Statistical Properties and Pre-Hit Dynamics of Price Limit Hits in the Chinese Stock Markets

Price limit trading rules are adopted in some stock markets (especially emerging markets) trying to cool off traders’ short-term trading mania on individual stocks and increase market efficiency. Under such a microstructure, stocks may hit their up-limits and down-limits from time to time. However, the behaviors of price limit hits are not well studied partially due to the fact that main stock markets such as the US markets and most European markets do not set price limits. Here, we perform detailed analyses of the high-frequency data of all A-share common stocks traded on the Shanghai Stock Exchange and the Shenzhen Stock Exchange from 2000 to 2011 to investigate the statistical properties of price limit hits and the dynamical evolution of several important financial variables before stock price hits its limits. We compare the properties of up-limit hits and down-limit hits. We also divide the whole period into three bullish periods and three bearish periods to unveil possible differences during bullish and bearish market states. To uncover the impacts of stock capitalization on price limit hits, we partition all stocks into six portfolios according to their capitalizations on different trading days. We find that the price limit trading rule has a cooling-off effect (object to the magnet effect), indicating that the rule takes effect in the Chinese stock markets. We find that price continuation is much more likely to occur than price reversal on the next trading day after a limit-hitting day, especially for down-limit hits, which has potential practical values for market practitioners.     

A cut above the rest? Private anthropometrics in marriage markets

A large body of economic research suggests that publicly observable anthropometric characteristics affect labor and marriage market outcomes. Private anthropometrics may not affect these outcomes. We examine male circumcision in marriage markets in Zambia. Our analysis reveals substantial variation across local marriage markets in circumcision prevalence relative to preference for circumcised partners, as well as excess aggregate demand for circumcised males. Regression estimates suggest a marriage market premium of approximately one-half to one year of additional schooling for matching with a partner of preferred anthropometric type in a local marriage market with excess demand for that anthropometric characteristic.     

Groove-backbone interaction in B-DNA. Implication for DNA condensation and recombination

DNA self-fitting is revealed by the study of intermolecular contacts found in the crystal packing of a dodecamer where the helices are locked together by a reciprocal groove-backbone interaction and form a crossed structure. It is proposed that it could be a model for DNA-DNA interaction in several biological processes such as the node of supercoiled DNA and synapsis in recombination. The main topological and symmetrical features of this crossed structure are described and the symmetry-homology relationships are analyzed in the more general case of B-DNA interacting helices. Model-building of Holliday junctions with minimal change from the starting crystal coordinates of the crossed structure leads to at least three different solutions. These various models are compared from the point of view of their symmetry and topology, in the light of their branch migration and resolution properties. In addition, a model for a self-favored reciprocal unwinding mechanism based on the experimentally observed structural alterations, such as the packing-induced opening of G.C base-pairs is proposed. In this model, the phosphate groups of the invading backbone trigger the opening of the base-pairs of the other helix, by pulling cytosine or adenine bases out of the major groove after binding to their amino group.     

An Experiment on Prediction Markets in Science

Prediction markets are powerful forecasting tools. They have the potential to aggregate private information, to generate and disseminate a consensus among the market participants, and to provide incentives for information acquisition. These market functionalities can be very valuable for scientific research. Here, we report an experiment that examines the compatibility of prediction markets with the current practice of scientific publication. We investigated three settings. In the first setting, different pieces of information were disclosed to the public during the experiment. In the second setting, participants received private information. In the third setting, each piece of information was private at first, but was subsequently disclosed to the public. An automated, subsidizing market maker provided additional incentives for trading and mitigated liquidity problems. We find that the third setting combines the advantages of the first and second settings. Market performance was as good as in the setting with public information, and better than in the setting with private information. In contrast to the first setting, participants could benefit from information advantages. Thus the publication of information does not detract from the functionality of prediction markets. We conclude that for integrating prediction markets into the practice of scientific research it is of advantage to use subsidizing market makers, and to keep markets aligned with current publication practice.     

Unraveling Hidden Order in the Dynamics of Developed and Emerging Markets

The characterization of asset price returns is an important subject in modern finance. Traditionally, the dynamics of stock returns are assumed to lack any temporal order. Here we present an analysis of the autocovariance of stock market indices and unravel temporal order in several major stock markets. We also demonstrate a fundamental difference between developed and emerging markets in the past decade - emerging markets are marked by positive order in contrast to developed markets whose dynamics are marked by weakly negative order. In addition, the reaction to financial crises was found to be reversed among developed and emerging markets, presenting large positive/negative autocovariance spikes following the onset of these crises. Notably, the Chinese market shows neutral or no order while being regarded as an emerging market. These findings show that despite the coupling between international markets and global trading, major differences exist between different markets, and demonstrate that the autocovariance of markets is correlated with their stability, as well as with their state of development.     

