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Price Declines (price + decline)
Kinds of Price Declines Selected AbstractsDemand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 1 2000James M. MacDonald Prices for seasonal food products fall at demand peaks. Price declines are not driven by falling agricultural input prices; indeed, farm to retail margins narrow sharply. I use electronic scanner data from a sample of US supermarkets to show that seasonal price declines are closely linked to market concentration, and are much larger in markets with several rivals than where a single brand dominates. Seasonal demand increases reduce the effective costs of informative advertising, and increased informative advertising by retailers and manufacturers in turn may allow for increased market information and greater price sensitivity on the part of buyers. [source] Underwriting and Calls of Convertible Bonds,DECISION SCIENCES, Issue 1 2000Arnold R. Cowan We model convertible bond calls under asymmetric information where, unlike Harris and Raviv (1985), we consider a nonzero call price and a call notice period. In the model, the use of underwriters conveys negative information. Consequently, the stock price decline is greater for underwritten calls than for nonunderwritten calls. Furthermore, underwritten calls are made earlier and when the conversion option is less deep in the money. Underwriting commissions and the stock price decline associated with a call are negatively related to the extent that the conversion option is in the money before the call. Empirical evidence in this paper and Singh, Cowan, and Nayar (1991) are consistent with the model's predictions. [source] Intraday Behavior of Stock Prices and Trades around Insider TradingFINANCIAL MANAGEMENT, Issue 1 2010A. Can Inci Our evidence indicates that insiders' trades provide significant new information to market participants and they are incorporated more fully in stock prices as compared to noninsiders' trades. We find that market professionals do not front-run insiders' trades. Both insiders' purchases and sales result in significant contemporaneous and subsequent price impact, while sales by large shareholders result in a contemporaneous stock price decline that is subsequently reversed. The arrival of insider purchases reverse the prevailing negative order imbalances from third party trades and lead to piggy-backing by market professionals resulting in subsequent market purchase orders as well as stock price increases. [source] Order imbalance and the dynamics of index and futures pricesTHE JOURNAL OF FUTURES MARKETS, Issue 12 2007Joseph K.W. Fung This study uses transaction records of index futures and index stocks, with bid/ask price quotes, to examine the impact of stock market order imbalance on the dynamic behavior of index futures and cash index prices. Spurious correlation in the index is purged by using an estimate of the "true" index with highly synchronous and active quotes of individual stocks. A smooth transition autoregressive error correction model is used to describe the nonlinear dynamics of the index and futures prices. Order imbalance in the cash stock market is found to affect significantly the error correction dynamics of index and futures prices. Order imbalance impedes error correction particularly when the market impact of order imbalance works against the error correction force of the cash index, explaining why real potential arbitrage opportunities may persist over time. Incorporating order imbalance in the framework significantly improves its explanatory power. The findings indicate that a stock market microstructure that allows a quick resolution of order imbalance promotes dynamic arbitrage efficiency between futures and underlying stocks. The results also suggest that the unloading of cash stocks by portfolio managers in a falling market situation aggravates the price decline and increases the real cost of hedging with futures. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:1129,1157, 2007 [source] On the Performance of Airlines and Airplane Manufacturers Following Aviation DisastersCANADIAN JOURNAL OF ADMINISTRATIVE SCIENCES, Issue 1 2005Thomas John Walker Our study examines the impact of aviation disasters on the short- and long-term performance of airlines and airplane manufacturers. We employ a sample of 138 aviation disasters involving airplanes operated by publicly traded U.S. carriers between July 1962 and December 2003. We use event study methodology to measure the abnormal performance of airlines and airplane manufacturers to these disasters. In addition, we employ a series of univariate tests and regression analysis to determine the factors that drive the abnormal returns for the firms in our sample. We observe that airlines experience an average stock price drop of 2.8% within one trading day after the corresponding news announcement, while airplane manufacturers experience a stock price drop of only 0.8% during that time period. The magnitude of the initial price decline appears to be driven by various characteristics of both the firm and the