a theoretical microstructure model of coordinated central bank intervention based on asymmetric information. We study the economic implications of coordination on some measures of market quality and show that the model predicts higher volatility and more significant exchange rate changes when central banks coordinate compared to when they intervene unilaterally. Both these predictions are in line with empirical evidence. Keywords: coordinated foreign exchange intervention, market microstructure. JEL Classification: D82, E58, F31, G14

All-pay auction equilibria in contests

We analyze (non-deterministic) contests with anonymous contest success functions. There is no restriction on the number of contestants or on their valuations for the prize. We provide intuitive and easily verifiable conditions for the existence of an equilibrium with properties similar to the one of the (deterministic) all-pay auction. Since these conditions are fulfilled for a wide array of situations, the predictions of this equilibrium are very robust to the specific details of the contest. An application of this result contributes to fill a gap in the analysis of the popular Tullock rent- seeking game because it characterizes properties of an equilibrium for increasing returns to scale larger than two, for any number of contestants and in contests with or without a common value. Keywords: (non-) deterministic contest, all-pay auction, contest success functions. JEL Classification Numbers: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D44 (Auctions).

Social chromosome variants differentially affect queen determination and the survival of workers in the fire ant Solenopsis invicta.

Intraspecific variation in social organization is common, yet the underlying causes are rarely known. An exception is the fire ant Solenopsis invicta in which the existence of two distinct forms of social colony organization is under the control of the two variants of a pair of social chromosomes, SB and Sb. Colonies containing exclusively SB/SB workers accept only one single queen and she must be SB/SB. By contrast, when colonies contain more than 10% of SB/Sb workers, they accept several queens but only SB/Sb queens. The variants of the social chromosome are associated with several additional important phenotypic differences, including the size, fecundity and dispersal strategies of queens, aggressiveness of workers, and sperm count in males. However, little is known about whether social chromosome variants affect fitness in other life stages. Here, we perform experiments to determine whether differential selection occurs during development and in adult workers. We find evidence that the Sb variant of the social chromosome increases the likelihood of female brood to develop into queens and that adult SB/Sb workers, the workers that cull SB/SB queens, are overrepresented in comparison to SB/SB workers. This demonstrates that supergenes such as the social chromosome can have complex effects on phenotypes at various stages of development.

Co-movements between US and UK stock prices: the roles of macroeconomic information and time-series varying conditional correlations

This paper provides evidence on the sources of co-movement in monthly US and UK stock price movements by investigating the role of macroeconomic and financial variables in a bivariate system with time-varying conditional correlations. Crosscountry communality in response is uncovered, with changes in the US Federal Funds rate, UK bond yields and oil prices having similar negative effects in both markets. Other variables also play a role, especially for the UK market. These effects do not, however, explain the marked increase in cross-market correlations observed from around 2000, which we attribute to time variation in the correlations of shocks to these markets. A regime-switching smooth transition model captures this time variation well and shows the correlations increase dramatically around 1999-2000. JEL classifications: C32, C51, G15 Keywords: international stock returns, DCC-GARCH model, smooth transition conditional correlation GARCH model, model evaluation.

A simple genetic basis for complex social behaviour mediates widespread gene expression differences.

A remarkable social polymorphism is controlled by a single Mendelian factor in the fire ant Solenopsis invicta. A genomic element marked by the gene Gp-9 determines whether workers tolerate one or many fertile queens in their colony. Gp-9 was recently shown to be part of a supergene with two nonrecombining variants, SB and Sb. SB/SB and SB/Sb queens differ in how they initiate new colonies, and in many physiological traits, for example odour and maturation rate. To understand how a single genetic element can affect all these traits, we used a microarray to compare gene expression patterns between SB/SB and SB/Sb queens of three different age classes: 1-day-old unmated queens, 11-day-old unmated queens and mated, fully reproductive queens collected from mature field colonies. The number of genes that were differentially expressed between SB/SB and SB/Sb queens of the same age class was smallest in 1-day-old queens, maximal in 11-day-old queens and intermediate in reproductive queens. Gene ontology analysis showed that SB/SB queens upregulate reproductive genes faster than SB/Sb queens. For all age classes, genes inside the supergene were overrepresented among the differentially expressed genes. Consistent with the hypothesized greater number of transposons in the Sb supergene, 13 transposon genes were upregulated in SB/Sb queens. Viral genes were also upregulated in SB/Sb mature queens, consistent with the known greater parasite load in colonies headed by SB/Sb queens compared with colonies headed by SB/SB queens. Eighteen differentially expressed genes between reproductive queens were involved in chemical signalling. Our results suggest that many genes in the supergene are involved in regulating social organization and queen phenotypes in fire ants.

