The drift burst hypothesis

Flash crashes, perceived as sharp drops in market prices that rebound shortly after, have turned the public eye towards the vulnerability of IT-based stock trading. In this paper we explain flash crashes as the result of actions made by rational agents. We argue that information technology, which has long been associated with competitive advantages, may cause ambiguities with respect to the game form that give rise to a Hypergame. We employ Hypergame Theory to demonstrate that a market crash constitutes an equilibrium state if players misperceive the true game. Once the ambiguity is resolved, prices readjust to the appropriate level, creating the characteristic flash crash effect. We also discuss endogenous and exogenous mechanisms that may alleviate the threat of a flash crash and present possible options for future research.

High-Frequency Runs and Flash Crash Predictability

We study the intraday behaviour of the statistical moments of the trading volume of the blue chip equities that composed the Dow Jones Industrial Average index between 2003 and 2014. By splitting that time interval into semesters, we provide a quantitative account of the nonstationary nature of the intraday statistical properties as well. Explicitly, we prove the well-known ∪-shape exhibited by the average trading volume—as well as the volatility of the price fluctuations—experienced a significant change from 2008 (the year of the “subprime” financial crisis) onwards. That has resulted in a faster relaxation after the market opening and relates to a consistent decrease in the convexity of the average trading volume intraday profile. Simultaneously, the last part of the session has become steeper as well, a modification that is likely to have been triggered by the new short-selling rules that were introduced in 2007 by the Securities and Exchange Commission. The combination of both results reveals that the ∪ has been turning into a ⊔. Additionally, the analysis of higher-order cumulants—namely the skewness and the kurtosis—shows that the morning and the afternoon parts of the trading session are each clearly associated with different statistical features and hence dynamical rules. Concretely, we claim that the large initial trading volume is due to wayward stocks whereas the large volume during the last part of the session hinges on a cohesive increase of the trading volume. That dissimilarity between the two parts of the trading session is stressed in periods of higher uproar in the market.

Foot-and-mouth disease (FMD) is an acute, highly infectious and pathogenic animal disease. In recent years, with the rapid development of the swine breeding industry in China, pig farms have shown a trend of larger-scale development. Large-scale pig farms employ standardized management, a high level of automation, and a strict system. However, these farms have a large trading volume, and increased transmission intensity of FMD is noted inside the farm. At present, the main control measure against FMD is pig vaccination. However, a standard for immunization procedures is not available, and currently adopted immunization procedures have not been effectively and systematically evaluated. Taking a typical large-scale pig farm in China as the research subject and considering the breeding pattern, piggery structure, age structure and immunization procedures, an individual-based state probability model is established to evaluate the effectiveness of the immune procedure. Based on numerical simulation, it is concluded that the optimal immunization program involves primary immunization at 40 days of age and secondary immunization at 80 days of age for commercial pigs. Breeding boars and breeding sows are immunized 4 times a year, and reserve pigs are immunized at 169 and 259 days of age. According to the theoretical analysis, the average control reproduction number of individuals under the optimal immunization procedure in the farm is 0.4927. In the absence of immunization, the average is 1.7498, indicating that the epidemic cannot be controlled without immunization procedures.

Incompleteness and Inefficiency in Trading Networks

ABSTRACTThis paper documents that firms face upward‐sloping supply curves when they repurchase shares in a Dutch auction, and it analyzes the market reaction to these offers. The announcement price increase is highly correlated with the ultimate repurchase premium. Prices decline at expiration only for pro‐rated offers. The cumulative return is positive and highly correlated with the repurchase premium, excepting pro‐rated offers. Much of this price increase is consistent with movement along an upward‐sloping supply curve. Trading volume around the Dutch auction parallels fixed‐price repurchases. Supply elasticity is larger for firms with large trading volume, firms included in the S&P 500 Index, and takeover targets.

China is one of the largest consumers of wild animals for food and traditional Chinese medicine in the world. A large volume of illegal trade has been recorded in the primary cities, such as Hong Kong and Guangzhou, but the wildlife markets in secondary Chinese cities have not been investigated. This study was carried out in 7 cities in Guangdong and Guangxi provinces. Wildlife trade data were collected using semi-structured interview, observation, and market survey. The study documented the selling of 97 animal species, >7,000 individuals. The most frequently used animal groups by quantity were reptiles (51%), followed by birds (21%) and mammals (10%). Of the reported species, 23% were threatened, including 1 species critically endangered and 12 species endangered. In this study, there were 19 species observed that are recognized by the Convention on International Trade in Endangered Species (CITES). The results show that the animals originated not only from south China but also Indochina and Southeast Asia. Our survey also verified that Guangzhou and Hong Kong are not the only wildlife markets in South China. A large volume of illegal trade also is occurring in secondary cities in South China.

A survey on trade in live wild animals was conducted along the Guangxi border between China and Vietnam during 1993–1996. The results showed that there were 55 species, which were underestimated, involved in the trade, including 15 species of mammals, 10 species of birds, 29 species of reptiles and 1 species of amphibian. Many of them were species listed on Appendices I and II of CITES and on China's protection list (known as ASSP). During the investigation, about 2.29–29.325 tons of wildlife per day were imported to China form Vietnam. Some species with a large volume of trade may be over-exploited. Sixty-three percent of middle–high quality restaurants in three border cities and Nanning in Guangxi sold wildlife foods. Twenty kinds of wild animals were eaten at the restaurants. Although numbers of species involved in the trade remained fairly stable over the survey period, numbers of species listed in Appendices I and II of CITES and the state protection list had declined. The scale of wildlife markets in border cities of Guangxi and consumption levels of wildlife in the restaurants had been reduced because border control measures were enforced on the trade by local governments of China. However, the prices of the 5 main species in wildlife markets were still going up. This suggested that demand for wildlife in Guangxi was strong and will facilitate the illegal trade. The key steps to control the illegal wildlife trade between the two countries should focus on (i)␣suppression of illegal wildlife markets and prohibition of the sale of wildlife food in restaurants consisting of species listed in the ASSP inventory; (ii) international cooperation in the control of the trade; (iii) tighter enforcement of CITES for both countries; (iv) control of invasion of exotic species and epidemics of disease in the trade in China; and (v) education for wildlife conservation in China.