Analyzing the Long Term Cohesive Effect of Sector Specific Driving Forces

Financial markets are partially composed of sectors dominated by external driving forces, such as commodity prices, infrastructure and other indices. We characterize the statistical properties of such sectors and present a novel model for the coupling of the stock prices and their dominating driving forces, inspired by mean reverting stochastic processes. Using the model we were able to explain the market sectors’ long term behavior and estimate the coupling strength between stocks in financial markets and the sector specific driving forces. Notably, the analysis was successfully applied to the shipping market, in which the Baltic dry index (BDI), an assessment of the price of transporting the major raw materials by sea, influences the shipping financial market. We also present the analysis of other sectors—the gold mining market and the food production market, for which the model was also successfully applied. The model can serve as a general tool for characterizing the coupling between external forces and affected financial variables and therefore for estimating the risk in sectors and their vulnerability to external stress.     

Emergence of Cooperative Long-Term Market Loyalty in Double Auction Markets

Loyal buyer-seller relationships can arise by design, e.g. when a seller tailors a product to a specific market niche to accomplish the best possible returns, and buyers respond to the dedicated efforts the seller makes to meet their needs. We ask whether it is possible, instead, for loyalty to arise spontaneously, and in particular as a consequence of repeated interaction and co-adaptation among the agents in a market. We devise a stylized model of double auction markets and adaptive traders that incorporates these features. Traders choose where to trade (which market) and how to trade (to buy or to sell) based on their previous experience. We find that when the typical scale of market returns (or, at fixed scale of returns, the intensity of choice) become higher than some threshold, the preferred state of the system is segregated: both buyers and sellers are segmented into subgroups that are persistently loyal to one market over another. We characterize the segregated state analytically in the limit of large markets: it is stabilized by some agents acting cooperatively to enable trade, and provides higher rewards than its unsegregated counterpart both for individual traders and the population as a whole.     

Allee effects, invasion pinning, and species' borders

All species' ranges are the result of successful past invasions. Thus, models of species' invasions and their failure can provide insight into the formation of a species' geographic range. Here, we study the properties of invasion models when a species cannot persist below a critical population density known as an "Allee threshold." In both spatially continuous reaction-diffusion models and spatially discrete coupled ordinary-differential-equation models, the Allee effect can cause an invasion to fail. In patchy landscapes (with dynamics described by the spatially discrete model), range limits caused by propagation failure (pinning) are stable over a wide range of parameters, whereas, in an uninterrupted habitat (with dynamics described by a spatially continuous model), the zero velocity solution is structurally unstable and thus unlikely to persist in nature. We derive conditions under which invasion waves are pinned in the discrete space model and discuss their implications for spatially complex dynamics, including critical phenomena, in ecological landscapes. Our results suggest caution when interpreting abrupt range limits as stemming either from competition between species or a hard environmental limit that cannot be crossed: under a wide range of plausible ecological conditions, species' ranges may be limited by an Allee effect. Several example systems appear to fit our general model.     

The Causal Effect of Market Priming on Trust: An Experimental Investigation Using Randomized Control

We report data from laboratory experiments where participants were primed using phrases related to markets and trade. Participants then participated in trust games with anonymous strangers. The decisions of primed participants are compared to those of a control group. We find evidence that priming for market participation affects positively the beliefs regarding the trustworthiness of anonymous strangers and increases trusting decisions.     

Dynamic Evolution of Cross-Correlations in the Chinese Stock Market

The analysis of cross-correlations is extensively applied for the understanding of interconnections in stock markets and the portfolio risk estimation. Current studies of correlations in Chinese market mainly focus on the static correlations between return series, and this calls for an urgent need to investigate their dynamic correlations. Our study aims to reveal the dynamic evolution of cross-correlations in the Chinese stock market, and offer an exact interpretation for the evolution behavior. The correlation matrices constructed from the return series of 367 A-share stocks traded on the Shanghai Stock Exchange from January 4, 1999 to December 30, 2011 are calculated over a moving window with a size of 400 days. The evolutions of the statistical properties of the correlation coefficients, eigenvalues, and eigenvectors of the correlation matrices are carefully analyzed. We find that the stock correlations are significantly increased in the periods of two market crashes in 2001 and 2008, during which only five eigenvalues significantly deviate from the random correlation matrix, and the systemic risk is higher in these volatile periods than calm periods. By investigating the significant contributors of the deviating eigenvectors in different time periods, we observe a dynamic evolution behavior in business sectors such as IT, electronics, and real estate, which lead the rise (drop) before (after) the crashes. Our results provide new perspectives for the understanding of the dynamic evolution of cross-correlations in the Chines stock markets, and the result of risk estimation is valuable for the application of risk management.     