Innovation sources and productivity in Catalonian firms: a quantile regression analysis

This paper explores the effects of two main sources of innovation -intramural and external R&D- on the productivity level in a sample of 3,267 Catalonian firms. The data set used is based on the official innovation survey of Catalonia which was a part of the Spanish sample of CIS4, covering the years 2002-2004. We compare empirical results by applying usual OLS and quantile regression techniques both in manufacturing and services industries. In quantile regression, results suggest different patterns at both innovation sources as we move across conditional quantiles. The elasticity of intramural R&D activities on productivity decreased when we move up the high productivity levels both in manufacturing and services sectors, while the effects of external R&D rise in high-technology industries but are more ambiguous in low-technology and knowledge-intensive services. JEL codes: O300, C100, O140. Keywords: Innovation sources, R&D, Productivity, Quantile regression

Foundations for contest success functions

In the literature the outcome of contests is either interpreted as win probabilities or as shares of the prize. With this in mind, we examine two approaches to contest success functions. In the first we analyze the implications of contestants' incomplete information concerning the "type" of the contest administrator. While in the case of two contestants this approach can rationalize prominent contest success functions, we show that it runs into difficulties when there are more agents. Our second approach interprets contest success functions as sharing rules and establishes a connection to bargaining and claims problems which is independent of the number of contestants. Both approaches provide foundations for popular contest success functions and guidelines for the definition of new ones. Keywords: Endogenous Contests, Contest Success Function. JEL Classification: C72 (Noncooperative Games), D72 (Economic Models of Political Processes: Rent-Seeking, Elections), D74 (Conflict; Conflict Resolution; Alliances).

Molecular variation at a candidate gene implicated in the regulation of fire ant social behavior

The fire ant Solenopsis invicta and its close relatives display an important social polymorphism involving differences in colony queen number. Colonies are headed by either a single reproductive queen (monogyne form) or multiple queens (polygyne form). This variation in social organization is associated with variation at the gene Gp-9, with monogyne colonies harboring only B-like allelic variants and polygyne colonies always containing b-like variants as well. We describe naturally occurring variation at Gp-9 in fire ants based on 185 full-length sequences, 136 of which were obtained from S. invicta collected over much of its native range. While there is little overall differentiation between most of the numerous alleles observed, a surprising amount is found in the coding regions of the gene, with such substitutions usually causing amino acid replacements. This elevated coding-region variation may result from a lack of negative selection acting to constrain amino acid replacements over much of the protein, different mutation rates or biases in coding and non-coding sequences, negative selection acting with greater strength on non-coding than coding regions, and/or positive selection acting on the protein. Formal selection analyses provide evidence that the latter force played an important role in the basal b-like lineages coincident with the emergence of polygyny. While our data set reveals considerable paraphyly and polyphyly of S. invicta sequences with respect to those of other fire ant species, the b-like alleles of the socially polymorphic species are monophyletic. An expanded analysis of colonies containing alleles of this clade confirmed the invariant link between their presence and expression of polygyny. Finally, our discovery of several unique alleles bearing various combinations of b-like and B-like codons allows us to conclude that no single b-like residue is completely predictive of polygyne behavior and, thus, potentially causally involved in its expression. Rather, all three typical b-like residues appear to be necessary.

