minimum variance hedging of bitcoin inverse futures we formulate an optimal hedging problem of bitcoin inverse futures under the minimum variance framework we obtain the optimal hedging strategy in closed forms for both short and long hedges and co

how investible is bitcoin analyzing the liquidity and transaction costs of bitcoin markets abstract we examine the investibility of bitcoin by exploring the trading dynamics and market microstructure of bitcoin on three us cryptocurrency exchanges using high frequency intraday data of individual trades and quotes although all exchanges offer continuous trading we find that the highest trading activity highest volatility and lowest spreads coincide with us market trading hours suggesting that most trades are non algorithmic and executed by retail investors we further find that average quoted and effective spreads for bitcoin are lower than spreads on major equity exchanges implying that bitcoin is highly investible for retail size transactions

spatial competition and vertical integration cement and concrete revisited reply in this review 1983 mark mcbride reconsiders the federal trade commission s ftc enforcement policy toward vertical mergers between cement and ready mix concrete firms in response to a significant increase in acquisitions of ready mix concrete firms by cement manufacturers during the 1960 s the ftc undertook a series of legal actions to block or dissolve the mergers the actions of the ftc constituted one of the most intensive efforts undertaken to date to challenge vertical mergers in a single industry mcbride p 1012 notes that the actions of the ftc provoked considerable debate concerning the motivation for the mergers both in the industry and in academe a significant number of articles were published advancing various reasons for the mergers in addition to the ftc s main contention that the mergers were motivated by a desire for captive markets it has been suggested that there were economies of integration or that the mergers were the outcome of an erroneous view of the potential benefits to foreclosure held by executives in the beleaguered cement industry 2 mcbride s 1983 paper offers another explanation for the mergers his argument is that vertical integration was undertaken to avoid rigid oligopolistic pricing in the cement industry 3 the empirical results presented by mcbride suggest that vertical integration was a significant factor in the decline of cement prices in the 1960 s the purpose of this comment is to point out some of the problems with mcbride s analysis in particular we show that the experimental design of his testing equation is faulty and does not offer a test of his hypothesis as a result mcbride s analysis does not provide convincing evidence on whether cement firms vertically integrated to avoid rigid oligopolistic pricing or if cement firms were merely reacting to prices that had already begun to decline our intent however is not to challenge mcbride s contention that vertical integration can provide lower prices to consumers rather we would argue that the evidence presented at the ftc hearings involving cement and ready mix concrete firms as well as mcbride s and others analyses illustrate the problems in discerning the motives for mergers 4

risk and return in an equilibrium apt application of a new test methodology abstract we use an asymptotic principal components technique to estimate the pervasive factors influencing asset returns and to test the restrictions imposed by static and intertemporal equilibrium versions of the arbitrage pricing theory apt on a multivariate regression model the empirical techniques allow for fairly arbitrary time variation in risk premiums we find that the apt provides a better description of the expected returns on assets than the capital asset pricing model capm however some statistically reliable mispricing of assets by the apt remains

sequential tests of the arbitrage pricing theory a comparison of principal components and maximum likelihood factors we examine the cross sectional pricing equation of the apt using the elements of eigenvectors and the maximum likelihood factor loadings of the covariance matrix of returns as measures of risk the results indicate that for data assumed stationary over twenty years the first vector is a surprisingly good measure of risk when compared with either a one or a five factor model or a five vector model we conclude that in some circumstances principal components analysis may be preferred to factor analysis

bitcoin for energy commodities before and after the december 2013 crash diversifier hedge or safe haven abstractwe study the relationship between bitcoin and commodities by assessing the ability of bitcoin to act as a diversifier hedge or safe haven against daily movements in commodities in general and energy commodities in particular we focus on energy commodities because energy in the form of electricity is an essential input in the bitcoin production for the entire period results show that bitcoin is a strong hedge and a safe haven against movements in both commodity indices we further examine whether that ability is also present for non energy commodities and our analysis show insignificant results when energy commodities are excluded from the general commodity index we also account for the december 2013 bitcoin price crash and our results reveal that bitcoin hedge and safe haven properties against commodities and energy commodities are only present in the pre crash period whereas in the post crash period bitcoin is no more than a diversifier in addition to uncovering the time varying role o