This paper uses multivariate Hawkes processes to model the transactions behavior of the US stock market as measured by the 30 Dow Jones Industrial Average individual stocks before, during and after the 36-min May 6, 2010, Flash Crash. The basis for our analysis is the excitation matrix, which describes a complex network of interactions among the stocks. Using high-frequency transactions data, we find strong evidence of self- and asymmetrically cross-induced contagion and the presence of fragmented trading venues. Our findings have implications for stock trading and corresponding risk management strategies as well as stock market microstructure design.

When firms announce a restatement of their financial reports, they inform investors that their prior announcements were faulty. Not only do companies lose credibility at times such as this but also their securities are revalued as investors respond to the substance of the announcement. We investigate investor size to understand how large and small investors differ in their responses to restatement announcements. Our results indicate that large investors seemingly anticipate the announcement; their holdings decrease before restatement announcements; consequently large investors trading after announcements is less pronounced than for smaller investors. The response of small investors depends on who has prompted the restatement: the company itself, FASB or the SEC and not on the reason for the restatement such as problems with revenue recognition, restructuring or cost/expense. Large investor trading volume is affected by both the source of the restatement and the reason for it. Large investors seem to anticipate potential problems, and sell securities before restatement announcements.

Commercial trade in wildlife is the major cause of species endangerment and a main threat to animal welfare in China and its neighboring countries. Driven by consumptive use for food and traditional medicine, the large volume of both legal and illegal trade in wildlife has caused great destruction to ecosystems and pushed many species to the brink of extinction. Data gathered from trading hubs at ports, boundary markets, city markets and stores, indicates the large amount of wildlife traded in the region of Guangxi, Yunnan and Qinghai provinces, a direct result of the numerous wildlife markets available. In a survey distributed in various trading places, while about half of the respondents agreed that wildlife should be protected, 60% of them had consumed wildlife at some point in the last 2 years. The results also indicated that law and regulation on wildlife trade control is insufficient. Wildlife trade controls are very limited because of bias on the utilization of wildlife as a natural resource to be exploited by the government agencies. The survey also shows that the current situation of wildlife consumption in key cities in China is serious, especially the consumption for food. The main consumption groups in China are male and young people with high education levels and good incomes. The key in public awareness publicity and education is to give them more information on the negative impacts of wildlife consumption and knowledge of protection.

Traditional analysis of customs union formation suggests that it leads to an increase in members' external tariffs. This paper stresses two aspects of European trade and trade policy - a large volume of intra-industry trade between similar countries and a political motivation for tariffs - and highlights a role for tariff co-ordination in a model of differentiated products in which tariffs affect domestic costs and thus export prices and the magnitude of monopolistic rents. We show that, when workers choose the tariffs and receive but a small portion of tariff revenues, the union's tariff wall falls.

ABSTRACT:This article develops a framework for analyzing when and why municipal incorporation laws impede or facilitate boundary changes that benefit special interests. This goal is achieved by shifting the attention from demand-side factors—such as wealth, race, and heterogeneity of tastes—behind the formation of municipalities to actors who supply them: city, county, and state officials. I develop a theoretical model that shows that there is an inverse relation between the number of jurisdictions and the size of the constituency of those public officials who review incorporation petitions. I also find that: (1) ceteris paribus, more new municipalities are formed in counties with a large volume of retail trade, and (2) neither state nor local officials can block fiscally motivated incorporations.

Transactional risk, market crashes, and the role of circuit breakers

The objectives of this study were to compare nonparametric stability measures, and to identify promising high-yield and stable bread wheat (Triticum aestivum L.) genotypes in 7 environments during 2003-2005 in the central Black Sea region of Turkey. The bread wheat genotypes (20 advanced lines and 5 cultivars) were grown in a randomized complete block design with 4 replications in 7 different environments. Three nonparametric statistical tests of significance for genotype × environment (GE) interaction and 10 nonparametric measures of stability were used to identify stable genotypes in 7 environments. Combined ANOVA and nonparametric tests (Kubinger, Hildebrand, and De Kroon/Van der Laan) of genotype × environment interaction indicated the presence of significant crossover and non-crossover interactions, as well as significant differences between genotypes. In this study high TOP values (proportion of environments in which a genotype ranked in the top third) and low rank-sum values (sum of ranks of mean yield and Shukla’s stability variance) were associated with high mean yield. Nonetheless, results of the other nonparametric tests were negatively correlated with mean yield. In the simultaneous selection for high yield and stability, only the rank-sum and TOP methods were useful in terms of the principal component analysis (PCA) results, and correlation analysis of nonparametric stability statistics and yield. According to these stability parameters (TOP and rank-sum) G7 (VONA//KS75210/TAM101), G9 (JUP/4/CLLF/3/II14.53/ODIN//CI13431/WA 00477), G20 (Sakin), and G21 (VORONA/KAUZ//1D13.1/MLT) were the most stable genotypes for grain yield. The results also revealed that based on nonparametric test results stability could be classified into 3 groups, according to agronomic and biological concepts of stability.