Search

We test the hypothesis that security analysts discipline credit rating agencies. After all, analyst reports about a firm’s equity would no doubt be informative about its debt default probability and calibrate its credit ratings. We follow Hong and Kacperczyk (2010) in using brokerage house mergers, which eliminate redundant analysts, to shock analyst following so as to identify the causal effect of coverage on credit ratings. We find that a drop in one analyst covering increases the subsequent ratings of a company by around a significant halfrating notch. This effect is coming largely from firms with low initial analyst coverage and hence where the loss of one analyst is a sizeable percentage drop in market discipline. Our effect is stronger for firms close to default and hence where firm debt trades more like equity. The higher ratings due to fewer analysts following also result in lower bond yields.

We study the effect of algorithmic trading (AT) on market quality between 2001 and 2011 in 42 equity markets around the world. We use an exchange colocation service that increases AT as an exogenous instrument to draw causal inferences about AT on market quality. On average, AT improves liquidity and informational efficiency but increases short-term volatility. Importantly, AT also lowers execution shortfalls for buy-side institutional investors. Our results are surprisingly consistent across markets and thus across a wide range of AT environments. We further document that the beneficial effect of AT is stronger in large stocks than in small stocks.

This study examines the interaction between dynamic limit order placement activities and market quality around the two system upgrades by the Australian Securities Exchange (ASX) which aims at reducing the latency of trades. We show that after the 2006 system upgrade from Stock Exchange Automated Trading System to Integrated Trading System, liquidity falls and short-term volatility heightens. Lower latency provides capacity for traders to position themselves to take liquidity when it is cheap. After the second upgrade in 2010 (launch of ASX Trade), the harmful effect reverses. Our evidence shows that in large-capitalisation stocks, algorithmic trading/high-frequency trading provides liquidity and stabilises the price when short-term volatility is high. Since we find that the market quality could be unfavourably affected after a system upgrade (i.e., the 2006 system upgrade), regulators need to be prepared for near-time reactions and rapid investigations in the event of market stress.

This article examines the informational volatility – the permanent component of volatility that is driven by information – and its effect on stock liquidity provision. Using option-implied volatility as a proxy for informational volatility, our results show it has a significant negative influence on liquidity provision prior to earnings announcement even after controlling for trade-related market conditions. We find the effect of informational volatility only exists on the bid-side but not the ask-side of the order book. Further analysis suggests that the information contained in implied volatility concerns the future uncertainty of the underlying stock. JEL Classification: G12, G14, G30

A costly arbitrage model, developed for the Australian imputation tax system, shows that stocks paying dividends with a tax credit are likely targets for ex-dividend arbitrage. We show that order imbalance, based on the direct observation of buyer and seller initiated trades, is a key factor in price movements around the ex-dividend day. Buying pressure before the ex-dividend day aimed at capturing the dividend and tax credit leads to an increase in prices that subsequently reverse in the ex-dividend period. This effect is concentrated in those stocks distributing a tax credit with their dividend payments. The price pressure resulting from order imbalance is substantially higher around the ex-dividend day relative to the effect observed outside this period. Our results reject the model of Frank and Jagannathan (1998) that bid-ask bounce is responsible for the ex-day premium and provide support for explanations based on taxes, transaction costs, and incomplete price adjustment on the ex-day.

Institutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001 and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short-term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter-term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross-sectional variation over time. Our findings suggest that brokers innovate to provide valuable services in the subsequent, lower brokerage environment.

This study examines dynamic order placement strategies in a low-latency environment together with limit orders' aggressiveness by a new approach which utilises survival analysis with a multiple-spell duration model. Two samples are considered, including the period immediately followed Australian Securities Exchange (ASX)’s migration to Integrated Trading System (ITS) and the period subsequent to the launch of ASX Trade. We find the evidence supporting both the ‘cost of immediacy hypothesis' and the ‘chasing hypothesis' as in Hasbrouck and Saar (2009). Furthermore, several distinctions in the results are found between the samples of ITS period and ASX Trade period as well as between the samples of small-cap stocks and large-cap stocks. The findings of this study are beneficial not only for high-frequency traders in forming dynamic order placement strategies in a low-latency stock market environment, but also for market regulators in helping their attempt to improve regulations for stock exchanges.

We use Finnish OMX Helsinki data to examine the relationship between demographic variables, individual investors' broker choices and trade informativeness. We find that men prefer to use Full-Service-Retail over Discount-Retail brokers and that a higher level of income leads to a higher likelihood of using Discount-Retail brokers. Women present more heterogenous broker choice behaviors. However, both genders are more likely to carry out larger trades through Discount-Retail brokers. We show that trades executed via Discount-Retail brokers are more informative than those of Full-Service-Retail brokers and that only Discount-Retail brokers show trade informativeness differences across gender after controlling for age. Collectively, women make more informative trades then men, but this result reverses after partitioning by age. We conclude that conditioning on the type of broker reduces unobserved individual investor heterogeneity and that demographic variables are essential to the understanding of broker clientele effect. Furthermore, clientele differences observed across broker types are market specific and dominate the effects of financial advice in determining trade informativeness.