on the number of factors in the arbitrage pricing model recent theory has demonstrated that the arbitrage pricing model with k factors critically depends on whether k eigenvalues dominate the covariance matrix of returns as the number of securities grows large the purpose of this paper is to test whether sample covariance matrices can be characterized as having k large eigenvalues using all available data on the 1983 crsp tapes we compute sample covariance matrices of returns in sequentially larger portfolios of securities analyzing their eigenvalues we find evidence that one eigenvalue dominates the covariance matrix indicating that a one factor model may describe security pricing we also find that for values of k larger than one there is no obvious way to choose the number of factors nevertheless we find that while only the first eigenvalue dominates the matrix the first five eigenvalues are growing more distinct arbitrage pricing theory apt as originally developed by ross 22 23 is built on the twin assumptions of no arbitrage opportunities in the capital market and a linear relationship between actual returns and k common factors the principal hypothesis of the model is that expected returns should be linearly related to the weights of the common factors in the assumed linear process in every test of the model the focus has been to use factor analysis to extract k factors from sample covariance matrices and then to test the hypothesis by regressing returns or average returns against the factor loadings of the common factors most previous tests have either assumed that the number of factors is equal to some predetermined number or have estimated k simultaneously with estimation of the factor loadings thus existing tests of the apt are joint tests of the apt pricing result and an assumed or estimated number of factors the question of how many factors are important has not been addressed separately from the pricing tests because the apt pricing result is the significant prediction of a theory which has little to say about the value of k nevertheless crosssection linear models have been a central part of financial economics and it is clearly important to know at least the approximate number of factors which will be significant in such regressions particularly given the computational difficulties of large scale factor analysis furthermore dhrymes friend and gultekin 6 report that the number of factors needed for standard chi squared tests increases university at buffalo suny i am in debt to donald bosshardt gary chamberlain thomas ho richard roll lemma senbet mark zmijewski and the participants in finance workshops at the universities of michigan wisconsin and buffalo for their extensive comments nevertheless i am solely responsible for what remains this paper would not have been started without the unselfish cooperation of jay leavitt director of academic computing university at buffalo suny who designed the eigenvalue algorithm which i used i am also grateful for partial financial support and lavish computer funds from the school of management and for the expert programming assistance provided by ravi shukla

spillovers between bitcoin and other assets during bear and bull markets this article contributes to the embryonic literature on the relations between bitcoin and conventional investments by studying return and volatility spillovers between this largest cryptocurrency a

speculative bubbles in bitcoin markets an empirical investigation into the fundamental value of bitcoin amid its rapidly increasing usage and immense public interest the subject of bitcoin has raised profound economic and societal issues in this paper we undertake economic and econometric modelling of bitcoin prices as with many asset classes we show that bitcoin exhibits speculative bubbles further we find empirical evidence that the fundamental price of bitcoin is zero

value at risk and expected shortfall in cryptocurrencies portfolio a vine copula based approach risk management is an important and helpful process for investors hedge funds traders and market makers one of its key points is the appropriate estimation of risk measures which can improve the

alternative models of spatial competition the concept of a spatial price equilibrium underlies most studies of spatial movement and competition however this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets such as the markets for oil and coal and ignores the existence of local spatial monopolies this paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm specifically after reformulating the classical spatial price equilibrium model and two extensions of takayama and judge s monopoly model we state and analyze a cournot nash model and discuss solution algorithms we then generalize these models and algorithms to multiple commodities and networks with transshipment nodes we conclude with a brief discussion of possible extensions of this class of models and associated algorithms

imperfect competition in the international energy market a computerized nash cournot model this paper describes the conceptual structure properties and solution approach of a computerized model of the international energy market the model treats energy producers as players in a multistage noncooperative game the goal of each player or cartel of players is assumed to be maximization of discounted profit subject to technical political and resource constraints the model calculates that collection of intertemporal extraction and price paths from which a player can unilaterally deviate only at a loss the open loop nash equilibrium the model integrates the theory of exhaustible resources due to hotelling and the theory of oligopoly due to nash and cournot although useful as a teaching device to illustrate theoretical results its main function is to facilitate analysis of real world resource problems the model is flexible allowing the user to specify not only cost demand and reserve information but also assumptions about who belongs to what coalition two shortcomings deserve note t

