High or low initial setting price?: Initial setting price as prediction of intention to bid in on line auctions

A Work Project, presented as part of the requirements for the Award of a Masters Degree in Management from the NOVA – School of Business and Economics

Equity offerings, stock price crash risk, and the impact of securities regulation: international evidence

We examine whether earnings manipulation around seasoned equity offerings (SEOs) is associated with an increase in the likelihood of a stock price crash post-issue and test whether the enactment of securities regulations attenuate the relation between SEOs and crash risk. Empirical evidence documents that managerial tendency to conceal bad news increases the likelihood of a stock price crash (Jin and Myers, 2006; Hutton, Marcus, and Tehranian, 2009). We test this hypothesis using a sample of firms from 29 EU countries that enacted the Market Abuse Directive (MAD). Consistent with our hypothesis, we find that equity issuers that engage in earnings management experience a significant increase in crash risk post-SEO relative to control groups of non-issuers; this effect is stronger for equity issuers with poor information environments. In addition, our findings show a significant decline in crash risk post-issue after the enactment of MAD that is stronger for firms that actively manage earnings. This decline in post-issue crash risk is more effective in countries with high ex-ante institutional quality and enforcement. These results suggest that the implementation of MAD helps to mitigate managers’ ability to manipulate earnings around SEOs.

Effects of competition over quality-adjusted price indexes: an application to the Spanish automobile market

Using a newly constructed data set, we calculate quality-adjusted price indexes after estimating hedonic price regressions from 1988 to 2004 in the Spanish automobile market. The increasing competition was favoured by the removal of trade restrictions and the special plans for the renewal of the Spanish automobile fleet. We find that the increasing degree of competition during those years led to an overall drop in automobile prices by 20 percent which implied considerable consumer gains thanks to higher market efficiency. Additionally, our results indicate that loyalty relevance and discrepancies in automobile reliability declined during those years. This is captured.

Price level convergence, purchasing power parity and multiple structural breaks: an application to US cities

This article provides a fresh methodological and empirical approach for assessing price level convergence and its relation to purchasing power parity (PPP) using annual price data for seventeen US cities. We suggest a new procedure that can handle a wide range of PPP concepts in the presence of multiple structural breaks using all possible pairs of real exchange rates. To deal with cross-sectional dependence, we use both cross-sectional demeaned data and a parametric bootstrap approach. In general, we find more evidence for stationarity when the parity restriction is not imposed, while imposing parity restriction provides leads toward the rejection of the panel stationar- ity. Our results can be embedded on the view of the Balassa-Samuelson approach, but where the slope of the time trend is allowed to change in the long-run. The median half-life point estimate are found to be lower than the consensus view regardless of the parity restriction.

A computable general equilibrium analysis of the relative price sensitivity required to induce rebound effects in response to an improvement in energy efficiency in the UK economy

In recent years there has been extensive debate in the energy economics and policy literature on the likely impacts of improvements in energy efficiency. This debate has focussed on the notion of rebound effects. Rebound effects occur when improvements in energy efficiency actually stimulate the direct and indirect demand for energy in production and/or consumption. This phenomenon occurs through the impact of the increased efficiency on the effective, or implicit, price of energy. If demand is stimulated in this way, the anticipated reduction in energy use, and the consequent environmental benefits, will be partially or possibly even more than wholly (in the case of ‘backfire’ effects) offset. A recent report published by the UK House of Lords identifies rebound effects as a plausible explanation as to why recent improvements in energy efficiency in the UK have not translated to reductions in energy demand at the macroeconomic level, but calls for empirical investigation of the factors that govern the extent of such effects. Undoubtedly the single most important conclusion of recent analysis in the UK, led by the UK Energy Research Centre (UKERC) is that the extent of rebound and backfire effects is always and everywhere an empirical issue. It is simply not possible to determine the degree of rebound and backfire from theoretical considerations alone, notwithstanding the claims of some contributors to the debate. In particular, theoretical analysis cannot rule out backfire. Nor, strictly, can theoretical considerations alone rule out the other limiting case, of zero rebound, that a narrow engineering approach would imply. In this paper we use a computable general equilibrium (CGE) framework to investigate the conditions under which rebound effects may occur in the Scottish regional and UK national economies. Previous work has suggested that rebound effects will occur even where key elasticities of substitution in production are set close to zero. Here, we carry out a systematic sensitivity analysis, where we gradually introduce relative price sensitivity into the system, focusing in particular on elasticities of substitution in production and trade parameters, in order to determine conditions under which rebound effects become a likely outcome. We find that, while there is positive pressure for rebound effects even where (direct and indirect) demand for energy is very price inelastic, this may be partially or wholly offset by negative income and disinvestment effects, which also occur in response to falling energy prices.

What if there was a stronger pharmaceutical price competition in Spain? When regulation has a similar effect to collusion

This paper examines statins competition in the Spanish pharmaceutical market, where prices are highly regulated, and simulates a situation in which there is unrestricted price competition. A nested logit demand model is estimated with a panel of monthly data for pharmaceuticals prescribed from 1997 to 2005. The simulation indicates that the regulation of prices is similar in its effects to cooperation among producers, since the regulated prices are close to those that would be observed in a scenario of perfect collusion. Freedom to set prices and a regulatory framework with appropriate incentives would result in a general reduction in prices and may make the current veiled competition in the form of discounts to pharmacists become more visible. The decrease in prices would be partially offset by an increase in consumption but the net effect would be an overall decrease in expenditure. The counterfactual set-up would also lead to important changes in the market shares of both manufacturers and active ingredients, and a reversal of generic drugs. Therefore, pro-competitive regulation would be welfare-enhancing but would imply winners and losers.

