Finance - Research Publications
Now showing items 1-12 of 96
Stock Price Manipulation: Prevalence and Determinants*
(OXFORD UNIV PRESS, 2014-01-01)
We empirically analyze the prevalence and economic underpinnings of closing price manipulation and its detection. We estimate that ∼1% of closing prices are manipulated, of which only a small fraction is detected and prosecuted. We find that stocks with high levels of information asymmetry and mid to low levels of liquidity are most likely to be manipulated. A significant proportion of manipulation occurs on month/quarter-end days. Manipulation on these days is more likely in stocks with high levels of institutional ownership. Government regulatory budget has a strong effect on both manipulation and detection.
Board interlocking network and financial decisions
Previous literature demonstrates that interlocking director networks are significant in various financial areas. However, the distinction between network selection and behavioral influence effects is not considered. Few studies in the finance discipline have sufficiently considered social networks in a statistically robust way. This inattention may cause bias similar to omitted variable bias, resulting in incorrect conclusions being reached from the reported results. We employ recent advances in statistical modeling to investigate the effect of the interlocking director network on executive compensation, capital structure and mergers and acquisitions. Results show selection and influence effects are strongly significant. Firms select directors from firms with a similar proportion of fixed executive compensation (such as salary) and a similar level of acquisitiveness. Firms are influenced via the interlocking director network to become more similar with respect to executive compensation practices and capital structure choice, and more dissimilar for the number of acquisitions undertaken. That firms become more dissimilar in level of acquisitiveness may be attributed to negative feedback on acquiring because prior research shows that acquisitions are generally value destructive for the acquirer. The results suggest that the interlocking director network is a potent mechanism for the spread of firm practices. Common dependent variables from prior literature are less significant in explaining observed outcomes when the network is taken into account. For executive compensation, the profitability of a firm is no longer significant for the model including the interlocking director network but is significant when the same data are used in a standard linear regression. A similar occurrence happens for asset tangibility in the capital structure models. Tobin’s q and free cash flow are significant for the same data in a Poisson regression model for count data, and not significant for interlocking director network mergers and acquisitions models.
Intrinsic Valuation of Information in Decision Making under Uncertainty
(PUBLIC LIBRARY SCIENCE, 2016-07-01)
In a dynamic world, an accurate model of the environment is vital for survival, and agents ought regularly to seek out new information with which to update their world models. This aspect of behaviour is not captured well by classical theories of decision making, and the cognitive mechanisms of information seeking are poorly understood. In particular, it is not known whether information is valued only for its instrumental use, or whether humans also assign it a non-instrumental intrinsic value. To address this question, the present study assessed preference for non-instrumental information among 80 healthy participants in two experiments. Participants performed a novel information preference task in which they could choose to pay a monetary cost to receive advance information about the outcome of a monetary lottery. Importantly, acquiring information did not alter lottery outcome probabilities. We found that participants were willing to incur considerable monetary costs to acquire payoff-irrelevant information about the lottery outcome. This behaviour was well explained by a computational cognitive model in which information preference resulted from aversion to temporally prolonged uncertainty. These results strongly suggest that humans assign an intrinsic value to information in a manner inconsistent with normative accounts of decision making under uncertainty. This intrinsic value may be associated with adaptive behaviour in real-world environments by producing a bias towards exploratory and information-seeking behaviour.
Is Australia HFT-friendly?
(Financial Services Institute of Australasia, 2012)
Stephen Satchell’s paper ‘An assessment of the social desirability of high-frequency trading’, in this issue of JASSA examines the costs and benefits, and highlights some empirical evidence on the impact of HFT on market quality and welfare. Building on Satchell’s paper, this paper provides a perspective on HFT in the Australian market and identifies the factors influencing its attractiveness to HFT players. It also compares the US and Australian markets in terms of these factors to indicate the growth prospects for HFT activity in Australia.
Incidental rewarding cues influence eeconomic decisions in people with obesity
(FRONTIERS MEDIA SA, 2015-10-15)
Recent research suggests that obesity is linked to prominent alterations in learning and decision-making. This general difference may also underlie the preference for immediately consumable, highly palatable but unhealthy and high-calorie foods. Such poor food-related inter-temporal decision-making can explain weight gain; however, it is not yet clear whether this deficit can be generalized to other domains of inter-temporal decision-making, for example financial decisions. Further, little is known about the stability of decision-making behavior in obesity, especially in the presence of rewarding cues. To answer these questions, obese and lean participants (n = 52) completed two sessions of a novel priming paradigm including a computerized monetary delay discounting task. In the first session, general differences between groups in financial delay discounting were measured. In the second session, we tested the general stability of discount rates. Additionally, participants were primed by affective visual cues of different contextual categories before making financial decisions. We found that the obese group showed stronger discounting of future monetary rewards than the lean group, but groups did not differ in their general stability between sessions nor in their sensitivity toward changes in reward magnitude. In the obese group, a fast decrease of subjective value over time was directly related to a higher tendency for opportunistic eating. Obese in contrast to lean people were primed by the affective cues, showing a sex-specific pattern of priming direction. Our findings demonstrate that environments rich of cues, aiming at inducing unhealthy consumer decisions, can be highly detrimental for obese people. It also underscores that obesity is not merely a medical condition but has a strong cognitive component, meaning that current dietary and medical treatment strategies may fall too short.