This study uses the trading records of institutional equity funds to examine their ex-dividend trading behaviour. We argue that trading is influenced by the tax incentives facing the fund, the characteristics of individual stocks and by changes in tax legislation. In aggregate, institutions trade to avoid the dividend and franking credit. Changes in tax incentives and the fund’s tax status also affect ex-dividend day trading, with unit trusts dominating the dividend avoidance trades. The results indicate that taxes, transactions costs and the cum-dividend price run-up influence the trading of institutional investors around the ex-dividend day.

We examine a general class of volatility over volume liquidity proxies as computed from low frequency (daily) data. We start from the Kyle and Obizhaeva (2016) hypothesis of transaction cost invariance to identify a new volatility over volume liquidity proxy “VoV(%Spread)” for percent spread cost and a new volatility over volume liquidity proxy “VoV(λ)” for the slope of the transaction cost function “λ”. We test the monthly and daily versions of these new and existing liquidity proxies against liquidity benchmarks as estimated from high frequency (intraday) data on both a global and US basis. We find that both the monthly and daily versions of VoV(λ) dominate the equivalent versions of Amihud and other cost-per-dollar-volume proxies on both a global and US basis. We also find that both the monthly and daily versions of VoV(%Spread) dominate the equivalent versions of other percent-cost proxies for US studies that cover pre-1993 years. In a case study, we find that our new VoV liquidity proxies yield different research inferences than the best previous liquidity proxies from the prior literature. The success of our invariance-based liquidity proxies across exchanges and over time supports the prediction of Kyle and Obizhaeva of a specific functional form for transaction costs across exchanges and over time.

This paper examines how liquidity provision is affected by market sentiment prior to scheduled earnings announcements. We use different measures of volatility to proxy for market-wide sentiment and stock-specific uncertainty to examine how they affect traders’ liquidity provision in the lead-up to earnings announcements. Our results show that traders reduce their provision of liquidity as volatility increases before scheduled announcements. This result is asymmetric with more pronounced effects on the bid side. Changes in the market depth closer to the top of the limit order book are associated with market-wide sentiment (VIX), whereas stock-specific implied volatility drives liquidity provision of value traders on the order book further away from the best-bid-offer price.

This paper examines the effect of algorithmic trading on the US mutual fund performance. Using the AT proxy of Hendershott et al. (2011), the US domestic equity mutual fund returns and their stock holdings, we find evidence that funds holding stocks with higher AT exposure have lower holdings return. This underperformance is compensated by higher interim trading profits of fund managers measured by the return gap. The strong positive causal effect of AT on return gap exists even after controlling for liquidity and execution shortfall, suggesting fund managers’ ability to benefit from improved trading conditions are brought about by AT. In addition, we find that the largest AT effect is in funds holding small-cap stocks, and the smallest effect in index funds.

© 2014 Michael G. Foster School of Business, University of Washington. We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the 12-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers, but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors' trades.

To reconcile why a growing number of households prefer to make their own trading decisions rather than to obtain professional advice, we examine the influence of households’ demographic characteristics such as gender, age, income and education on the choice between full service and discount brokers. We find that in general education has a greater impact on broker choice for women than for men. For men trading on their own through discount retail brokers, higher income and education is associated with better risk adjusted performance. Furthermore it is found that men and women, regardless of the broker type they use, perform better with age. The improvement in performance with age is more pronounced for women than for men.

Conventional discounted cash flow valuation techniques are inappropriate for mining companies because operational flexibilities are deemed an essential component of mine values. In this article the authors review the real options literature on the valuation of mines and their embedded option to close the mine. They use a model based on Brennan and Schwartz (1985) to empirically value Australian gold mines and mining companies. One difficulty with doing empirical research in this area is in obtaining relevant and complete data, given the nature of real assets and the fact that investments are typically private in nature. The mine data for this study is supplied by Brook Hunt Mining and Metal Industry Consultants, UK and covers the period from 1992 to 1995. The primary advantage of this data set is its consistency across different mines that cannot be matched by data sets derived from annual reports data. The authors find that the real options model is a useful tool for the description and valuation of operational flexibilities. However, the values of the embedded options are very sensitive to estimation errors in the input parameters of the model. While average and median closure option values are economically significant, the option values vary over a large range.