computing cournot nash equilibria this paper examines convergence criteria of an algorithm for the computation of cournot nash economic equilibria the method is based on formulating the equilibrium problem as that of finding a solution to a nonlinear complementarity problem solved by sequential linearization and lemke s algorithm conditions for local and global convergence are developed and the technique is applied to homogeneous segmented and differentiated product markets

corrections for trading frictions in multivariate returns when observed stock returns are obtained from trades subject to friction it is known that an individual stock s beta and covariance are measured with error univariate models of additive error adjustment are available and are often applied simultaneously to more than one stock unfortunately these multivariate adjustments produce nonpositive definite covariance and correlation matrices unless the return sample sizes are very large to prevent this restrictions on the adjustment matrix are developed and a correction is proposed which dominates the uncorrected estimator the estimators are illustrated with asset opportunity set estimates where daily returns have trading frictions a number of univariate nonsynchronous trading adjustments are available for beta but no multivariate adjustment has been specifically designed for a general covariance matrix for example the univariate trading friction adjustment of cohen hawawini maier schwartz and whitcomb chmsw 1983 is a generalization of scholes and williams 1977 the chmsw procedure adjusts beta to account for price adjustment delays exceeding one period where a portion of the true return is reflected in lagged returns the procedure is extended and applied in shanken 1987 to estimation of the daily multivariate covariance matrix of stocks returns observed covariances significantly understated true covariances by a factor of two suggesting that a daily covariance adjustment is necessary because of a large number of studies which employ multivariate daily stock returns it is therefore important that the adjustment results in a good estimator of the covariance matrix while no evidence is available regarding other properties it is shown in chmsw that their univariate adjusted estimator has the desirable statistical properties of consistency and unbiasedness unfortunately when the adjusted covariance estimator is applied in finite samples the resulting adjusted covariance matrix may not be a covariance matrix and the implied adjusted correlation matrix independently may not be a correlation matrix because the adjustment does not restrict the covariance and correlation matrices to be positive definite 1 when these matrices are not positive definite functions of these matrices can produce very unreliable inference results this paper provides empirical examples of the violations of the positive definite

stable factors in security returns identification using cross validation recent papers in financial research focus on identifying a stable factor structure for security returns the likelihood ratio test typically is used to determine the number of factors from exploratory factor analysis models in this article we consider the use of cross validation to identify a stable factor structure in security returns when applied to actual stock return data cross validation identifies a smaller number of stable factors than the likelihood ratio test in groups of 30 60 randomly selected securities cross validation suggests one dominant factor whereas the likelihood ratio test identifies from four to six factors furthermore when groups are designed to highlight industry or size effects the discovery of more than one dominant factor is problematic even if there are multiple economic factors generating stock returns they may be difficult to disentangle if the underlying factors tend to be correlated

can cryptocurrencies be a safe haven a tail risk perspective analysis abstractcryptocurrencies are one of the most promising financial innovations of the last decade different from major stock indices and the commodities of gold and crude oil the cryptocurrencies e

friction in the trading process and the estimation of systematic risk abstract this paper considers how estimates of the market model beta parameter can be biased by friction in the trading process information decision and transaction costs that a leads to a distinction between observed and true returns b causes observed returns to be generated asynchronously for a set of interdependent securities and c thereby introduces serial cross correlation into security returns several propositions are derived from which consistent estimators of beta are obtained and the effect of differencing interval length on beta estimates is specified the formulation is contrasted with the related analyses of scholes williams 1977 and dimson 1979

