The impact of changes in the FTSE 100 index

This paper examines both the long-term and short-term impact associated with changes in the constituents of the FTSE 100 Index. We find that stocks exhibit positive (negative) abnormal long-run performance following their inclusion in (deletion from) the index. There is also evidence of significant short-term cumulative abnormal returns around the event. The reversal of these price effects suggests that short-term buying (selling) pressure (possibly from index trackers) moves prices temporarily away from equilibrium. An analysis of stock liquidity implies speculators may trade in advance of the announcement, while index trackers trade between the announcement and event dates. Finally, the organisation of the FTSE 100 Index enables us to conduct an analysis of stocks that just avoid being relegated from (fail to be promoted to) the FTSE 100

A Change of Focus: Stock Market Classification in the UK

This paper examines the impact of a change of focus by a firm, as signified by stock market reclassification. It distinguishes between sector reclassifications that are motivated by information specific to a particular firm, and those that result from sector redefinitions and reorganisations. The direction of the price effects following reclassification depends significantly upon this distinction. Moreover, for firm-specific reclassifications, the negative price effect is greater where the firm has been underperforming its sector, suggesting that investors may be sceptical about the motives underlying a change of focus. Furthermore, a stock’s return comovement with the FTSE All-Share Index may be affected by it being reclassified into a new sector. This change in return comovement is consistent with the allocation of stocks into categories, as discussed by Barberis and Shleifer (2003). Reclassification can induce common factors in the returns to stocks in an index without there being any change in these stocks’ fundamental cash flows

The Information Contained in The Exercise of Executive Stock Options

This paper investigates the use by insiders of private information in their decision to exercise executive stock options. It is the first to categorise the exercise of an executive stock option by the proportion of stock sold at exercise. Consistent with existing research, exercises overall do not yield subsequent abnormal returns. However, we find a marked and significant difference in subsequent performance between exercises categorised as ‘high’ and ‘low’ sale proportion respectively. Therefore, while the exercise decision may appear uninformed, this study demonstrates that executives do use private information in their exercise and corresponding sale decisions. Further, near-the-money exercises produce negative abnormal returns, consistent with such exercises being relatively expensive. These results need to be reflected in the valuation of executive stock options, and hence the compensation executives derive from them

Executive Stock Option Exercises and the Predictive Ability of Transaction Value

This paper investigates the predictive ability of executives’ stock option exercises by categorising all exercises by the overall value of the transaction. This measure incorporates the cost to the executive of exercising the option, together with the income generated by the associated sale of stock at the time of exercise. As a result, we show that, in contrast to the existing literature, executive stock option exercises do have predictive ability for future stock returns. This is, however, limited to transactions that generate net revenue for the executive, a finding that is the reverse of the evidence relating to standard executive transactions

The Equity Premium

Recent research on the equity risk premium has questioned the ability of historical estimates of the risk premium to provide reliable estimates of the expected risk premium. We calculate the equity risk premium for a number of countries over longer horizons than has been attempted to date. We show that the realised US equity premium is consistent with the premia obtained elsewhere. Furthermore, using well over a century of data, we find that current estimates of the equity premia are close to those observed during the pre-1914 era. This is of particular relevance given the argument that the financial environment during that period bears a closer resemblance to today than the 1914-1945 period, and possibly also the 1945-1971 period. This points to a current equity risk premium that is considerably lower than consensus forecasts (Welch 2001)

Private information in executives' option trades: Evidence from the UK

UK executives' stock option exercises and associated sell decisions are motivated by private, inside, information. Executives use their inside information to lock in short-term gains, and to sell stock acquired prior to negative abnormal stock returns. This informed trading is robust to the alternative factors that might motivate the exercise of executive stock options, including option moneyness and value of exercise. We suggest that the disparity in informed trading between US and UK executives' option trades is related to important differences in the proportion of executive remuneration linked to options, the regulation of options, and the taxation of option gains. Copyright (c) The London School of Economics and Political Science 2009

Design and Initial Performance of the Askaryan Radio Array Prototype EeV Neutrino Detector at the South Pole