Overnight futures trading is available in USA, France and Australia. The overnight prices can be used to compute 24 h returns for two international markets over exactly the same time interval, even though the countries in which these markets operate are in completely different time zones. These synchronous returns make it possible to compute accurate daily correlation measures, which can for example be used for daily value-at-risk (VaR). Using Australian overnight index futures prices we find the correlation between USA and Australia to be about 55%, in stark contrast to near-zero correlation measures obtained from non-synchronous closing prices.

Chang et al. [Journal of Business 68 (1) (1995) 61] examine the impact of the closure of the New York Stock Exchange (NYSE) on S&P500 stock index futures traded on the Chicago Mercantile Exchange. They document a decline in futures market volatility immediately after the close of the NYSE, and an increase 15 minutes later when the futures market closes. They attribute this to contagion–i.e. a decline in information transfer from equities to futures markets following the closure of the underlying market. This paper examines the impact of the extension of trading hours in Hang Seng Index futures traded on the Hong Kong Futures Exchange on the 20 November, 1998 to 15 minutes after the close of the underlying market (the Stock Exchange of Hong Kong). Using the unique natural experiment provided by this change, a pattern similar to US markets is documented for the Hang Seng Index Futures following the change in trading hours. This provides strong evidence that the intraday pattern in volatility is caused by market closure. Unlike US futures exchanges, price reporters on the floor of the Hong Kong Futures Exchange collect quote data in addition to trade data. This data facilitates a test of another plausible microstructure explanation for the observed behaviour–bid–ask bounce associated with trading activity. This paper provides evidence that bid–ask bounce also explains part of the observed intraday behaviour in price volatility.

We use a large sample from 2001 to 2009 that incorporates intraday transactions data from 39 exchanges and an average of 12,800 different common stocks to assess the effect of algorithmic trading (AT) on firms’ capital raising activities. Greater AT reduces net equity issues over the next year, but this is only partly driven by AT’s effect on proceeds from new securities issues. Our findings suggest that the main driver of this relationship is AT’s effect on share repurchases.

Institutional brokerage rates have been in decline. We investigate whether this reduction has coincided with a fall in benefits provided by brokers to institutional asset managers. We use trade packages from both active and passive equity funds from 1995 to 2001, and active equity funds from 2002 to 2010. We find that later period active funds recoup a combined 1.75 basis point benefit (from price impact cost recovery and short-term alpha) per basis point of brokerage cost. Later period active investors saw improved trade price impact and shorter-term alpha net benefits, relative to earlier period active investors. These results are robust after controlling for trade characteristics and cross-sectional variation over time. Our findings suggest brokers innovate to provide valuable services in the subsequent, lower brokerage environment.

When fund managers trade sequentially in the same direction, the information confirmation hypothesis predicts the long-term profitability of the leader trade to be increasing in the number of subsequent trades. The information cascade hypothesis predicts a non-positive relationship. Using active equity fundsï½ daily trading data, we document a transition from information confirmation to information cascades as the number of followers increase. We find that highly disguised multiple-broker packages exhibit higher market impact, higher long-term returns and are associated with fewer followers. Our study also documents that lead fund managers face portfolio risk constraints in trading on private information.

We compare liquidity proxies constructed from low-frequency (daily) stock data to liquidity benchmarks computed from high-frequency (intraday) data for 18,472 firms on 43 exchanges around the world from January 1996 to December 2007. We evaluate eight percent-cost proxies (including a new one) relative to four percent-cost benchmarks: percent effective spread, percent quoted spread, percent realized spread, and percent price impact. We examine eleven cost-per-volume proxies (including a new one) relative to a costper-volume benchmark: the slope of the price function “lambda.” We test these proxies on three performance dimensions: average cross-sectional correlation with the benchmarks, portfolio correlations with the benchmarks, and prediction accuracy. We find that a new proxy, FHT, strongly dominates prior percent cost proxies. It is highly correlated with percent effective spread, percent quoted spread, percent realized spread, and percent price impact. It captures the level of percent effective spread and percent quoted spread, but does not capture the level of percent realized spread or percent price impact. We find that the best cost-per-volume proxies are FHT Impact, Zeros Impact, and Amihud. All three are highly correlated with lambda, but do not capture the level of lambda. Finally, we find that lower synchronicity, higher disclosure, lower turnover, and greater likelihood of prosecuting insider trading lead to higher performance of the best liquidity proxies.