spatial pricing in the united states west germany and japan this paper investigates the spatial pricing policies of a sample of firms in the united states west germany and japan we begin in section i by providing general results for the three countries these suggest that f o b pricing is the exception rather than the rule furthermore there appear to be significant differences between the countries in the degree of spatial price discrimination the remainder of the paper examines whether the inter country differences in spatial discrimination can be explained by a theory of spatial pricing section ii uses the theory of spatial pricing proposed in greenhut and greenhut 1975 to derive an operational model in section iii the parameters of this model are estimated from the individual country data and the results are discussed section iv presents the conclusions the data used in this study were obtained from a survey of firms in the three countries in each country target regions were selected with a similar urban rural proportions as restricted by b existing acquaintanceships with professors in or near these urban rural centres survey constraint b was imposed after a mailed questionnaire pilot study in the united states had indicated a likely need for follow up mailings phone calls and even interviews before a sufficient number of responses from a particular place e g a particular state in the united states could be expected after selecting our comparable survey areas firms were picked at random from industrial lists of business establishments in each country and questionnaires were mailed to them the questionnaire is reproduced in the appendix the firms that returned questionnaires were compared to non responding firms no distinction in size of firm industry type or location was apparent for any country or sub region studied among the respondents we dropped from the sample all firms that were not subject to a significant freight cost defined to be a 5 per cent minimum freight cost to delivered cost ratio on sales to at least one distant market point our findings on pricing strategies are summarized in table 1 firms in the united states tend to price discriminatorily of 174 sampled firms less than one third priced non discriminatorily f o b the spokesmen for the remaining firms 67 per cent admitted that they did not add full freight cost to their mill price on all of their distant sales these firms therefore priced discriminatorily the tendency to price discriminatorily is even greater in west germany and japan with the percentage of discriminating firms approximately

border flow rights and contracts for differences of differences models for electric transmission property rights in this paper a property rights model for electric transmission is proposed and its properties analyzed the proposed rights called border flow rights support financial hedging of transmission risk and merchant transmission expansion through associated financial rights called contracts for differences of differences these financial rights allow for forward trading of both energy and transmission by a unified exchange avoiding the bifurcation in current markets between decentralized long term energy trading and centralized long term transmission trading such long term trading can help to support the financing of both generation and transmission assets we consider incentive properties of such a right in the absence of lumpiness economies of scale and market power

large scale market power modeling analysis of the u s eastern interconnection and regulatory applications this paper presents results from a large scale cournot model of the u s eastern interconnection using a dc load flow network there are 100 network locations at the level of control areas along with 2725 generators owned by 99 cournot firms and 200 competitive fringe suppliers these results demonstrate that this modeling approach can analyze potential generation market power with a reasonable approximation of the actual transmission network over a large integrated region while such models have been used to analyze market design alternatives their application to regulatory decision making concerning generation market power mitigation has been more controversial we suggest that such large scale market price simulations could improve upon aspects of the existing generation market power screening methods used in the united states for mergers and market based rates illustrating such applications using this model

transformed securities and alternative factor structures grinblatt and titman 1985 reformulate a result of chamberlain and rothschild 1983 to show that the approximate factor structure of chamberlain and rothschild is asymptotically equivalent to the strict factor structure of ross 1976 as long as investors can always repackage securities into an equal number of arbitrary portfolios this paper uses a procrustes rotation methodology that is compatible with the repackaging interpretation of grinblatt and titman to show that the empirical structure of stock prices is consistent with the convergency hypothesis

volatility and return jumps in bitcoin abstract in this article we are interested in understanding the dynamics of bitcoin daily returns and volatility cryptocurrencies have very high unconditional volatility and are subject to sudden massive price swings we start with a standard log normal stochastic volatility model then explore two formulations which incorporate discontinuous jumps to volatility and returns jumps to volatility are permanent while jumps to mean returns have contemporaneous effects only results point to two high volatility periods the first from late 2013 to early 2014 likely associated to the mt gox incident the second covers the year of 2017 peaking on december likely driven by increased popular attention jumps to mean returns are specially relevant to capture large price variations mostly negative associated with formative events in cryptocurrency markets such as hacks and unsuccessful fork attempts