accident itself. We observe that airlines' abnormal performance is negatively related to firm size and the number of fatalities resulting from the accident. In addition, we observe that disasters that occurred in the U.S. and disasters caused by criminal activity (in particular the 9/11 terrorist attacks) cause significantly larger stock price drops in the days following the event. Similar dependencies can be observed for airplane manufacturers. Résumé La présente étude examine l'incidence des catastrophes aériennes sur la performance à court et à long terme des compagnies aériennes et des constructeurs d'avions. Elle se sert d'un échantillon de 138 catastrophes aériennes survenues entre juillet 1962 et décembre 2003, impliquant des appareils exploités par des transporteurs aériens des États-Unis, cotés en bourse. La méthodologie de l'étude de cas est utilisée pour mesurer la performance anormale des lignes aériennes et des constructeurs d'avions, à la suite de catastrophes aériennes. L'étude essaie de déterminer les facteurs qui régissent la performance anormale des entreprises à partir d'une série de tests à une variable et de l'analyse de régression. Elle montre que le cours des actions des lignes aériennes fléchit en moyenne de 2,8% en une journée de bourse après l'annonce d'une catastrophe, tandis que le cours des actions des constructeurs d'avions n'enregistre qu'une baisse de 0,8% durant la même période. L'ampleur du déclin initial des cours semble être déterminée par diverses caractéristiques de l'entreprise ainsi que par l'accident même. La performance anormale des lignes aériennes est en relation négative avec la taille de l'entreprise et le nombre de décès résultant de l'accident. En outre, les catastrophes survenues aux États-Unis (ou dans son espace aérien) et les catastrophes résultant d'actes criminels (en particulier les attaques terroristes du 11 septembre) ont provoqué des chutes des cours beaucoup plus marquées dans les jours suivant l'événement. Les interdépendances relevées touchent également les constructeurs d'avions. [source] What happens during recessions, crunches and busts?ECONOMIC POLICY, Issue 60 2009Stijn Claessens Summary We provide a comprehensive empirical characterization of the linkages between key macroeconomic and financial variables around business and financial cycles, for 21 OECD countries over the period 1960,2007. In particular, we analyse the implications of 122 recessions, 113 (28) credit contraction (crunch) episodes, 114 (28) episodes of house price declines (busts), 245 (61) episodes of equity price declines (busts), and their various overlaps in these countries, over the sample period. Our results indicate that the interactions between macroeconomic and financial variables can play a major role in determining the severity and duration of a recession. Specifically, we find evidence that recessions associated with credit crunches and house price busts tend to be deeper and longer than other recessions. , Stijn Claessens, M. Ayhan Kose and Marco E. Terrones [source] SIX CHALLENGES IN DESIGNING EQUITY-BASED PAYJOURNAL OF APPLIED CORPORATE FINANCE, Issue 3 2003Brian J. Hall The past two decades have seen a dramatic increase in the equitybased pay of U.S. corporate executives, an increase that has been driven almost entirely by the explosion of stock option grants. When properly designed, equity-based pay can raise corporate productivity and shareholder value by helping companies attract, motivate, and retain talented managers. But there are good reasons to question whether the current forms of U.S. equity pay are optimal. In many cases, substantial stock and option payoffs to top executives,particularly those who cashed out much of their holdings near the top of the market,appear to have come at the expense of their shareholders, generating considerable skepticism about not just executive pay practices, but the overall quality of U.S. corporate governance. At the same time, many companies that have experienced sharp stock price declines are now struggling with the problem of retaining employees holding lots of deep-underwater options. This article discusses the design of equity-based pay plans that aim to motivate sustainable, or long-run, value creation. As a first step, the author recommends the use of longer vesting periods and other requirements on executive stock and option holdings, both to limit managers' ability to "time" the market and to reduce their incentives to take shortsighted actions that increase near-term earnings at the expense of longer-term cash flow. Besides requiring "more permanent" holdings, the author also proposes a change in how stock options are issued. In place of popular "fixed value" plans that adjust the number of options awarded each year to reflect changes in the share price (and that effectively reward management for poor performance by granting more options when the price falls, and fewer when it rises), the author recommends the use of "fixed number" plans that avoid this unintended distortion of incentives. As the author also notes, there is considerable confusion about the real