The 10th International Congress of the International Radiation Protection Association (IRPA) was held on 14–19 May 2000 in Hiroshima. This conference is held every 4 years, a reasonable time interval that could usefully be copied by other international congresses, as it allows the development of new ideas and science for debate. Hiroshima is a bustling city, but also the selfstyled ‘‘city of peace’’. The conference centre is on the periphery of Peace Memorial Park, built on a site beneath the epicentre of the bomb. There are a number of statues and monuments within the park, the best known being the ‘‘A-bomb (Genbaku) dome’’, one of very few structures within a 1500 m radius to survive the blast and now a world heritage site. Each day the park receives hundreds of visitors of all ages and nationalities. The big issue at the conference was the debate on ‘‘controllable dose’’, a concept promoted by Roger Clarke in 1998, which has received much attention in the radiation protection community [1]. In 1999, the IRPA invited its member societies worldwide to comment on the proposals for major revision to the International Commission on Radiological Protection (ICRP) system for radiological protection. The outcome was a series of position papers from many member societies, including the UK Society for Radiological Protection, leading to a major debate in Hiroshima. The overall purpose was to review the current effectiveness of radiation protection and to provide input at an early stage to the ongoing work for a new or revised recommendation for the future. A full report of the debate was published in the Journal for Radiological Protection, to which the interested reader is referred [2]. It is sufficient to say here that the consultation process was widely acclaimed, that the basic principles of justification, optimization and dose limitation have proved sound and that in any review, defects and weaknesses should be corrected before introducing more radical change. Guidance on interpretation of the present system of radiation protection and means of communication with others needs amplifying, as well as involving other professional groups and the public. In summary, the radiation protection community received the Clarke proposal with interest but were conscious of the need to establish the existing framework more widely before introducing further changes. The proposals also threw up an interesting problem, not often considered in the past but becoming an increasing difficulty, namely that of language and terminology. Many different meanings and nuances can be put on a word in any one language, but the same word cannot always be directly translated into another language as the word may not exist or the concept is not understood. Traditionally, the conference opens with the Sievert Lecture and Award. Itsuzo Shigematsu (Japan) discussed lessons from the Atomic Bomb Survivors in Hiroshima and Nagasaki. He raised the possibility that the current survivors may reflect a resistant subpopulation that is not representative of overall human risk, and emphasized that radiation dosimetry remains essential for identifying an exposed population so that dose– response relationships can define the health risks of radiation. He pointed out that absolute risk is the fundamental index for assessing the frequency with which a radiation-induced disease occurs and concluded by describing the work of the Adult Health Study, which has been following a subsection of 20 000 survivors since 1958. Not only has this given data on emerging and nonfatal effects of radiation, but also on the ageing process in the Japanese population. The scientific programme was divided into 24 main topics, covering all aspects of radiation protection, from cosmic to underground, from medical to nuclear, from containment to communication with the public. The proceedings of this conference have been published on CD-ROM. This is a great improvement from before and Received 1 December 2000 and in revised form 29 May 2001, accepted 14 June 2001. The British Journal of Radiology, 74 (2001), 883–885 E 2001 The British Institute of Radiology

We study the informativeness of trades via discount and full-service retail brokers. We find that trades via full-service retail brokers are statistically and economically more informative than are trades via discount retail brokers. This finding holds in every year over the twelve-year sample period and in various subsamples. We also find that past returns, volatility, and news announcements positively relate to the net volume of discount retail brokers but these variables are unrelated to the net volume of full-service retail brokers. Our results suggest that broker type selection bias is an important consideration in studying individual investors’ trades.

Calcineurin A was purified by calmodulin-Sepharose affinity chromatography from Sf9 cells infected with recombinant baculovirus containing the cDNA of a rat calcineurin A isoform. The Sf9-expressed calcineurin A has a low basal phosphatase activity in the presence of EDTA (0.9 nmol/min/mg) which is stimulated 3-5-fold by Mn2+. Calmodulin increased the Mn2+ stimulated activity 3-5-fold. Bovine brain calcineurin B increased the A subunit activity 10-15-fold, and calmodulin further stimulated the activity of reconstituted A and B subunits 10-15-fold (644 nmol/min/mg). The Km of calcineurin A for 32P-RII pep (a peptide substrate (DLDVPIPGRFDRRVSVAAE) for CaN), was 111 microM with or without calmodulin, and calmodulin increased the Vmax about 4-fold. The Km of reconstituted calcineurin A plus B for 32P-RII pep was 20 microM, and calmodulin increased the Vmax 18-fold without affecting the Km. CaN A467-492, a synthetic autoinhibitory peptide (ITSFEEAKGLDRINERMPPRRDAMP) from calcineurin, inhibited the Mn2+/calmodulin-stimulated activities of the reconstituted enzyme and the A subunit with IC50's of 25 microM and 90 microM, respectively. The reconstitution of the phosphatase activity of an expressed isoform of calcineurin A by purified B subunit and calmodulin may facilitate comparative studies of the regulation of calcineurin A activity by the B subunit and calmodulin.

This study examines a portfolio strategy which selects stocks using the undisclosed monthly holdings of Australian active fund managers. When considering a large range of strategies incorporating fund portfolio holdings information, the top performing strategies are robust to data-snooping and are both economically and statistically significant. These strategies are short term in nature, with significant performance lasting up to two months. However, when we account for look-ahead bias in the formation of a strategy, we document the absence of statistically significant performance. When we consider a strategy following the best performing strategy holding 20 stocks or more in the previous month, we find statistically significant alpha of at least 6.88 percent per year.