Assessing the Precision of Compositional Data in a Stratified Double Stage Cluster Sample: Application to the Swiss Earnings Structure Survey

Precision of released figures is not only an important quality feature of official statistics,it is also essential for a good understanding of the data. In this paper we show a casestudy of how precision could be conveyed if the multivariate nature of data has to betaken into account. In the official release of the Swiss earnings structure survey, the totalsalary is broken down into several wage components. We follow Aitchison's approachfor the analysis of compositional data, which is based on logratios of components. Wefirst present diferent multivariate analyses of the compositional data whereby the wagecomponents are broken down by economic activity classes. Then we propose a numberof ways to assess precision

How to Measure Scope Variables when no Metrics Exist : Application to Landscape Quality Measurement and Hedonic Price Evaluation

Landscape is an example of a non-market good where no metrics exist to measure its quality. The paper proposes an original methodology to nevertheless estimate scope variables in those circumstances, allowing then to better test if people's willingnesstopay for such good is sensitive to the scope. The methodology is based on techniques developed in the context of multicriteria decision analysis. It is applied to assess the quality of the landscape of several Swiss alpine resorts. This assessment is then used as an explanatory variable in a hedonic price function to explain the rent of apartments and to derive an implicit price of the landscape quality.

The impotence of price controls: failed attempts to constrain pharmaceutical expenditures in Greece.

BACKGROUND: While the prices of pharmaceuticals are relatively low in Greece, expenditure on them is growing more rapidly than almost anywhere else in the European Union. OBJECTIVE: To describe and explain the rise in drug expenditures through decomposition of the increase into the contribution of changes in prices, in volumes and a product-mix effect. METHODS: The decomposition of the growth in pharmaceutical expenditures in Greece over the period 1991-2006 was conducted using data from the largest social insurance fund (IKA) that covers more than 50% of the population. RESULTS: Real drug spending increased by 285%, despite a 58% decrease in the relative price of pharmaceuticals. The increase in expenditure is mainly attributable to a switch to more innovative, but more expensive, pharmaceuticals, indicated by a product-mix residual of 493% in the decomposition. A rising volume of drugs also plays a role, and this is due to an increase in the number of prescriptions issued per doctor visit, rather than an increase in the number of visits or the population size. CONCLUSIONS: Rising pharmaceutical expenditures are strongly determined by physicians' prescribing behaviour, which is not subject to any monitoring and for which there are no incentives to be cost conscious.

Earnings management and audit adjustments: An empirical study of IBEX 35 constituents

Doubts about the reliability of a company's qualitative financial disclosure increase market participant expectations from the auditor's report. The auditing process is supposed to serve as a monitoring device that reduces management incentives to manipulate reported earnings. Empirical research confirms that it could be an efficient device under some circumstancesand recognizes that our estimates of the informativeness of audit reports are unavoidably biased (e.g., because of a client's anticipation of the auditing process). This empirical study supports the significant role of auditors in the financial market, in particular in the prevention of earnings management practice. We focus on earnings misstatements, which auditors correct with anadjustment, using a sample of past and current constituents of the benchmark market index in Spain, IBEX 35, and manually collected audit adjustments reported over the 1997-2004 period (42 companies, 336 annual reports, 75 earnings misstatements). Our findings confirm that companies more often overstate than understate their earnings. An investor may foresee earningsmisreporting, as manipulators have a similar profile (e.g., more leveraged and with lower sales). However, he may receive valuable information from the audit adjustment on the size of earnings misstatement, which can be significantly large (i.e., material in almost all cases). We suggest that the magnitude of an audit adjustment depends, other things constant, on annual revenues and free cash levels. We also examine how the audit adjustment relates to the observed market price, trading volume and stock returns. Our findings are that earnings manipulators have a lower price and larger trading volume compared to their rivals. Their returns are positively associated with the magnitude of earnings misreporting, which is not consistent with the possible pricing of audit information.

Des services adaptés aux adolescents, à quel prix. [What services do we adapt to adolescents and at what price?].

http://rms.medhyg.ch/numero-253-page-1227.htm

An overlapping generations approach to price policies in privatehealthcare insurance. The Catalan case

We analyze premium policies and price dispersion among private healthcare insurance firms from an overlapping-generations model. The model shows that firms that apply equal premium to all policyholders and firms that set premiums according to the risk of insured can coexist in the short run, whereas coexistence is unlikely in the long run because it requires the coincidence of economic growth and interest rates. We find support for the model’s results in the Catalan health insurance industry. Keywords: Economic theory, price policies, health insurance, health economics, overlapping-generations. JEL Classifications: I11 / L11 / L23

Price differences between domestic and international air markets : an empirical application to routes from Gran Canaria

In this paper we examine whether airline prices on national routes are higher than those charged on international routes. Drawing on a database prepared specifically for this study, we estimate a pricing equation for all routes originating from Gran Canaria, Canary Islands, Spain; differentiating between national and international routes. A key difference between these two route types is that island residents benefit from discounts on domestic flights. When controlling for variables related to airline characteristics, market structure and demand, we find that national passengers who are non-residents on the islands are paying higher prices than international passengers.