Fads, Fallacies and Foolishness in Medical Care Management and Policy (268 pages)

No one misses the onslaught of claims about reforming modern medical care. How doctors should be paid, how hospitals should be paid or governed, how much patients should pay when sick in co-payments, how the quality of care could be improved, and how governments and other buyers could better control the costs of care - all find expression in the explosion of medical care conference proceedings, op-eds, news bulletins, journal articles, and books. This collection of articles takes up a key set of what the author regards as particularly misleading fads and fashions - developments that produce a startling degree of foolishness in contemporary discussions of how to organize, deliver, finance, pay for and regulate medical care services in modern industrial democracies. The policy fads addressed include the celebration of explicit rationing as a major cost control instrument, the belief in a "basic package" of health insurance benefits to constrain costs, the faith that contemporary cross-national research can deliver a large number of transferable models, and the notion that broadening the definition of what is meant by health will constitute some sort of useful advance in practice. Contents 8 Preface to Volume 3 6 Introduction to Volume 3 Ivan E. Brick, Tavy Ronen 10 List of Contributors 16 Section I — Economics of Limit Orders 22 Chapter 1 Discriminatory Limit Order Books, Uniform Price Clearing and Optimality Lawrence R. Glosten 24 1. Introduction 24 2. The Economic Setting 25 3. OptimumTerms of Trade 28 4. Discriminatory CLOB and Uniform Price Clearing 32 4.1. CLOB 32 4.2. Uniform price clearing 34 4.3. Welfare analysis 36 5. Discussion 37 6. Conclusion 38 Acknowledgments 38 References 38 Chapter 2 Electronic Limit Order Books and Market Resiliency: Theory, Evidence, and Practice Mark Coppejans, Ian Domowitz, Ananth Madhavan 40 1. Introduction 40 2. Theory 41 2.1. Model framework 41 2.2. Liquidity dynamics 43 3. Empirical Results 44 3.1. Institutional details 44 3.2. Data 45 3.3. Liquidity metrics 45 3.4. Realized price impact costs 48 4. Dynamics of Liquidity 49 4.1. Identification 49 4.2. Specification and estimation of market liquidity dynamics 50 4.3. Impulse response functions 50 4.4. The dynamic relationship between liquidity and volatility 53 5. Practical Issues 54 5.1. Institutional trading 54 5.2. Optimal trading strategies 55 5.3. Market structure, trading protocols, and resiliency 55 6. Conclusion 56 Acknowledgments 56 References 56 Chapter 3 Notes for a Contingent Claims Theory of Limit Order Markets Bruce N. Lehmann 60 1. Introduction 60 2. Limit Orders as Order Flow Derivatives 62 3. Limit Order Valuation and Order Flow Bets 65 4. Limit Order Book Dynamics 73 5. Conclusion 75 Acknowledgments 76 References 76 Chapter 4 The Option Value of the Limit Order Book Alex Frino, Elvis Jarnecic, Thomas H. McInish 78 1. Introduction 78 2. The ASX Market Structure 80 3. Data and Methodology 82 3.1. Databases and sample selection 82 3.2. Reconstruction of the limit order schedule 82 3.3. Calculation of variables and the option value of a limit order 83 3.4. The limit order schedule and its option value 84 4. Empirical Results 84 4.1. An intraday examination of the limit order schedule 84 4.2. Robustness of results across size of stocks and time periods 88 5. Summary and Conclusions 90 Acknowledgments 91 References 91 Section II — Essays on Liquidity of Markets 94 Chapter 5 The Cross Section of Daily Variation in Liquidity Tarun Chordia, Lakshmanan Shivakumar, Avanidhar Subrahmanyam 96 1. Data 99 1.1. Inclusion requirements 99 1.2. Summary statistics 101 2. The Relation Between Liquidity and Stock Volatility 107 2.1. Theoretical background 107 2.2. Empirical analysis 109 2.2.1. Time-series regressions 109 2.2.2. Cross-sectional determinants of the response of liquidity to absolute returns 119 2.2.3. Robustness checks 125 3. Conclusion 128 Acknowledgments 130 References 130 Chapter 6 Intraday Volatility on the NYSE and NASDAQ Daniel G.Weaver 132 1. Introduction 132 2. Sample and Methodology 134 3. Results 140 4. Conclusion 158 Acknowledgments 158 References 158 Chapter 7 The Intraday Probability of Informed Trading on the NYSE Michael A. Goldstein, Bonnie F. Van Ness, Robert A. Van Ness 160 1. Introduction 160 2. Probability of Informed Trading Model 162 3. Data 163 4. Intraday Results 164 5. Factors that Might Affect the Overall Probability Informed Trading 171 5.1. Spread 172 5.2. Price 172 5.3. Trading activity, order flow, and regional exchanges 172 5.4. Trade size 173 5.5. Risk 173 6. Conclusion 177 References 178 Chapter 8 Leases, Seats, and Spreads: The Determinants of the Returns to Leasing a NYSE Seat Thomas O. Miller, Michael S. Pagano 180 1. Introduction 180 2. Relevant Literature 182 3. An Empirical Model of Returns on Leasing NYSE Seats 183 4. Sample 186 5. Empirical Results 187 5.1. Summary statistics 187 5.2. Historical trends in leasing returns and seat prices 188 5.3. Empirical tests of the partial adjustment model of NYSE seat leasing returns 190 6. Conclusion 193 Acknowledgments 194 References 194 Chapter 9 Decimalization and Market Quality Robin K. Chou,Wan-Chen Lee 196 1. Introduction 196 2. Data 200 3. Research Methodology 201 3.1. Spreads 201 3.2. Depth 202 3.3. Trading activities 202 3.4. Clustering 203 3.5. Front-running 203 3.6. Multivariate regression test 204 4. Empirical Results 205 4.1. Spreads and depth 205 4.2. Trading activities 207 4.3. Clustering 208 4.4. Front-running 209 4.5. A closer look at decimalization 211 5. Conclusions 213 Acknowledgments 213 References 214 Section III — Market Rationality 216 Chapter 10 The Importance of Being Conservative: An Illustration of Natural Selection in a Futures Market GuoYing Luo 218 1. Introduction 218 2. The Model 221 3. The Simulation Model 227 4. Conclusion 236 References 237 Chapter 11 Speculative Non-Fundamental Components in Mature Stock Markets: Do they Exist and are they Related? Ramaprasad Bhar, A. G. Malliaris 238 1. Introduction 238 2. Rational Asset Bubbles 239 3. Review of Key Empirical Papers 240 3.1. Flood and Garber (1980) 240 3.2. West (1987) 241 3.3. Ikeda and Shibata (1992) 242 3.4. Wu (1997) 243 3.5. Wu (1995) 244 4. Global Stock Market Integration 245 5. Our Methodological Contribution 246 6. Dynamic Linear Model with Nonfundamental Component 247 7. Dynamic Linear Model with Garch Error 249 8. Subset VAR Framework for Establishing Linkages Between Markets 249 9. Discussion of Results 251 10. Conclusions 258 Appendix A: Setting up the DLM with Nonfundamental Component 259 Appendix B: Setting up the DLM with Garch Error 261 Appendix C: Estimating the Parameters of the DLM 262 Acknowledgments 265 References 265 Index 268