This study investigates the tax efficiency of actively managed equity funds by conducting a previously unaddressed natural experiment. Specifically, we examine whether asset sales were timed to take advantage of the introduction of a substantial discount to realized capital gains when the holding period was at least 1 year. Institutional equity fund management in Australia is principally focused on the pre-fee and pre-tax performance surveys of leading asset consultants. Given this industry setting, our study is important because tax efficiency is not accounted for directly in the reported performance numbers, and is thus opaque. We find that active fund managers overall have significantly increased the proportion of long-term capital gains realized after the change in taxation code, although there are significant variations across funds. We also find that active fund managers realize more long-term gains on both large capitalization and low volatility stocks.

We study the trade performance of three investor clienteles: investors that use discount retail brokers, full service retail brokers and institutional brokers. Our data have some advantages over those used in other studies in that it covers trade and order data across an entire developed market dominated by institutional investors over a long sample period. We find that individual investors incur significant losses to institutional investors from intraday trading, whereas their net trades earn a positive return over the first month. While individuals trading through both full service and discount brokers lose from intraday trading, only full service broker trades profit over longer holding periods. Full service broker clients' limit order trades earn positive returns over 10 to 25 days, and their market order trades earn positive profit over horizons from 1 to 254 days. They fit the profile of individual investors in Kaniel, Saar and Titman (2008) and the behavior of informed traders in Bloomfield, O'Hara and Saar (2005). The returns discount broker clients earn on limit order trades are negative while those on market orders are not different from zero. Furthermore, discount broker client losses reduce over the course of a trading day, and during low volatility periods. Discount broker clients appear uninformed and suffer from better informed traders picking off their limit orders. Their consistent losses echo the finding in Barber, Lee, Liu and Odean (2009). Our counter party analysis and other robustness tests also support the above interpretation. Overall, our evidence from individual investors trading in stock markets is consistent with a Grossman and Stiglitz (1980) equilibrium in that full service brokers provide more valuable services to their clients than discount brokers and charge a higher fee. This is in contrast to Bergstresser, Chalmers and Tufano (2007) findings in the mutual fund industry. We conclude that individual investors are heterogeneous, and their trading performance reflects the information and brokerage services that they receive.

In a sequence of trades in the same direction across fund managers, we expect the long-term return of a trade to be increasing in the number of subsequent trades if fund managers' trading is driven by private information. In contrast, information cascades imply the lack of such a relationship. Using the number of brokers and the number of zero trading days prior to a trade to identify the beginning of a trade sequence in our daily fund manager trade series, we find evidence of private information trading when there are less than four fund managers in a trade sequence and information cascade when there are four or more fund managers. We discover that multiple-broker trades have higher price impact as well as higher long-term returns. These trades are also associated with fewer subsequent trades by other fund managers. Finally, we observe that the post-completion returns of the lead trades in a trade sequence are increasing in the managers' portfolio weights in excess of the index weights. While there is evidence that fund managers follow the trades of their peers, they typically trade on private information and they leave some 'money on the table' when they face binding risk constraints.

Using monthly active equity fund portfolio holdings, we examine the magnitude of style drift and decompose it into active and passive components. We find that while fund style tilts are consistent with their self-stated investment objective, there is variation in the degree of style bias within style groups. We document that funds actively adjust their portfolio holdings in response to passive style drift to retain a desired portfolio tilt. The degree of adjustment varies with the frequency over which the drift is measured, with funds being most responsive to changes in book-to-market and momentum drift. We also find that certain types of style drift affect portfolio turnover.

A costly arbitrage model, developed for the Australian imputation tax system, shows that stocks paying dividends with a tax credit are likely targets for ex-dividend arbitrage. We show that order imbalance, based on the direct observation of buyer and seller initiated trades, is a key factor in price movements around the ex-dividend day. Buying pressure before the ex-dividend day aimed at capturing the dividend and tax credit leads to an increase in prices that subsequently reverse in the ex-dividend period. This effect is concentrated in those stocks distributing a tax credit with their dividend payments. The price pressure resulting from order imbalance is substantially higher around the ex-dividend day relative to the effect observed outside this period. Our results reject the model of Frank and Jagannathan (1998) that bid-ask bounce is responsible for the ex-day premium and provide support for explanations based on taxes, transaction costs and incomplete price adjustment on the ex-day.