stochastic programming based bounding of expected production costs for multiarea electric power system a bounding based method is developed for estimating the expected operation cost of a multiarea electric power system in which transmission capacity limits interarea flows costs include the expense of power generation and losses suffered by consumers because of supply shortfalls averaged over random generator outage states and varying demand levels the calculation of this expectation termed the distribution problem is a large scale stochastic programming problem rather than solving this problem directly lower and upper bounds to the expected cost are created using two more easily solved models the lower bound is from a deterministic model based on the expected value of the uncertain inputs the upper bound results from a linear program with recourse whose structure permits relatively quick solution by benders decomposition the benders subproblems use probabilistic production costing which can be viewed as a stochastic greedy algorithm to consider random outages and demands these bounds are iteratively tightened by partitioning realizations of the random variables into subsets based on the status of larger generators and a cluster analysis of demands computational examples are described and application issues addressed

a critical reexamination of the empirical evidence on the arbitrage pricing theory this paper demonstrates that the roll and ross rr and other previously published tests of the apt are subject to several basic limitations there is a general nonequivalence of factor analyzing small groups of securities and factor analyzing a group of securities sufficiently large for the apt model to hold it is found that as one increases the number of securities the number of factors determined increases this increase in the number of factors with larger groups of securities cannot readily be explained by a distinction between priced and nonpriced risk factors as it is impermissible to carry out tests on whether a given risk factor is priced using factor analytic procedures the apt model as exposited by ross 17 18 and extended by huberman 9 has provided the basis of an extensive literature as for example brown and weinstein 1 chen 3 hughes 10 ingersoll 11 jobson 12 reinganum 15 roll and ross rr 16 and shanken 17 to mention but a few it has also been treated in a more general context by chamberlain and rothschild 2 our purpose here is not to comment on this collection of papers many of which are unpublished but to reexamine the evidence presented by rr and point out major pitfalls involved in the empirical methodology employed by them and others who have followed their lead rr claim that on theoretical and more importantly on empirical grounds arbitrage pricing theory apt is an attractive alternative to the capital asset pricing model capm the apt it is argued requires less stringent and presumably more plausible assumptions is more readily testable since it does not require the measurement of the market portfolio and may be better able to explain the anomalies found in the application of the capm to asset returns the acceptability of the apt like that of the capm or any other theory ultimately depends on its ability to explain the relevant empirical evidence our subsequent discussion will show that many of the prqblems associated with the capm are also present in the apt context and that its ability to explain the relevant empirical evidence is not markedly superior moreover it raises questions not only about the rr and related empirical investigations of the apt but also about the testability of that theory in the present state of the art a major part of the problem results from the necessity to break down the universe being analyzed through the apt model this is forced upon the investigator by the fact

the heterogeneous investment horizon and the capital asset pricing model theory and implications this paper generalizes the risk return relationship implied by the traditional capital asset pricing model with finite investment horizons it examines the effect of heterogeneous investment horizons on the functional form of capital asset pricing and proposes a translog model for estimating the risk return relationship in addition this paper contends that some empirical findings that are inconsistent with the traditional capm have resulted from misspecification of the capm by ignoring the discrepancy between the observed data periods and the true investment horizons finally the paper shows that under various conditions the translog model is a suitable function for estimating the relationship between risk and expected returns

the empirical foundations of the arbitrage pricing theory abstract this paper uses maximum likelihood factor analysis of large cross sections to examine the validity of the arbitrage pricing theory apt we are unable to explain the expected returns on firm size portfolios although we do explain the expected returns on portfolios formed on the basis of dividend yield and own variance where risk adjustment using the usual capm market proxies fails we also compare alternate versions of the apt and sharply reject the hypothesis that basis portfolios formed to mimic the factors span the mean variance frontier of the individual assets

momentum trading in cryptocurrencies short term returns and diversification benefits abstract we test for the presence of momentum effects in cryptocurrency market and estimate dynamic conditional correlations dccs of returns between momentum portfolios of cryptocurrencies and traditional assets first investment portfolios are constructed adherent to the classic j k momentum strategy using daily data from twelve cryptocurrencies for over a period of three years we identify the existence of momentum effect which is highly significant for short term portfolios but disappears over the longer term second we show that cross correlations of weekly returns between momentum portfolio of cryptocurrencies and traditional assets are unlike correlations of returns between traditional assets third we find that momentum portfolios of cryptocurrencies not only offer diversification benefits but also can be a hedge and safe haven for traditional assets

