Vijay Singal

Stock Market Openings: Experience of Emerging Economies

This article is an exploratory examination of the benefits and risks associated with opening of stock markets. Specifically, we estimate changes in the level and volatility of stock returns, inflation, and exchange rates around market openings. We find that stock returns increase immediately after market opening without a concomitant increase in volatility. Stock markets become more efficient as determined by testing the random walk hypothesis. We find no evidence of an increase in inflation or an appreciation of exchange rates. If anything, inflation seems to decrease after market opening as do the volatility of inflation and volatility of exchange rates. Copyright 2000 by University of Chicago Press.

Role of Speculative Short Sales in Price Formation: The Case of the Weekend Effect

We argue that short sellers affect prices in a significant and systematic manner. In particular, we contend that speculative short sales contribute to the weekend effect: The inability to trade over the weekend is likely to cause these short sellers to close their speculative positions on Fridays and reestablish new short positions on Mondays causing stock prices to rise on Fridays and fall on Mondays. We find evidence in support of this hypothesis based on a comparison of high short-interest stocks and low short-interest stocks, stocks with and without actively traded options, IPOs, zero short-interest stocks, and highly volatile stocks. Copyright 2003 by the American Finance Association.

AIRLINE MERGERS AND COMPETITION, AN INTEGRATION OF STOCK AND PRODUCT PRICE EFFECTS /

While research using stock prices has rejected the hypothesis that market power is important in motivating horizontal mergers, studies of airfares find evidence consistent with a dominant role of market power in airline mergers. The author integrates the two lines of research by examining the same set of airline mergers from a capital market viewpoint. Further, he links changes in the stock market to changes in the product market, presenting a dual market perspective. The author concludes that airline mergers result in both increased market power and more efficient operations. The article has implications for antitrust policy. Copyright 1996 by University of Chicago Press.

AIRLINE MERGERS AND MULTIMARKET CONTACT

This paper examines changes in the pricing behavior of airline firms around mergers that occurred during 1985-8. We find that the changes in concentration, a measure of contact within a market, and changes in multimarket contact, a measure of contact with the same firms outside of that market, significantly affect airfares. Further, increases in multimarket contact alone are sufficient to effect an increase in fares. Antitrust policy must consider changes not only in concentration but also in multimarket contact to evaluate more fully the effect of consolidations on consumers.

The fear of globalizing capital markets

Abstract It is generally accepted that free flow of goods benefits both economies without serious risks. The situation with the free flow of capital is different. Many policy makers and economists are skeptical not only about the benefits of free flow of capital, but also see uncontrolled capital flows as risky and destabilizing. Other economists, however, firmly believe that free capital flows will lead to a more efficient allocation of resources and greater economic growth. Nevertheless, the debate has little empirical evidence to rely on. We hope to fill that gap in this paper. We study the benefits and risks associated with capital flows by examining the experience of emerging economies around the time that foreign investment in stock markets was allowed. We investigate the impact of capital flows on stock returns, stock market efficiency, inflation, and exchange rates. We also examine the effect on different kinds of volatility that might arise as a consequence of capital flows: volatility of stock returns, volatility of inflation rates, and volatility of exchange rates. We find no evidence of an increase in inflation or an appreciation of exchange rates. Stock returns reflect a lower cost of capital after liberalization. There is no increase in stock market volatility and the volatility of inflation and exchange rates actually decreases. Stock markets become more efficient as determined by testing the random walk hypothesis.

Financial health and airline safety

A voter subsystem for a multiple node fault tolerant system having an upper medial value sorter for sorting a plurality of received values to generate an upper medial value and a lower medial value sorter for sorting the same plurality of received values to generate a lower medial value. An averaging circuit adds the upper and lower medial values then divides by two to generate a voted value. A deviance checker checks each of the plurality of received values against the voted value to generate a deviance error for each received value which differed from the voted value by a predetermied amount. A loader loads the plurality of received values into the upper and lower medial value sorters and the deviance checker bit-by-bit, starting from the most significant bit positions through the least significant bit positions. The upper and lower medial value sorters and deviance checker process the received values on-the-fly in the order they are received.

Index Changes and Losses to Index Fund Investors

Because of arbitrage around the time of index changes, investors in funds linked to the S&P 500 Index and the Russell 2000 Index lose between

Exchange Rates and Stock Prices: Are they Related?

1.0 billion and

Stock Prices Matter

2.1 billion a year for the two indices combined. The losses can be higher if benchmarked assets are considered, the pre-reconstitution period is lengthened, or involuntary deletions are taken into account. The losses are an unexpected consequence of the evaluation of index fund managers on the basis of tracking error. Minimization of tracking error, coupled with the predictability and/or pre-announcement of index changes, creates the opportunity for a wealth transfer from index fund investors to arbitrageurs.

Are earnings predictable? Evidence from equity issues and buyback announcements

Changes in exchange rates are expected to affect the competitiveness of companies: a strong dollar is bad for American exporters and a weak dollar is good. Yet empirical research has not found much evidence of the expected contemporaneous correlation between exchange rate changes and stock returns even for a carefully selected set of exporting firms. Authors have attributed this apparent anomaly to market inefficiency, investor naivete, sample selection, etc. In this paper, we propose a simple extension by looking at a different implication of currency valuation. If a stronger currency signals a stronger economy then the weakness that exporting firms experience in the foreign markets is partially or fully offset by the strength in the domestic economy. We find that positive surprises in GDP announcements are typically associated with a stronger dollar supporting the dual effect of currency changes. The above result implies that a better sample to capture the impact of currency changes would likely be importing firms because an importer is helped by a stronger currency on both dimensions: lower import prices and a stronger domestic economy. Our results are consistent with this explanation. Alternate explanations for the results such as pass-through and hedging are considered.