Realized Volatility and Absolute Return Volatility: A Comparison Indicating Market Risk

Measuring volatility in financial markets is a primary challenge in the theory and practice of risk management and is essential when developing investment strategies. Although the vast literature on the topic describes many different models, two nonparametric measurements have emerged and received wide use over the past decade: realized volatility and absolute return volatility. The former is strongly favored in the financial sector and the latter by econophysicists. We examine the memory and clustering features of these two methods and find that both enable strong predictions. We compare the two in detail and find that although realized volatility has a better short-term effect that allows predictions of near-future market behavior, absolute return volatility is easier to calculate and, as a risk indicator, has approximately the same sensitivity as realized volatility. Our detailed empirical analysis yields valuable guidelines for both researchers and market participants because it provides a significantly clearer comparison of the strengths and weaknesses of the two methods.     

Short and Long Term Investor Synchronization Caused by Decoupling

The dynamics of collective decision making is not yet well understood. Its practical relevance however can be of utmost importance, as experienced by people who lost their fortunes in turbulent moments of financial markets. In this paper we show how spontaneous collective “moods” or “biases” emerge dynamically among human participants playing a trading game in a simple model of the stock market. Applying theory and computer simulations to the experimental data generated by humans, we are able to predict the onset of such moments before they actually happen.     

Being on the Field When the Game Is Still Under Way. The Financial Press and Stock Markets in Times of Crisis

This paper looks at the relationship between negative news and stock markets in times of global crisis, such as the 2008/2009 period. We analysed one year of front page banner headlines of three financial newspapers, the Wall Street Journal, Financial Times, and Il Sole24ore to examine the influence of bad news both on stock market volatility and dynamic correlation. Our results show that the press and markets influenced each other in generating market volatility and in particular, that the Wall Street Journal had a crucial effect both on the volatility and correlation between the US and foreign markets. We also found significant differences between newspapers in their interpretation of the crisis, with the Financial Times being significantly pessimistic even in phases of low market volatility. Our results confirm the reflexive nature of stock markets. When the situation is uncertain and unpredictable, market behaviour may even reflect qualitative, big picture, and subjective information such as streamers in a newspaper, whose economic and informative value is questionable.     

What Affects the Secondhand Value of Smartphones: Evidence from eBay

Reuse via secondhand markets can extend the use phase of products, thereby reducing environmental impacts. Analyzing 500,000 listings of used Apple and Samsung smartphones sold in 2015 and 2016 via eBay, we examine which product properties affect how long smartphones retain market value and facilitate market‐based reuse. Our results suggest that although repairability and large memory size are typically thought to be “life extending,” in practice they have limited impact on the current economic life span of smartphones and their market‐based reuse. In contrast, we show that brand, an intangible product property, can extend smartphones’ economic life span by 12.5 months. Because longer economic life spans imply extended use phases and longer life spans overall, these results illustrate the potential of harnessing the intangible properties of products to promote sustainable consumption.     

Predicted decline of protected whales based on molecular genetic monitoring of Japanese and Korean markets

We present a two-tiered analysis of molecular genetic variation in order to determine the origins of whale' products purchased from retail markets in Japan and the Republic of (South) Korea during 1993-1999. This approach combined phylogenetic analysis of mitochondrial DNA sequences for identification of protected species with a statistical comparison of intraspecific haplotype frequencies for distinguishing regional subpopulations or 'stocks' hunted for scientific research by the Japanese and killed incidentally in coastal fisheries by the Koreans. The phylogenetic identification of 655 products included eight species or subspecies of baleen whales, sperm whales, a pygmy sperm whale, two species of beaked whales, porpoises, killer whales and numerous species of dolphins as well as domestic sheep and horses. Six of the baleen whale species (the fin, sei, common-form and small-form Bryde's, blue or blue/fin hybrid, and humpback) and the sperm whale are protected by international agreements dating back to at least 1989 for all species and 1966 for some species. We compared the haplotype frequencies from the Japanese market sample to those reported from scientific hunting in the western North Pacific stock for products derived from the exploited North Pacific minke whale. The market sample differed significantly from the scientific catch (p < 0.001), showing a greater than expected frequency of haplotypes characteristic of the protected Sea of Japan stock. We used a 'mixed-stock' analysis and maximum-likelihood methods to estimate that 31% (95% confidence interval 19-43%) of the market for this species originated from the Sea of Japan stock. The source of these products was assumed to be undocumented 'incidental takes' from fisheries' by-catch, although we cannot exclude the possibility of illegal hunting or smuggling. The demographic impact of this undocumented exploitation was evaluated using the model of population dynamics adopted by the Scientific Committee of the International Whaling Commission. For the range of exploitation consistent with the market sample, this protected stock was predicted to decline towards extinction over the next few decades. These results confirmed the power of molecular methods in monitoring retail markets and pointed to the inadequacy of the current moratorium for ensuring the recovery of protected species. More importantly, the integration of genetic evidence with a model of population dynamics identified an urgent need for actions to limit undocumented exploitation of a 'protected' stock of whales.     

