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An objective look at high-frequency trading

May 28, 2015 Comments off

An objective look at high-frequency trading
Source: PricewaterhouseCoopers

Today’s trading is complex and frequently involves little human intervention. Five years after the “Flash Crash,” do you know how high frequency trading and dark pools work? Our new report separates fact from fiction.

Discount Rate (Risk-Free Rate and Market Risk Premium) Used for 41 Countries in 2015: A Survey

May 27, 2015 Comments off

Discount Rate (Risk-Free Rate and Market Risk Premium) Used for 41 Countries in 2015: A Survey
Source: Social Science Research Network

This paper contains the statistics of a survey about the Risk-Free Rate (RF) and of the Market Risk Premium (MRP) used in 2015 for 41 countries. We got answers for 68 countries, but we only report the results for 41 countries with more than 25 answers.

The average (RF) used in 2015 was smaller than the one used in 2013 in 26 countries (in 11 of them the difference was more than 1%). In 8 countries the average (RF) used in 2015 was more than a 1% higher than the one used in 2013.

The change between 2013 and 2015 of the average Market risk premium used was higher than 1% for 13 countries. Most of the respondents use for US, Europe and UK a Risk-Free Rate (RF) higher than the yield of the 10-year Government bonds.

A Look at the End-of-Life Financial Situation in America

May 21, 2015 Comments off

A Look at the End-of-Life Financial Situation in America
Source: Employee Benefit Research Institute

  • This report takes a comprehensive look at the financial situation of older Americans at the end of their lives. In particular, it documents the percentage of households with a member who recently died with few or no assets. It also documents the income, debt, home-ownership rates, net home equity, and dependency on Social Security for households that experienced a recent death.
  • Significant findings include that among all those who died at ages 85 or above, 20.6 percent had no non-housing assets and 12.2 percent had no assets left. Among singles who died at or above age 85, 24.6 percent had no non-housing assets left and 16.7 percent had no assets left.
  • Data show those who died at earlier ages were generally worse off financially: 29.8 percent of households that lost a member between ages 50 and 64 had no assets left. Households with at least one member who died earlier also had significantly lower income than households with all surviving members.
  • The report shows that among singles who died at ages 85 or above, 9.1 percent had outstanding debt (other than mortgage debt) and the average debt amount for them was $6,368.
  • The report also shows that the importance of Social Security to older households cannot be overstated. For recently deceased singles, it provided at least two-thirds of their household income. Couple households above 75 with deceased members received more than 60 percent of their household income from Social Security.

SEC Staff and FINRA Issue Report on National Senior Investor Initiative

April 17, 2015 Comments off

SEC Staff and FINRA Issue Report on National Senior Investor Initiative
Source: U.S. Securities and Exchange Commission and Financial Industry Regulatory Authority

With the Social Security Administration estimating that each day for the next 15 years, an average of 10,000 Americans will turn 65, the staff of the Securities and Exchange Commission (SEC) and the Financial Industry Regulatory Authority (FINRA) today issued a report to help broker-dealers assess, craft, or refine their policies and procedures for investors as they prepare for and enter into retirement.

The National Senior Investor Initiative report includes observations and practices identified in examinations that focused on how firms conduct business with senior investors. The examinations by the SEC’s Office of Compliance Inspections and Examinations (OCIE) and FINRA focused on the types of securities purchased by senior investors, the suitability of recommended investments, training of brokerage firm representatives, marketing, communications, use of designations such as “senior specialist,” account documentation, disclosures, customer complaints, and supervision.

Recent Trends in Securities Class Action Litigation: 2014 Full-Year Review

March 27, 2015 Comments off

Recent Trends in Securities Class Action Litigation: 2014 Full-Year Review
Source: NERA Economic Consulting

Securities class action settlement amounts plummeted in 2014 according to new analysis from NERA. In the latest edition of this annual study, Recent Trends in Securities Class Action Litigation: 2014 Full-Year Review, co-authors Dr. Renzo Comolli and Svetlana Starykh examine a wide range of data and draw from more than 20 years of NERA research on case filings and settlements in the US.

Measured by median amount, settlement amounts have been the lowest in 10 years. Measured by average amount, settlements have dropped 38-61 percent, depending on which types of class actions are considered. Moreover, average settlement amounts were actually lower after Halliburton II as compared with the previous part of 2014.

On the other hand, filings of 10b-5 cases increased 14 percent post Halliburton II compared to when the case was before the Court. Filings alleging violations of Rule 10b-5, Section 11, or Section 12 totaled 168 in 2014, an 11 percent increase over 2013 and a 30 percent increase over 2010 (the recent trough).

See also: Trends in Canadian Securities Class Actions: 2014 Update

The Lost Generation of the Great Recession

March 20, 2015 Comments off

The Lost Generation of the Great Recession
Source: Social Science Research Network

This paper analyzes the effects of the Great Recession on different generations. While older generations have suffered the largest decline in wealth due to the collapse in asset prices, younger generations have suffered the largest decline in labor income. Potentially, the young may benefit from the purchase of cheaper assets, especially if they have access to credit. To analyze the impact of these channels, I construct an overlapping generations model with borrowing constraints in which households choose a portfolio over risky and risk-free assets. Shocks to labor efficiency and uncertainty regarding the return on risky assets generate a recession with a drop in asset prices and cross-sectional changes in risky investment that are consistent with the recent recession. Overall, the young suffer the largest welfare losses, equivalent to an 8 percent reduction in lifetime consumption.

Do Tax Incentives Increase 401(k) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions

March 19, 2015 Comments off

Do Tax Incentives Increase 401(k) Retirement Saving? Evidence from the Adoption of Catch-Up Contributions
Source: Center for Retirement Research at Boston College

The U.S. government subsidizes retirement saving through 401(k) plans with $61.4 billion in tax expenditures annually, but the question of whether these tax incentives are effective in increasing saving remains unanswered. Using longitudinal U.S. Social Security Administration data on tax-deferred earnings linked to the Survey of Income and Program Participation, the project examines whether the “catch-up provision,” which was enacted in 2001 and allows workers over age 50 to contribute more to their 401(k) plans, has been effective in increasing earnings deferrals. Compared with similar workers under age 50, the study finds that contributions increased by $540 more among age-50-plus individuals who had approached the 401(k) tax-deferral limits prior to turning 50, suggesting that the older individuals respond to the expanded tax incentives. For this group, the elasticity of retirement savings to the tax incentive is quite high: a one-dollar increase in the tax-deferred limit leads to an immediate 49-cent increase in 401(k) contributions.

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