Stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysian KLCI

We examine the stock price and volume effects associated with changes in the composition of the FTSE Bursa Malaysia Kuala Lumpur Composite Index (KLCI), over the time period of 2005–2012. We find evidence to support the price pressure hypothesis for both additions to and deletions from the KLCI. This is because significant stock price and trading volume effects in the pre index revision period are entirely reversed after the announcement of the news. Our empirical findings can be explained by the market microstructure literature. Significant changes in liquidity cause trading volume and stock prices to reverse back to their original level before the index revisions took place.

Estudo exploratório sobre os motivos que levam as empresas a recomprarem suas próprias ações

Através de estudo de evento este trabalho analisa o impacto provocado pelo anúncio de recompra de ações sobre os seus próprios preços, utilizando como referência, as empresas que anunciaram aquisição de ações de sua emissão, através de publicação de fato relevante na Comissão de Valores Mobiliário (CVM), nos exercícios de 2003 a 2009. O estudo pressupõe eficiência de mercado na sua forma semi-forte e identifica retorno anormal, estatisticamente significativo na data um do evento, ou seja, um dia após o anúncio. Os retornos acumulados de três dias são regredidos contra dados da recompra e os resultados reforçam a hipótese de sinalização, já sugerida pela análise do gráfico do retorno anormal acumulado, com os retornos indicando alta decorrente de pressão de preços. Os modelos de regressão utilizados, incluindo variáveis contábeis associadas a outras hipóteses explicativas, não encontram resultados significativos que dêem suporte a outras possíveis motivações propostas na literatura acadêmica.

Trading the changes of stock market index composition: Evidence from European markets

This paper studies the changes in European stock market indexes composition from 1995 to 2015. It was found that there are mixed price effects producing abnormal returns around the effective replacement of added and deleted stocks. The price pressure hypothesis seems to hold for added stocks in some indexes but not for deleted stocks as there is not a clear inversion of behaviour after the replacement. Finally, the building and back testing of a trading strategy aiming to capture some of those abnormal returns shows it yields a Sharpe Ratio of 1.4 and generates an annualised alpha of 11%.

Stock market reactions to changes in the FTSE SmallCap and S&P/TSX SmallCap indices

Stocks added to (deleted from) the Russell 2000 and the S&P 600 indexes experience positive (negative) abnormal returns following the announcement. However, researchers disagree on whether these abnormal returns are permanent or temporary and offer competing explanations. I address this controversy by examining market reactions for firms that are added to or deleted from the FTSE Small Cap index (the main testing sample) and the S&P/TSX SmallCap index (the comparison sample). For the main testing sample, all stocks except pure additions, experience a permanent price change that is accompanied by a permanent change in liquidity. However, for the comparison sample, abnormal returns over the announcement period fully reverted within 30 days. In further examination of stock liquidity for the main testing sample, sample stocks experience permanent change in liquidity. Taken together, the observed results support the price pressure and liquidity hypotheses.

Market reactions to changes in the Nasdaq-100 Index membership

We examine stock market reactions around the Nasdaq-100 Index reconstitutions. We find a symmetric and transitory price response accompanied by a significant increase in trading volume on the effective date. Firms added to the Nasdaq-100 Index experience significant increases in institutional ownership, the number of market makers, and the number of shareholders. In contrast, firms removed from the index show significant decreases in the number of institutional shareholders. Additions to the Nasdaq-100 Index also show significant increases in four liquidity measures, whereas deletions demonstrate significant decreases in two liquidity measures. These changes in liquidity are related to the abnormal return on the announcement day. Taken together, the results suggest support for the price pressure, liquidity, and investor awareness hypotheses.

The dynamics of asset prices and transaction activity in illiquid markets: the case of private commercial real estate

This paper investigates the relationship between capital flows, turnover and returns for the UK private real estate market. We examine a number of possible implication of capital flows and turnover on capital returns testing for evidence of a price pressure effect, ‘return chasing’ behaviour and information revelation. The main tool of analysis is a panel vector autoregressive (VAR) regression model in which institutional capital flows, turnover and returns are specified as endogenous variables in a two equation system in which we also control for macro-economic variables. Data on flows, turnover and returns are obtained for the 10 market segments covering the main UK commercial real estate sectors. Our results do not support the widely-held belief among practitioners that capital flows have a ‘price pressure’ effect. Although there is some evidence of return chasing behaviour, the short timescales involved suggest this finding may be due to delayed recording of flows relative to returns given the difficulties of market entry. We find a significant positive relationship between lagged turnover and contemporaneous capital returns, suggesting that asset turnover provides pricing information.