We examine the relation of active equity fund managers’ location proximity to a stock's headquarter and fund managers’ stock selection skill and investment behaviour using a representative sample of Australian institutional equity funds. Contrary to the findings of much international research, our study reveals evidence which is inconsistent with a location advantage for Melbourne and Sydney active equity funds. Both Melbourne and Sydney fund managers overweight Melbourne stocks, exhibit skill in picking Sydney stocks and avoid poor performing Melbourne and Sydney stocks. In addition, we find no evidence of word-of-mouth trading effects in Melbourne or Sydney funds. Taken together, this suggests information asymmetries arising from location are weak for Melbourne and Sydney funds. © 2008, SAGE Publications. All rights reserved.

This paper investigates the trading performance of retail brokerage investors on the Australian Securities Exchange (ASX) from 1990 to 2005. We document average losses per day, before transaction costs, of USD$120,000 (AUD$190,000) or 27 basis points per day from individual investors buying (selling) higher (lower) than the closing price on the day. This loss is robust across calendar years, stock size, order type, time of day and broker service offerings. Net of this loss, individual buy trades are statistically indistinguishable to sells at a 254-day/1 year window. We find that this result is due to the off-setting returns of discount and non-discount broker retail investors: Discount broker retail investors lose -1.85 percent while non-discount broker retail investors earn 1.23 percent from trade during the same trading window. This dichotomy in individual investor behaviour is consistent with the Grossman and Stiglitz (1980) information equilibria. Our findings have implications to studies analysing individual investor behaviour.

Sf9 cells infected with the recombinant mouse CaMKII-alpha (Ca2+/calmodulin dependent kinase II) baculovirus expressed 12-15 mg of MCaMKII-alpha per liter of cells. Approximately 50% of the MCaMKII-alpha activity could be purified using a CaM-Sepharose affinity column. The purified MCaMKII-alpha had a M(rapp) of 50 kDa by SDS-PAGE and a native Mr of 600 kDa. MCaMKII-alpha, like rat brain CaMKII, had an A0.5 for CaM of 100 nM, a Km for syntide-2 of 8 microM, and was able to generate Ca2(+)-independent activity by autophosphorylation. The baculovirus system expressed large quantities of MCaMKII-alpha with characteristics similar to the rat brain CaMKII, thus providing an expression system for the detailed biochemical analysis of MCaMKII-alpha.

The regulatory role of Arg283 in the autoinhibitory domain of Ca2+/calmodulin-dependent protein kinase II was investigated using substituted inhibitory synthetic peptides and site-directed mutation of the expressed kinase. In the synthetic peptide corresponding to the autoinhibitory domain (residues 281-309) of Ca2+/calmodulin-dependent protein kinase II, substitution of Arg283 by other residues increased the IC50 values of the peptides in the following order: Arg much less than Lys much less than Gln much less than Glu. Site-directed mutations of Arg283 to glutamic acid and glutamine in the kinase alpha subunit cDNA were transcribed and translated in vitro. The expressed enzymes had the same total kinase activities, determined in the presence of Ca2+/CaM, but the Glu283 mutant had a slightly higher Ca2(+)-independent kinase activity (5.46 +/- 0.88%) compared to the wild-type Arg283 (1.86 +/- 0.71%) and the Gln283 mutant (2.15 +/- 0.60%). When the expressed kinases were subjected to limited autophosphorylation on ice to monitor generation of the Ca2(+)-independent activity, the Arg283 kinase attained maximal Ca2(+)-independent activity (about 20%) within 30 s, whereas the Gln283 and Glu283 mutants attained maximal Ca2(+)-independence only after about 40 min of autophosphorylation. The results indicate that Arg283 is a very important determinant for the regulatory autophosphorylation of Thr286 that generates the Ca2(+)-independent activity but is not essential for the other multiple autophosphorylations within Ca2+/calmodulin-dependent protein kinase II, and that Arg283 is only one of several important residues for the inhibitory potency of the autoinhibitory domain.

This study provides an empirical examination of derivative instruments used by institutional investors. Our analysis provides a unique insight into the role of derivative securities within portfolios, and the potential benefits from their use. We contribute to the literature using a database that comprises the periodic portfolio holdings and daily trades of active equity managers. The consequence of derivative use is analyzed using a number of performance and risk measures. Overall, we find the use of derivatives have a negligible impact on fund returns. This finding is attributed to low levels of derivative exposure relative to total fund size. We also evaluate how derivatives are used by considering the trading strategies executed by investment managers. The option trading patterns of active institutional investors are shown to be consistent with the execution of momentum trading strategies. The study also documents that active investment managers prefer not to use options markets to engage in informed trading.

We examine the price impact cost of block trades across three trading mechanisms: the upstairs market, a crossing network system, and the limit order book. While, unsurprisingly, both the upstairs market and crossing system provide lower price impact costs for block trades than downstairs, using unique exogenous measures of market access we find no evidence that competition from these external markets has an adverse affect. Thus despite the threat that they drain liquidity and cream-skim to harm the main market, these alternative trading mechanisms are Pareto-improving for all investor classes and market participants regardless of which market is the major focus.

