Discretionary-based disclosure: evidence from the Brazilian market

The primary objective of this paper is to identify the factors that explain Brazilian companies level of voluntary disclosure. Underpinning this work is the Discretionary-based Disclosure theory. The sample is composed of the top 100 largest non-financial companies listed in the Bolsa de Valores de São Paulo (Brazilian Securities, Commodities, and Futures exchange - BOVESPA). Information was gathered from Financial Statements for the years ending in 2006, 2007, and 2008, with the use of content analysis. A disclosure framework based on 27 studies from these years was created, with a total of 92 voluntary items divided into two dimensions: economic (43) and socio-environmental (49). Based on the existing literature, a total of 12 hypotheses were elaborated and tested using a panel data approach. Results evidence that: (a) Sector and Origin of Control are statistically significant in all three models tested: economic, socio-environmental, and total; (b) Profitability is relevant in the economic model and in the total model; (c) Tobin s Q is relevant in the socio-environmental model and in the total disclosure model; (d) Leverage and Auditing Firm are only relevant in the economic disclosure model; (e) Size, Governance, Stock Issuing, Growth Opportunities and Concentration of Control are not statistically significant in any of the three models.

The relationship between implied and realized volatility : evidence from the Australian stock index option market

This paper examines the relationship between the volatility implied in option prices and the subsequently realized volatility by using the S&P/ASX 200 index options (XJO) traded on the Australian Stock Exchange (ASX) during a period of 5 years. Unlike stock index options such as the S&P 100 index options in the US market, the S&P/ASX 200 index options are traded infrequently and in low volumes, and have a long maturity cycle. Thus an errors-in-variables problem for measurement of implied volatility is more likely to exist. After accounting for this problem by instrumental variable method, it is found that both call and put implied volatilities are superior to historical volatility in forecasting future realized volatility. Moreover, implied call volatility is nearly an unbiased forecast of future volatility.

Executive Stock Options: Exercise Policy and Market Reaction

In this paper I investigate the exercise policy, and the market reaction to that, of the executive stock option holders in Finland. The empirical tests are conducted with aggregated firm level data from 34 firms and 41 stock option programs. I find some evidence of an inverse relation between the exercise intensity of the options holders and the future abnormal return of the company share price. This finding is supported by the view that information about future company prospect seems to be the only theoretical attribute that could delay the exercise of the options. Moreover, a high concentration of exercises in the beginning of the exercise window is predicted and the market is expected to react to deviations from this. The empirical findings however show that the market does not react homogenously to the information revealed by the late exercises.

Much Ado About Nothing: The Limitation of Liability and the Market for 19th century Irish Bank Stock

Abstract Limited liability is widely believed to be a prerequisite for the emergence of an active and liquid securities market because the transactions costs associated with trading ownership of unlimited liability firms are viewed as prohibitive. In this article, we examine the trading of shares in an Irish bank, which limited its liability in 1883. Using this bank’s archives, we assemble a time series of trading data, which we test for structural breaks. Our results suggest that the move to limited liability had a negligible impact upon the trading of this bank’s shares.