The performance effects of composition changes on sector specific stock indices: The case of European listed real estate

This paper examines the impact of changes in the composition of real estate stock indices, considering companies both joining and leaving the indices. Stocks that are newly included not only see a short-term increase in their share price, but trading volumes increase in a permanent fashion following the event. This highlights the importance of indices in not only a benchmarking context but also in enhancing investor awareness and aiding liquidity. By contrast, as anticipated, the share prices of firms removed from indices fall around the time of the index change. The fact that the changes in share prices, either upwards for index inclusions or downwards for deletions, are generally not reversed, would indicate that the movements are not purely due to price pressure, but rather are more consistent with the information content hypothesis. There is no evidence, however, that index changes significantly affect the volatility of price changes or their operating performances as measured by their earnings per share.

Anticipatory effects in the FTSE 100 index revisions

This paper examines the price impact of trading due to expected changes in the FTSE 100 index composition. We focus on the latter index because it employs publicly-known objective criteria to determine membership and hence it provides a natural context to investigate anticipatory trading e ects. We propose a panel-regression event study that backs out these anticipatory e ects by looking at the price impact of the ex-ante proba-bility of changing index membership status. Our ndings reveal that anticipative trading explains about 40% and 23% of the cumulative abnormal returns of additions and deletions, respectively. We con rm these in-sample results out of sample by tracking the performance of a trading strategy that relies on the addition/deletion probability estimates. The perfor-mance is indeed very promising in that it entails an average daily excess return of 11 basis points over the FTSE 100 index.

Microstructures, mechanical properties and corrosion behavior of high-pressure die-cast Mg-4Al-0.4Mn-xPr (x=1, 2, 4, 6) alloys

Mg-4Al-0.4Mn-xPr (x = 1, 2, 4 and 6 wt.%) magnesium alloys were prepared successfully by the high-pressure die-casting technique. The microstructures, mechanical properties, corrosion behavior as well as strengthening mechanism were investigated. The die-cast alloys were mainly composed of small equiaxed dendrites and the matrix. The fine rigid skin region was related to the high cooling rate and the aggregation of alloying elements, such as Pr. With the Pr content increasing, the alpha-Mg grain sizes were reduced gradually and the amounts of the Al2Pr phase and All, Pr-3 phase which mainly concentrated along the grain boundaries were increased and the relative volume ratio of above two phases was changed. Considering the performance-price ratio, the Pr content added around 4 wt.% was suitable to obtain the optimal mechanical properties which can keep well until 200 degrees C as well as good corrosion resistance. The outstanding mechanical properties were mainly attributed to the rigid casting surface layer, grain refinement, grain boundary strengthening obtained by an amount of precipitates as well as solid solution strengthening.

Role of social pressure as a key contributor of materialism and related status consumption

“At resale stores I have seen brand new clothes with original price tag still hanging from the sleeve. Some children have so many toys that they stay frustrated, not knowing which one to pick up for their next amusement. Presumably sensible adults trade in perfectly good cars just to have something shinier and newer. Didn’t us once live productive normal lives, without all these gadgets” [Cunningham (2005)]. During late eighties, nearly forty four percent of the participants, who took part in a consumer survey conducted in the US, responded positively to the question “My closets are filled with still 2 unopened items” [Faber and O’Guinn (1988)]. Reading such excerpts does not greatly surprise us anymore; as such reports have become common now. For many people shopping has moved beyond something that caters to their needs and wants and has become a hobby [Cunningham (2005)], an activity that they engage in to satisfy their hedonistic or pleasure-seeking goals [Ramnathan and Menon(2006), O’Cass and McEween (2004), Faber and O’Guinn (1989)]. Others look at their new possession as something that fills a void in their lives [Belk (1985), Diener et al. (1993)].

Association of vitamin D status with arterial blood pressure and hypertension risk: a mendelian randomisation study