Increased ecological amplitude through heterosis following wide outcrossing in Banksia ilicifolia R.Br. (Proteaceae)

To assess whether wide outcrossing (over 30 km) in the naturally fragmented Banksia ilicifolia R.Br. increases the ecological amplitude of offspring, we performed a comparative greenhouse growth study involving seedlings of three hand-pollinated progeny classes (self, local outcross, wide outcross) and a range of substrates and stress conditions. Outcrossed seedlings outperformed selfed seedlings, with the magnitude of inbreeding depression as high as 62% for seed germination and 37% for leaf area. Wide outcrossed seedlings outperformed local outcrossed seedlings, especially in non-native soils, facilitated in part by an improved capacity to overcome soil constraints through greater root carboxylate exudation. Soil type significantly affected seedling growth, and waterlogging and water deficit decreased growth, production of cluster roots, root exudation and total plant P uptake. Our results suggest that the interaction of narrow ecological amplitude and the genetic consequences of small fragmented populations may in part explain the narrow range of local endemics, but that wide outcrossing may provide opportunities for increased genetic variation, increased ecological amplitude and range expansion.     

The Application of Cash-Flow-at-Risk to Risk Management in a Deregulated Electricity Market

The current level of deregulation in electricity markets is continuing to expand. Although each of these markets has individual operational and financial structures, one common characteristic is volatility. This volatility is significant and time-varying, and the persistence of this volatility makes the management of financial risk a priority among market participants.

This article considers two applications of an innovative spot price model to risk management in such a market. The first application is the empirical estimation of risk premia in the market considered here. The results support other approaches, which find the risk premia to be both significant and time-variant. In addition, this work considers the application of a Cash-Flow-at-Risk (CFaR) approach to measuring and comparing financial risk among various portfolio alternatives. These portfolios are considered from the perspective of the electricity producer, and the electricity purchaser. This approach is flexible and practical, allowing the comparison among portfolios and across seasons. The results of this analysis show that derivative instruments are significantly over-priced in this market, and that producers have the opportunity to earn significant profits, above those justified by the inherent risk in the market.     

Estimating the number of whales entering trade using DNA profiling and capture-recapture analysis of market products

Surveys of commercial markets combined with molecular taxonomy (i.e. molecular monitoring) provide a means to detect products from illegal, unregulated and/or unreported (IUU) exploitation, including the sale of fisheries bycatch and wild meat (bushmeat). Capture-recapture analyses of market products using DNA profiling have the potential to estimate the total number of individuals entering the market. However, these analyses are not directly analogous to those of living individuals because a 'market individual' does not die suddenly but, instead, remains available for a time in decreasing quantities, rather like the exponential decay of a radioactive isotope. Here we use mitochondrial DNA (mtDNA) sequences and microsatellite genotypes to individually identify products from North Pacific minke whales (Balaenoptera acutorostrata ssp.) purchased in 12 surveys of markets in the Republic of (South) Korea from 1999 to 2003. By applying a novel capture-recapture model with a decay rate parameter to the 205 unique DNA profiles found among 289 products, we estimated that the total number of whales entering trade across the five-year survey period was 827 (SE, 164; CV, 0.20) and that the average 'half-life' of products from an individual whale on the market was 1.82 months (SE, 0.24; CV, 0.13). Our estimate of whales in trade (reflecting the true numbers killed) was significantly greater than the officially reported bycatch of 458 whales for this period. This unregulated exploitation has serious implications for the survival of this genetically distinct coastal population. Although our capture-recapture model was developed for specific application to the Korean whale-meat markets, the exponential decay function could be modified to improve the estimates of trade in other wildmeat or fisheries markets or abundance of living populations by noninvasive genotyping.     

Management of product variety in cellular manufacturing systems

In today’s markets, non-uniform, customized products complicate the manufacturing processes significantly. In this paper, we propose a cellular manufacturing system design model to manage product variety by integrating with the technology selection decision. The proposed model determines the product families and machine groups while deciding the technology of each cell individually. Hedging against changing market dynamics leads us to the use of flexible machining systems and dedicated manufacturing systems at the same facility. In order to integrate the market characteristics in our model, we proposed a new cost function. Further, we modified a well known similarity measure in order to handle the operational capability of the available technology. In the paper, our hybrid technology approach is presented via a multi-objective mathematical model. A filtered-beam based local search heuristic is proposed to solve the problem efficiently. We compare the proposed approach with a dedicated technology model and showed that the improvement with the proposed hybrid technology approach is greater than 100% in unstable markets requiring high product varieties, regardless of the volumes of the products.