Ant genomics sheds light on the molecular regulation of social organization.

Ants are powerful model systems for the study of cooperation and sociality. In this review, we discuss how recent advances in ant genomics have contributed to our understanding of the evolution and organization of insect societies at the molecular level.

Pupal cocoons affect sanitary brood care and limit fungal infections in ant colonies.

BACKGROUND: The brood of ants and other social insects is highly susceptible to pathogens, particularly those that penetrate the soft larval and pupal cuticle. We here test whether the presence of a pupal cocoon, which occurs in some ant species but not in others, affects the sanitary brood care and fungal infection patterns after exposure to the entomopathogenic fungus Metarhizium brunneum. We use a) a comparative approach analysing four species with either naked or cocooned pupae and b) a within-species analysis of a single ant species, in which both pupal types co-exist in the same colony. RESULTS: We found that the presence of a cocoon did not compromise fungal pathogen detection by the ants and that species with cocooned pupae increased brood grooming after pathogen exposure. All tested ant species further removed brood from their nests, which was predominantly expressed towards larvae and naked pupae treated with the live fungal pathogen. In contrast, cocooned pupae exposed to live fungus were not removed at higher rates than cocooned pupae exposed to dead fungus or a sham control. Consistent with this, exposure to the live fungus caused high numbers of infections and fungal outgrowth in larvae and naked pupae, but not in cocooned pupae. Moreover, the ants consistently removed the brood prior to fungal outgrowth, ensuring a clean brood chamber. CONCLUSION: Our study suggests that the pupal cocoon has a protective effect against fungal infection, causing an adaptive change in sanitary behaviours by the ants. It further demonstrates that brood removal-originally described for honeybees as "hygienic behaviour"-is a widespread sanitary behaviour in ants, which likely has important implications on disease dynamics in social insect colonies.

Stock market integration between new EU member states and the Euro-zone

This paper measures the degree in stock market integration between five Eastern European countries and the Euro-zone. A potentially gradual transition in correlations is accommodated by smooth transition conditional correlation models. We find that the correlation between stock markets has increased from 2001 to 2007. In particular, the Czech and Polish markets show a higher correlation to the Euro-zone. However, this is not a broad-based phenomenon across Eastern Europe. We also find that the increase in correlations is not a reflection of a world-wide phenomenon of financial integration but appears to be specific to the European market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; New EU Members.

The Complete Information First. Price Auction or the Importance of Being Indivisible

Abstract Despite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the first-price sealed-bid auction mechanism under complete information. This paper aims to remedy that omission. We show that the existence of pure strategy undominated Nash equilibria requires that the bidding space is not "too divisible" (that is, a continuum). In fact, when bids must form part of a finite grid there always exists a "high price equilibrium". However, there might also be "low price equilibria" and when the bidding space is very restrictive the revenue obtained in these "low price equilibria" might be very low. We discuss the properties of the equilibria and an application of auction theoretical thinking in which "low price equilibria" may be relevant. Keywords: First-price auctions, undominated Nash equilibria. JEL Classification Numbers: C72 (Noncooperative Games), D44 (Auctions).

Progress Towards to Equity Market Integration in Eastern Europe

The advent of the European Union has decreased the diversification benefits available from country based equity market indices in the region. This paper measures the increase in stock integration between the three largest new EU members (Hungary, the Czech Republic and Poland who joined in May 2004) and the Euro-zone. A potentially gradual transition in correlations is accommodated in a single VAR model by embedding smooth transition conditional correlation models with fat tails, spillovers, volatility clustering, and asymmetric volatility effects. At the country market index level all three Eastern European markets show a considerable increase in correlations in 2006. At the industry level the dates and transition periods for the correlations differ, and the correlations are lower although also increasing. The results show that sectoral indices in Eastern European markets may provide larger diversification opportunities than the aggregate market. JEL classifications: C32; C51; F36; G15 Keywords: Multivariate GARCH; Smooth Transition Conditional Correlation; Stock Return Comovement; Sectoral correlations; New EU Members