Brazilian savanna forest : conservation, medicinal reservoir and bioprospecting

This study aimed to analyse the Brazilian savanna forest from a Legal Reserve (LR) area from a perspective of conservation, reservoir of organic carbon and medicinal biomass for a prospective use of native medicinal plants. An ethnobotanical and ethnopharmacological survey was carried out close to a community settled in the rural area in the south of Tocantins, being selected 9 of the most cited species (cajuí- Anacardium othonianum; inharé-Brosimum gaudichaudii; jatobá-Hymenaeae courbaril; jenipapo-Genipa americana, aroeira-Myracrodruon urundeuva; negramina-Siparuna guianensis; barbatimão- Stryphnodendron obovatum; assa peixe-Vernonia brasiliana, embaúba-Cecropia pachystachya). Crude foliar extracts were subjected to a preliminary phytochemical prospection and triage of secondary metabolites with antimicrobial activity of potential interest in health and familiar agriculture. Phenolic compounds, terpenes and flavonoids were detected in the extracts of most species, which suggests the presence of antimicrobial, antioxidant and anti-insect activities. It was evident the need to better know the LR as a reservoir of medicinal biomass in an area under ecological tension where 35% (610ha) of the property is LR and should be protected by law. Therefore, a forest inventory of live woody species was performed using the allometric or indirect method. This identified a rare remnant of Semidecidual Seasonal Forest amidst the largest world savannah, the Cerrado biome. An analysis of the forest average productivity per basal area (m².ha), aerial live biomass (ton.ha-1) and carbon stock was carried out. The forest fragment was considered relatively rich in species and diversity, although showing signs of disturbance and dominance by a few species. Its horizontal structure suggests biotic regeneration conditions. It is an important reservoir of medicinal plants. Of the families (57.5%) presenting medicinal species, 19 from a total of 33 are represented in the area and contain 44% (27) of the total species (61) and 63% (432) of the total individuals catalogued. Medicinal species have ecological importance for the equilibrium of the local flora and represent 80% of the 10 species with higher Importance Value Index (IVI): Tetragastris altissima, Chrysophyllum marginatum, Oenocarpus distichus, Sclerolobium paniculatum, Simarouba versicolor, Alibertia macrophylla, Siparuna guianensis, Maprounea guianensis, Licania parvifolia e Physocalymma scaberrimum. Medicinal productivity was high for this type of phytophysionomy: 183,2 ton. ha-1 of biomass and 91,51 ton. ha-1 of carbon representing 66% of the total biomass and carbon of this Cerrado forest. From this stage S. guianensis (Siparunaceae) was selected for performing bioassays in order to verify its biological activity against microorganisms of health and agricultural relevance. This is a native aromatic medicinal plant recommended as priority for conservation, with local popular medicinal validation and availability of medicinal feedstock (3300 Kg.ha-1), with the foliar fraction giving 38Kg/ha of crude extract and 5L/ha of essential oil. Foliar crude extracts and essential oil were obtained and tested in vitro using a disk diffusion bioassay. Different concentrations of these natural products were tested against gram-positive bacteria (Staphylococcus aureus ATCC 29213), gram-negative bacteria (Escherichia coli ATCC 25922 and ATCC 35218; Pseudomonas aeruginosa ATCC 10145) and fungi (Candida albicans ATCC 6258 e Fusarium oxysporum). The essential oil inhibited the growth of S. aureus in its crude concentration (380μg.mL-1), as well as diluted to half (190μg.mL-1) and a quarter strength (95μg.mL-1). It’s likely that such action is due to sesquiterpenes major components, such as bisabolol and bisabolene (10.35%), measured by gas chromatography (GC-MS, GC-FID). Extracts did not exhibit any antimicrobial activity against the microorganisms tested. The native medicinal plants prospective market is an alternative that favours the conservation of biodiversity while generating benefits for the development of sustainable family productive activities within local ecosystems instead of the current inappropriate uses. This strengthens conservation policies of Legal Reserve in rural settlements and is in agreement with public policy on global warming and climate changes.

Market value of corruption

This paper studies the impact of the Brazilian anticorruption legislation, PL 6826/2010, on stock returns. I show that, around the law approval date, the greater the link between the corporate and political worlds, the worse is the companies’ performance. Companies awarded with public contracts in 2012 suffer more with the new legislation approval. Firms with above median contract values have 2.9% lower returns than its peers. The negative effect is more pronounced for bigger and more complex entities, associated with higher levels of Corporate Responsibility and Governance and not subject to the US FCPA.

Modeling Stock Order Flows and Learning Market-Making from Data

Stock markets employ specialized traders, market-makers, designed to provide liquidity and volume to the market by constantly supplying both supply and demand. In this paper, we demonstrate a novel method for modeling the market as a dynamic system and a reinforcement learning algorithm that learns profitable market-making strategies when run on this model. The sequence of buys and sells for a particular stock, the order flow, we model as an Input-Output Hidden Markov Model fit to historical data. When combined with the dynamics of the order book, this creates a highly non-linear and difficult dynamic system. Our reinforcement learning algorithm, based on likelihood ratios, is run on this partially-observable environment. We demonstrate learning results for two separate real stocks.

The role of food standards in international trade: evidence from Brazilian beef exports to the EU market

The study reviews the literature on global chain governance and food standards to allow for an assessment of Brazilian beef exports to the European Union. The empirical approach employed is based on company case studies. The results suggest that the Brazilian beef chain has little choice but to adapt to market changes as standards evolve. Costs of compliance for meeting international food standards reduce Brazil's comparative advantage. At the same time, changes in the nature of demand have created the need for a more integrated supply chain in order to enhance confidence in Brazil's beef production and processing abroad.

Predicting stock index volatility: can market volume help?

This paper explores a number of statistical models for predicting the daily stock return volatility of an aggregate of all stocks traded on the NYSE. An application of linear and non-linear Granger causality tests highlights evidence of bidirectional causality, although the relationship is stronger from volatility to volume than the other way around. The out-of-sample forecasting performance of various linear, GARCH, EGARCH, GJR and neural network models of volatility are evaluated and compared. The models are also augmented by the addition of a measure of lagged volume to form more general ex-ante forecasting models. The results indicate that augmenting models of volatility with measures of lagged volume leads only to very modest improvements, if any, in forecasting performance.

Barriers faced by the Brazilian business community to access the United States market system

Trade history between Brazil and the United States is long and complicated but it is only in recent years that the trade balance has become more equal in terms of both imports and exports. As Brazil continues to establish its position in the world economy and expand its export market it is only natural that it seeks to increase exports to its single largest trading partner, the United States, and maintain the market share already established. In order to achieve success in these regards Brazil must have a deep understanding of the American political economy system. Part of this entails understanding barriers that must be overcome by Brazilian businesses to access United States markets, particularly the access of certain products at the industry level.