We report on studies of the viability and sensitivity of the Askaryan Radio Array (ARA), a new initiative to develop a Teraton-scale ultra-high energy neutrino detector in deep, radio-transparent ice near Amundsen-Scott station at the South Pole. An initial prototype ARA detector system was installed in January 2011, and has been operating continuously since then. We report on studies of the background radio noise levels, the radio clarity of the ice, and the estimated sensitivity of the planned ARA array given these results, based on the first five months of operation. Anthropogenic radio interference in the vicinity of the South Pole currently leads to a few-percent loss of data, but no overall effect on the background noise levels, which are dominated by the thermal noise floor of the cold polar ice, and galactic noise at lower frequencies. We have also successfully detected signals originating from a 2.5 km deep impulse generator at a distance of over 3 km from our prototype detector, confirming prior estimates of kilometer-scale attenuation lengths for cold polar ice. These are also the first such measurements for propagation over such large slant distances in ice. Based on these data, ARA-37, the 200 km^2 array now under construction, will achieve the highest sensitivity of any planned or existing neutrino detector in the 10^{16}-10^{19} eV energy range.Comment: 25 pages, 37 figures, this version with improved ice attenuation length analysis; for submission to Astroparticle Physic

Performance of two Askaryan Radio Array stations and first results in the search for ultra-high energy neutrinos

Ultra-high energy neutrinos are interesting messenger particles since, if detected, they can transmit exclusive information about ultra-high energy processes in the Universe. These particles, with energies above $10^{16}\mathrm{eV}$, interact very rarely. Therefore, detectors that instrument several gigatons of matter are needed to discover them. The ARA detector is currently being constructed at South Pole. It is designed to use the Askaryan effect, the emission of radio waves from neutrino-induced cascades in the South Pole ice, to detect neutrino interactions at very high energies. With antennas distributed among 37 widely-separated stations in the ice, such interactions can be observed in a volume of several hundred cubic kilometers. Currently 3 deep ARA stations are deployed in the ice of which two have been taking data since the beginning of the year 2013. In this publication, the ARA detector "as-built" and calibrations are described. Furthermore, the data reduction methods used to distinguish the rare radio signals from overwhelming backgrounds of thermal and anthropogenic origin are presented. Using data from only two stations over a short exposure time of 10 months, a neutrino flux limit of $3 \cdot 10^{-6} \mathrm{GeV} / (\mathrm{cm^2 \ s \ sr})$ is calculated for a particle energy of 10^{18}eV, which offers promise for the full ARA detector.Comment: 21 pages, 34 figures, 1 table, includes supplementary materia

Cell shape analysis of random tessellations based on Minkowski tensors

To which degree are shape indices of individual cells of a tessellation characteristic for the stochastic process that generates them? Within the context of stochastic geometry and the physics of disordered materials, this corresponds to the question of relationships between different stochastic models. In the context of image analysis of synthetic and biological materials, this question is central to the problem of inferring information about formation processes from spatial measurements of resulting random structures. We address this question by a theory-based simulation study of shape indices derived from Minkowski tensors for a variety of tessellation models. We focus on the relationship between two indices: an isoperimetric ratio of the empirical averages of cell volume and area and the cell elongation quantified by eigenvalue ratios of interfacial Minkowski tensors. Simulation data for these quantities, as well as for distributions thereof and for correlations of cell shape and volume, are presented for Voronoi mosaics of the Poisson point process, determinantal and permanental point processes, and Gibbs hard-core and random sequential absorption processes as well as for Laguerre tessellations of polydisperse spheres and STIT- and Poisson hyperplane tessellations. These data are complemented by mechanically stable crystalline sphere and disordered ellipsoid packings and area-minimising foam models. We find that shape indices of individual cells are not sufficient to unambiguously identify the generating process even amongst this limited set of processes. However, we identify significant differences of the shape indices between many of these tessellation models. Given a realization of a tessellation, these shape indices can narrow the choice of possible generating processes, providing a powerful tool which can be further strengthened by density-resolved volume-shape correlations.Comment: Chapter of the forthcoming book "Tensor Valuations and their Applications in Stochastic Geometry and Imaging" in Lecture Notes in Mathematics edited by Markus Kiderlen and Eva B. Vedel Jense