We use unique data from Australia to analyze the nature and determinants of order flow frag-mentation across all trades and every security traded. Our panel regression estimates shows that cross-sectional difference in off-market trading (ECNs, after-hours and upstairs trading alike) is driven by institutional trading interest (trading volume, indexation) and liquidity (bid-ask spread and market depth). At the transaction level, we study upstairs and primary downstairs block trades and find strong evidence that trade size, downstairs liquidity and a trader?s reputation af-fect his market selection decision. We conclude that there is significant competition between markets in highly liquid securities and their coexistence benefits those in a position to switch.

Calmodulin (CaM)-kinase II is inactive in the absence of Ca2+/CaM due to interaction of its autoinhibitory domain with its catalytic domain. Previous studies using synthetic autoinhibitory domain peptides (residues 281-302) identified several residues as important for inhibitory potency and suggested that His282 may interact with the ATP-binding motif of the catalytic domain. To further examine the autoinhibitory domain, site-specific mutants were expressed using the baculovirus/Sf9 cell system. The purified mutants had many biochemical properties identical to wild-type kinase, but mutants H282Q, H282R, R283E, and T286D had 10-20% constitutive Ca(2+)-independent activities, indicating that these residues are involved in the autoinhibitory interaction. The Ca(2+)-independent activities of the H282Q, H282R, and R283E mutants exhibited 10-fold lower Km values for ATP than the wild-type kinase. Wild-type and mutant kinases, except T286A and T286D, generated Ca2+ independence upon autophosphorylation in the presence of Ca2+/CaM, and those mutants having constitutive Ca2+ independence also exhibited enhanced Ca2+/CaM-independent autophosphorylation. This Ca(2+)-independent autophosphorylation resulted in a decrease in total kinase activity, but there was little increase in Ca(2+)-independent activity, consistent with autophosphorylation of predominantly Thr306 rather than Thr286. These results are consistent with an inhibitory interaction of His282 and possibly Arg283 with the ATP-binding motif of the catalytic domain, and they indicate that constitutively active CaM-kinase II cannot autophosphorylate on Thr286 in the absence of bound Ca2+/CaM. Based on these and other biochemical characterizations, we propose a molecular model for the interaction of a bisubstrate autoinhibitory domain with the catalytic domain of CaM-kinase II.

Calcineurin A was purified by calmodulin-Sepharose affinity chromatography from Sf9 cells infected with recombinant baculovirus containing the cDNA of a rat calcineurin A isoform. The Sf9-expressed calcineurin A has a low basal phosphatase activity in the presence of EDTA (0.9 nmol/min/mg) which is stimulated 3-5-fold by Mn2+. Calmodulin increased the Mn2+ stimulated activity 3-5-fold. Bovine brain calcineurin B increased the A subunit activity 10-15-fold, and calmodulin further stimulated the activity of reconstituted A and B subunits 10-15-fold (644 nmol/min/mg). The Km of calcineurin A for 32P-RII pep (a peptide substrate (DLDVPIPGRFDRRVSVAAE) for CaN), was 111 microM with or without calmodulin, and calmodulin increased the Vmax about 4-fold. The Km of reconstituted calcineurin A plus B for 32P-RII pep was 20 microM, and calmodulin increased the Vmax 18-fold without affecting the Km. CaN A467-492, a synthetic autoinhibitory peptide (ITSFEEAKGLDRINERMPPRRDAMP) from calcineurin, inhibited the Mn2+/calmodulin-stimulated activities of the reconstituted enzyme and the A subunit with IC50's of 25 microM and 90 microM, respectively. The reconstitution of the phosphatase activity of an expressed isoform of calcineurin A by purified B subunit and calmodulin may facilitate comparative studies of the regulation of calcineurin A activity by the B subunit and calmodulin.

Publisher Summary This chapter discusses brain CaM-kinase II with a particular focus on its unique regulatory properties, its regulation in cultured brain cells, and its physiological functions. CaM-kinase II has widespread tissue distribution as oligomeric isozyme forms and is particularly abundant in the brain. In certain regions of the brain, such as hippocampus, it constitutes up to 2% of total protein, which probably makes it the most abundant enzyme in these tissues. CaM-kinase II is localized presynaptically where it is involved in Ca 2+ -dependent regulation of neurotransmitter biosynthesis and exocytosis. At excitatory synapses in forebrain, there is a thickening of the postsynaptic membrane called the postsynaptic density (PSD), and CaM-kinase II constitutes about 30–50% of the protein in the PSD. These excitatory synapses are subject to a usage-dependent enhancement of synaptic transmission called long-term potentiation (LTP)—a popular model for learning and memory.