economic cost of options relative to stock. Part of the confusion stems, of course, from current GAAP accounting, which allows companies to report the issuance of at-the-money options as costless and so creates a bias against stock and other forms of compensation. But, coming on top of the "opportunity cost" of executive stock options to the company's shareholders, there is another, potentially significant cost of options (and, to a lesser extent, stock) that arises from the propensity of executives and employees to place a lower value on company stock and options than well-diversified outside investors. The author's conclusion is that grants of (slow-vesting) stock are likely to have at least three significant advantages over employee stock options: ,they are more highly valued by executives and employees (per dollar of cost to shareholders); ,they continue to provide reasonably strong ownership incentives and retention power, regardless of whether the stock price rises or falls, because they don't go underwater; and ,the value of such grants is much more transparent to stockholders, employees, and the press. [source] Annual miles drive used car pricesJOURNAL OF APPLIED ECONOMETRICS, Issue 1 2009Maxim Engers This paper investigates whether the net benefits from owning a vehicle, proxied by annual miles driven, explain the price declines observed over a vehicle's life. We first model the household decision on how much to drive each of its vehicles. Then we empirically establish that variation in household annual miles across brands explains observed price declines. Furthermore, the effect of vehicle age on annual miles decisions (and consequently on market value) depends on household characteristics and the composition of the vehicle stock owned. Copyright © 2008 John Wiley & Sons, Ltd. [source] The Buyer's Option in Multi-Unit Ascending Auctions: The Case of Wine Auctions at DrouotJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2005Philippe Février This paper studies multi-unit ascending (English) auctions with a buyer's option. The buyer's option gives the winner of an auction the right to purchase any number of units at the winning price. We develop a theoretical model and derive the optimal strategies for the bidders. The model predicts various behavioral implications (e.g., the winner never exercises the option, the price declines,) that are tested using a unique data set on wine auctions held at the Paris-based auction house Drouot. We also analyze why the buyer's option is used. Estimating the model in a structural econometric way, and using counterfactual comparisons, we find that the buyer's option does not affect the seller's revenue (relative to a system where the units are auctioned sequentially without the option). Drouot, however, saves a lot of time with the option and this effect represents a considerable amount of money. The time-saving effect seems thus to be the primary purpose of the buyer's option. [source] Is reversal of large stock-price declines caused by overreaction or information asymmetry: Evidence from stock and option marketsTHE JOURNAL OF FUTURES MARKETS, Issue 4 2009Hyung-Suk Choi The role of option markets is reexamined in the reversal process of stock prices following stock price declines of 10% or more. A matched pair of optionable and nonoptionable firms is randomly selected when their price declines by 10% or more on the same date. The authors examine the 1,443 and 1,018 matched pairs of New York Stock Exchange/American Stock Exchange (AMEX) and National Association of Securities Dealers Automated Quotations firms over the period from 1996 to 2004. It was found that the positive rebounds for nonoptionable firms are caused by an abnormal increase in bid,ask spread on and before the large price decline date. On the other hand, the bid,ask spreads for optionable firms decrease on and before the large price decline date. An abnormal increase in the open interest and volume in the option market on and before the large price decline date was also found. Overall, the results suggest that the stock-price reversal neither is a result of overreaction nor can it be simply explained by the bid,ask bounce. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 29:348,376, 2009 [source] Demand, Information, and Competition: Why Do Food Prices Fall at Seasonal Demand Peaks?THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 1 2000James M. MacDonald Prices for seasonal food products fall at demand peaks. Price declines are not driven by falling agricultural input prices; indeed, farm to retail margins narrow sharply. I use electronic scanner data from a sample of US supermarkets to show that seasonal price declines are closely linked to market concentration, and are much larger in markets with several rivals than where a single brand dominates. Seasonal demand increases reduce the effective costs of informative advertising, and increased informative advertising by retailers and manufacturers in turn may allow for increased market information and greater price sensitivity on the part of buyers. [source] | ||||||||||||||||||||||