This report looks at diabetes in the UK today. It contains statistics about who is affected and how. Diabetes is serious. If left untreated, it can lead to heart disease, stroke, blindness, and kidney failure. Diabetes mellitus is a condition in which the amount of glucose (sugar) in the blood is too high because the body cannot use it properly. There are two main types of diabetes.
Type 1 diabetes develops if the body cannot produce any insulin. Insulin is a hormone which helps the glucose to enter the cells where it is used as fuel by the body. Type 1 diabetes usually appears before the age of 40. It is the least common of the two main types and accounts for around 10 per cent of all people with diabetes.
Unsolicited bank credit ratings assigned to banks by Nationally Recognized Statistical Rating Organizations (NRSROs), such as Standard and Poor’s Ratings Services (S&P’s) and Moody’s Investor Service (Moody’s), are controversial. Credit ratings that are initiated and paid for by issuers are called “solicited ratings,” and credit ratings that are not paid for by the issuing firm are called “unsolicited ratings.” The U.S. Department of Justice (DOJ) has recommended that the U.S. Securities and Exchange Commission (SEC) require rating agencies to disclose when credit ratings are unsolicited (Gasparino, 1996a). The DOJ stated that “‘unsolicited’ ratings may not be as accurate as ratings by retained agencies … When unsolicited ratings are not based on the same type of information as solicited ones, the ratings agency runs the risk that its rating is not accurate” (DOJ, 1998). Based on the survey of Baker and Mansi (2002), there are concerns that unsolicited ratings are less accurate than ratings that are paid for in the traditional manner because the rating agency does not have access to confidential information in the traditional ratings process.
Rating agencies encounter potential conflicts of interest because they serve both issuers and investors (Baker and Mansi, 2002). Investors are the main users of credit ratings, but fees paid by the issuers are the principal source of income of the agencies. For example, about 90 percent of Moody’s and Fitch’s revenues come from issuer fees (SEC, 2003). Michael Oxley (2004), Chairman of the House Committee on Financial Services, said in hearings about “The Ratings Game” that “Officials from Northern Trust Corporation have stated that the major rating agencies have requested payment for unsolicited ratings and strong-armed the company to pay the fees in return for a good rating. Northern Trust is not the only company to register a complaint about these practices.” The following year, Oxley (2005) also stated in hearings about “Reforming Credit Rating Agencies” that “Given the inherent conflicts and evidence that unsolicited ratings tend to be lower, this practice begs for reform, if not outright prohibitions.”
This paper demonstrate the importance of liquidity to asset pricing. It shows that liquidity is strongly related to the persistence of the momentum anomaly, which has not been explained by standard asset-pricing models to date. Most of these models take the stand that expected returns vary across assets because of variations in risk (see, e.g., Ferson and Jagannathan (1996)). Typically, the effects of market frictions, such as transaction costs, are ignored.
From a theoretical standpoint, one might argue that transaction costs can be ignored in the pricing of financial assets because investors can choose to trade only in liquid assets with low transaction costs and hold higher transaction-costs assets for longer periods (see, e.g., Constantinides (1986). See also Heaton and Lucas (1996), and Vayanos (1998)). Hence, when transaction costs are amortized over the expected holding period they become rather small and of second order. This argument assumes that transaction costs are constant and that investor are free to choose when to trade. However, these two assumptions may not hold in practice. First, this paper shows empirically that liquidity varies over time, which raises the possibility of a premium associated with liquidity risk. For example, when considering whether to undertake a large investment, an arbitrageur may demand a premium for bearing the risk of incurring large costs when closing out the position in the future. Second, investors may be impatient to execute their trades or they might be subject to liquidity shocks, forcing them to liquidate their positions. This paper finds that transaction costs can impose a first order effect on prices.
