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Facebook Inc. (FB) raised $16 billion in the biggest initial public offering by a technology company in history, pricing the shares at the top end of an increased range.
The social network sold 421.2 million shares at $38 each, a statement today shows. That values Facebook at $104.2 billion, making it the largest company to go public in the U.S. by market capitalization, according to data compiled by Bloomberg and Dealogic. Facebook, led by 28-year-old Mark Zuckerberg, this week expanded the IPO to meet demand, allowing investors Goldman Sachs Group Inc. and Accel Partners to reap more gains.

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The implosion in Spanish banks continues. On Wednesday, Spain nationalized BFA, the 8th nationalization since the start of the crisis.

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The Europeans have had the best governments money can buy. Their elected leaders have provided them with all sorts of wonderful social welfare benefits. Many Europeans are employed by their governments to provide those benefits to their needy fellow citizens. Those who cannot find a job, or are too depressed to look for one, are provided with extremely generous unemployment benefits. Retirement benefits are great, and early retirement is the norm. Life has been very good in Europe.

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The aim of this paper is twofold: to provide a theoretical framework and to give further empirical support to Shiller’s test of the appropriateness of prices in the stock market based on the Cyclically Adjusted Price Earnings (CAPE) ratio. We devote the first part of the paper to the empirical analysis and we show that the CAPE is a powerful predictor of future long run performances of the market not only for the U.S. but also for countries such as Belgium, France, Germany, Japan, the Netherlands, Norway, Sweden and Switzerland. We show four relevant empirical facts: i) the striking ability of the logarithmic averaged earning over price ratio to predict returns of the index, ii) how this evidence increases switching from returns to gross returns, iii) moving over different time horizons, the regression coefficients are constant in a statistically robust way, and iv) the poorness of the prediction when the precursor is adjusted with long term interest rate. In the second part we provide a theoretical justification of the empirical observations. Indeed we propose a simple model of the price dynamics in which the return growth depends on three components: a) a momentum component, naturally justified in terms of agents’ belief that expected returns are higher in bullish markets than in bearish ones; b) a fundamental component proportional to the log earnings over price ratio at time zero, from which the actual stock price may deviate as an effect of random external disturbances, and c) a driving component ensuring the diffusive behaviour of stock prices. Under these assumptions, we are able to prove that, if we consider a sufficiently large number of periods, the expected rate of return and the expected gross return are linear in the initial time value of the log earnings over price ratio, and their variance goes to zero with rate of convergence equal to minus one.

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We identify the major public debt overhang episodes in the advanced economies since the early 1800s, characterized by public debt to GDP levels exceeding 90% for at least five years. Consistent with Reinhart and Rogoff (2010) and other more recent research, we find that public debt overhang episodes are associated with growth over one percent lower than during other periods. Perhaps the most striking new finding here is the duration of the average debt overhang episode. Among the 26 episodes we identify, 20 lasted more than a decade. Five of the six shorter episodes were immediately after World Wars I and II. Across all 26 cases, the average duration in years is about 23 years. The long duration belies the view that the correlation is caused mainly by debt buildups during business cycle recessions. The long duration also implies that cumulative shortfall in output from debt overhang is potentially massive. We find that growth effects are significant even in the many episodes where debtor countries were able to secure continual access to capital markets at relatively low real interest rates. That is, growth-reducing effects of high public debt are apparently not transmitted exclusively through high real interest rates.

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This paper links the recent fragmentation in equity trading to the arrival of high-frequency traders (HFTs). It documents how three events coincided: a new market’s take-off, the arrival of a large HFT, and a 50% drop in the bid-ask spread. Detailed analysis of the HFT’s trading strategy reveals that 80% of its trades were passive, i.e., its price quote was consumed by others. It participated in 14.4% of all trades, it was extremely fast, and, per trade, it earned a net EUR1.55 on the spread but lost EUR0.68 on its position. In sum, the HFT that ‘made’ the new market looks much like an electronic version of the classic market maker.

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China’s economy expanded by $520 billion (8.7%). China’s fixed asset investment grew by $516 billion (24%). Therefore, China’s economy ex-fixed asset investment did not grow. Given that China’s growth depends on fixed asset investment, it is necessary to conclude that if fixed asset investment is not true economic growth than China’s economy is in a recession.

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Owners of growth stocks can be especially vulnerable to a missed quarter, since an earnings miss affects both the “E” in the P/E ratio and may also lead to a lower multiple.

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The potential for, and actual occurrence of, short squeezes are taken as a fact of life by professional investor but receive little attention from the academic community. In this study, we document systematic evidence of short squeezes in individual stocks and investigate the determinants of short squeezes. By examining stock returns following events of large one-day price increases, we report that an average short squeeze has a 3.25% impact on stock price and this effect lasts for a day and half. Further, we find that the impact of short squeezes is significantly correlated with event-day stock returns, short interest, institutional holdings, event-day market returns and event-day industry returns. We also find that the impact of short interest, institutional holdings, event-day market returns and event-day industry returns on short squeezes is more significant after the SEC’s adoption of Regulation SHO in 2005. In the aggregate, this evidence suggests that the capital constraints of short sellers and the short sale constraints of individual stocks are key determinants of short squeezes.

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Apple’s market cap is larger than the combined market cap of companies in Spain, Portugal, and Greece.