The regulatory role of Arg283 in the autoinhibitory domain of Ca2+/calmodulin-dependent protein kinase II was investigated using substituted inhibitory synthetic peptides and site-directed mutation of the expressed kinase. In the synthetic peptide corresponding to the autoinhibitory domain (residues 281-309) of Ca2+/calmodulin-dependent protein kinase II, substitution of Arg283 by other residues increased the IC50 values of the peptides in the following order: Arg much less than Lys much less than Gln much less than Glu. Site-directed mutations of Arg283 to glutamic acid and glutamine in the kinase alpha subunit cDNA were transcribed and translated in vitro. The expressed enzymes had the same total kinase activities, determined in the presence of Ca2+/CaM, but the Glu283 mutant had a slightly higher Ca2(+)-independent kinase activity (5.46 +/- 0.88%) compared to the wild-type Arg283 (1.86 +/- 0.71%) and the Gln283 mutant (2.15 +/- 0.60%). When the expressed kinases were subjected to limited autophosphorylation on ice to monitor generation of the Ca2(+)-independent activity, the Arg283 kinase attained maximal Ca2(+)-independent activity (about 20%) within 30 s, whereas the Gln283 and Glu283 mutants attained maximal Ca2(+)-independence only after about 40 min of autophosphorylation. The results indicate that Arg283 is a very important determinant for the regulatory autophosphorylation of Thr286 that generates the Ca2(+)-independent activity but is not essential for the other multiple autophosphorylations within Ca2+/calmodulin-dependent protein kinase II, and that Arg283 is only one of several important residues for the inhibitory potency of the autoinhibitory domain.

A cyclic AMP and calcium-independent protein kinase has been identified and purified from pig brain to near homogeneity. This independent protein kinase was isolated in an inactive form, and activation required ATP and Mg2+. On sodium dodecyl sulfate-polyacrylamide gel electrophoresis, the purified enzyme contains 1 subunit with a molecular mass of about 36 kDa. Although there was no significant phosphorylation of phosphorylase, phosphorylase b kinase, casein, phosvitin, and protamine, this kinase was found to be very active toward myelin basic protein and histones H1, 2A, and 2B. Trypsinolysis completely destroyed the kinase activity, indicating that this is not a protease-activated protein kinase. More interesting, this cAMP and calcium-independent protein kinase can be regulated by its state of phosphorylation. In its non-phosphorylated state, the kinase was essentially inactive but could be fully activated when the enzyme was phosphorylated up to a 1:1 molar ratio. Conversely, partial dephosphorylation of the phosphorylated enzyme was associated with a time-dependent decrease in the kinase activity and a loss of 32P. All the results taken together point out that this kinase is distinguished from all the reported protein kinases and may represent a previously undiscovered protein kinase. The results also provide initial evidence that a cascade activation mechanism may possibly be involved in the regulation of a protein kinase activity which is independent of cAMP and calcium.

Two peptide analogs of Ca2+/calmodulin-dependent protein kinase II (CaMK-(peptides)) were synthesized and used to probe interactions of the various regulatory domains of the kinase. CaMK-(281-289) contained only Thr286, the major Ca2+-dependent autophosphorylation site of the kinase (Schworer, C. M., Colbran, R. J., Keefer, J. R. & Soderling, T. R. (1988) J. Biol. Chem. 263, 13486-13489), whereas CaMK-(281-309) contained Thr286 together with the previously identified calmodulin binding and inhibitory domains (Payne, M. E., Fong, Y.-L., Ono, T., Colbran, R. J., Kemp, B. E., Soderling, T. R. & Means, A. R. (1988) J. Biol. Chem. 263, 7190-7195). CaMK-(281-309), but not CaMK-(281-289), bound calmodulin and was a potent inhibitor (IC50 = 0.88 +/- 0.7 microM using 20 microM syntide-2) of exogenous substrate (syntide-2 or glycogen synthase) phosphorylation by a completely Ca2+/calmodulin-independent form of the kinase generated by limited proteolysis with chymotrypsin. This inhibition was completely relieved by the inclusion of Ca2+/calmodulin in excess of CaMK-(281-309) in the assays. CaMK-(281-289) was a good substrate (Km = 11 microM; Vmax = 3.15 mumol/min/mg) for the proteolyzed kinase whereas phosphorylation of CaMK-(281-309) showed nonlinear Michaelis-Menton kinetics, with maximal phosphorylation (0.1 mumol/min/mg) at 20 microM and decreased phosphorylation at higher concentrations. The addition of Ca2+/calmodulin to assays stimulated the phosphorylation of CaMK-(281-309) by the proteolyzed kinase approximately 10-fold but did not affect the phosphorylation of CaMK-(281-289). A model for the regulation of Ca2+/calmodulin-dependent protein kinase II is proposed based on the above observations and results from other laboratories.