BACKGROUND: Low plasma 25-hydroxyvitamin D (25[OH]D) concentration is associated with high arterial blood pressure and hypertension risk, but whether this association is causal is unknown. We used a mendelian randomisation approach to test whether 25(OH)D concentration is causally associated with blood pressure and hypertension risk. METHODS: In this mendelian randomisation study, we generated an allele score (25[OH]D synthesis score) based on variants of genes that affect 25(OH)D synthesis or substrate availability (CYP2R1 and DHCR7), which we used as a proxy for 25(OH)D concentration. We meta-analysed data for up to 108 173 individuals from 35 studies in the D-CarDia collaboration to investigate associations between the allele score and blood pressure measurements. We complemented these analyses with previously published summary statistics from the International Consortium on Blood Pressure (ICBP), the Cohorts for Heart and Aging Research in Genomic Epidemiology (CHARGE) consortium, and the Global Blood Pressure Genetics (Global BPGen) consortium. FINDINGS: In phenotypic analyses (up to n=49 363), increased 25(OH)D concentration was associated with decreased systolic blood pressure (β per 10% increase, -0·12 mm Hg, 95% CI -0·20 to -0·04; p=0·003) and reduced odds of hypertension (odds ratio [OR] 0·98, 95% CI 0·97-0·99; p=0·0003), but not with decreased diastolic blood pressure (β per 10% increase, -0·02 mm Hg, -0·08 to 0·03; p=0·37). In meta-analyses in which we combined data from D-CarDia and the ICBP (n=146 581, after exclusion of overlapping studies), each 25(OH)D-increasing allele of the synthesis score was associated with a change of -0·10 mm Hg in systolic blood pressure (-0·21 to -0·0001; p=0·0498) and a change of -0·08 mm Hg in diastolic blood pressure (-0·15 to -0·02; p=0·01). When D-CarDia and consortia data for hypertension were meta-analysed together (n=142 255), the synthesis score was associated with a reduced odds of hypertension (OR per allele, 0·98, 0·96-0·99; p=0·001). In instrumental variable analysis, each 10% increase in genetically instrumented 25(OH)D concentration was associated with a change of -0·29 mm Hg in diastolic blood pressure (-0·52 to -0·07; p=0·01), a change of -0·37 mm Hg in systolic blood pressure (-0·73 to 0·003; p=0·052), and an 8·1% decreased odds of hypertension (OR 0·92, 0·87-0·97; p=0·002). INTERPRETATION: Increased plasma concentrations of 25(OH)D might reduce the risk of hypertension. This finding warrants further investigation in an independent, similarly powered study.

The partial oxidation of methane over Pd/Al2O3 catalyst nanoparticles studied in-situ by near ambient-pressure x-ray photoelectron spectroscopy

Near ambient-pressure X-ray photoelectron spectroscopy (NAP-XPS) is used to study the chemical state of methane oxidation catalysts in-situ. Al2O3{supported Pd catalysts are prepared with different particle sizes ranging from 4 nm to 10 nm. These catalysts were exposed to conditions similar to those used in the partial oxidation of methane (POM) to syn-gas and simultaneously monitored by NAP-XPS and mass spectrometry. NAP-XPS data show changes in the oxidation state of the palladium as the temperature in- creases, from metallic Pd0 to PdO, and back to Pd0. Mass spectrometry shows an increase in CO production whilst the Pd is in the oxide phase, and the metal is reduced back under presence of newly formed H2. A particle size effect is observed, such that CH4 conversion starts at lower temperatures with larger sized particles from 6 nm to 10 nm. We find that all nanoparticles begin CH4 conversion at lower temperatures than polycrystalline Pd foil.

Do European Union fines deter price-fixing? Bruegel Policy Brief 2013/04, May 2013

The issue: Anti-cartel enforcement is the least controversial of competition policy themes. Agreements to restrict competition such as price fixing or market sharing have obvious negative effects on welfare. Within the European Union, however, industry representatives have increasingly voiced concern that the European Commission applies a too-strict fining policy to enforce anti-cartel law, particularly since the introduction of new guidelines on fines in 2006. Fines are said to be too high, disproportionate and liable to introduce distortions into the market, ultimately leading to higher prices for consumers. It is often argued that more lenient approaches should be followed in crisis times. Policy challenge: High fines for cartel activity could entail costs for society and might be difficult to implement. Nevertheless, there is no case for reducing current levels of EU anti-cartel fines. Fine levels already take the economic crisis into account, and the net present value of fines might prove to be too low to discourage collusion. We estimate that fines might even be not high enough to offset the additional profits yielded by collusion. Fines should be complemented with other measures to increase deterrence, in particular personal sanctions targeting company officers who are responsible for leading the company to commit infringements. In the short term, pressure on decision makers could be increased by reducing the expected duration of investigations.

At any price: Russia is embarking on the construction of South Stream. OSW Commentary No. 98, 2012-12-07

Gazprom is determined to continue its efforts to build the South Stream gas pipeline regardless of the slump on the European gas market and the fact that there is sufficient capacity already in the existing transport infrastructure. The official inauguration of the maritime section of South Stream was held on 7 December this year, but the construction itself will commence in 2014. The agreements concluded so far, both intergovernmental and between corporations, are necessary for the launch of the construction of the new pipeline, but still do not guarantee that the project will be completed on time. First of all, some legal problems have yet to be resolved, such as the evaluation of the compliance of the planned actions with the ‘third energy package’ or the fact that ecological surveys required under European law need to be carried out. Secondly, given the present situation on the European gas market and medium-term forecasts, the high cost of implementation of this project and the maintenance expenses of existing pipelines – which are not being used to full capacity – the new project seems to be unfeasible. However, Gazprom’s determination in its efforts to build the pipeline proves that Russia is ready to take a high economic risk to maintain its dominant position on the European gas supply market; it will restrict the possibilities of alternative infrastructural projects being implemented (above all, the EU’s Southern Corridor) and use the construction of new pipelines as an instrument of political pressure on the present transit countries (especially Ukraine).