on the predictive power of arji volatility forecasts for bitcoin motivated by the recent literature on cryptocurrency volatility dynamics this paper adopts the arji garch egarch and cgarch models to explore their capabilities to make out of sample volatility

the number of factors in security returns both factor analysis of security returns and the analysis of eigenvalues seem to indicate that a market factor explains the major part of security returns we find that such evidence is consistent with an economy where there are in fact k equally important priced factors eigenvalue analysis in the context of such an economy will lead an investigator to the false inference that the one important factor is the return on an equally weighted market index this paper examines a particular exact k factor economy where each of the k factors is priced and contributes equally on average to the variance of returns we show analytically that for such an economy the approximate factor solution identifies the first factor as the return on an equally weighted market index and would lead to the inference that the remaining h 1 factors are not priced using a cross section regression technology our particular model is consistent with existing empirical work that has studied the number of factors in security markets these results suggest an important caveat to the interpretation of approximate factor solutions in an apt or multibeta pricing context one might also infer a capm bias in tests of the apt using the factor analysis technology on a more positive note the results suggest a simple rotation of the factor analysis solution that will lead to more powerful tests of the asset pricing relations to motivate this study consider the fact that the single factor market model suggested by markowitz 1959 and developed by sharpe 1963 remains one of the most popular empirical models of the return generating process the widespread acceptance of this model owes much to the work of king 1966 through a seven factor analysis of return data he concludes that one factor explains a large percentage of the variance of stock prices a factor on which each security tends to weight positively he interpreted this result to mean that there exists a basic market factor in operation which has a major effect on all securities this work supported the development of empirical research into the capital asset pricing model the model has been extensively applied in the event study context

modelling the dynamics of bitcoin and litecoin garch versus stochastic volatility models abstractwe examine and compare a large number of generalized autoregressive conditional heteroskedastic garch and stochastic volatility sv models using series of bitcoin and litecoin price retu

the economics of bitcoin price formation abstractthis is the first article that studies bitcoin price formation by considering both the traditional determinants of currency price e g market forces of supply and demand and digital currencies specific factors e g bitcoin attractiveness for investors and users the conceptual framework is based on the barro 1979 model from which we derive testable hypotheses using daily data for five years 2009 2015 and applying time series analytical mechanisms we find that market forces and bitcoin attractiveness for investors and users have a significant impact on bitcoin price but with variation over time our estimates do not support previous findings that macro financial developments are driving bitcoin price in the long run

announcement effects in the cryptocurrency market cryptocurrencies have gained popularity as new economic investment assets globally in recent years this study examines market reactions to major news events associated with cryptocurrencies abnor

some stylized facts of the cryptocurrency market abstractwe examine the stylized facts of eight forms of cryptocurrencies representing almost 70 of cryptocurrency market capitalization in particular the empirical results show that 1 there ex

new tests of the apt and their implications this paper provides new tests of the arbitrage pricing theory apt test results appear to be extremely sensitive to the number of securities used in the two stages of the tests of the apt model new tests also indicate that unique risk is fully as important as common risk while these tests have serious limitations they are inconsistent with the apt

return volatility and shock spillovers of bitcoin with energy and technology companies we employ an asymmetric multivariate var garch model to study spillover effects between bitcoin and energy and technology companies we find unilateral return and volatility spillovers and bidirectional shock influences and demonstrate portfolio management implications of dynamic conditional correlations

stock return anomalies and the tests of the apt this paper shows that the empirical tests of the arbitrage pricing theory apt model are very sensitive to the anomalies observed in january in the stock returns data there is a strong seasonal pattern in the estimates of the risk premia from the apt model the most important implication of the findings in this paper is that the apt model can explain the risk return relation mostly for january once the january returns are excluded from the data there is no significant relation between the expected stock returns and the risk measures predicted by the apt model it is now a very well known phenomenon that stock returns exhibit a peculiar seasonal pattern while such a seasonal pattern in stock returns is an interesting phenomenon in itself and has yet to be fully explained there is a serious implication of the observed seasonality in stock returns on the tests of the assetpricing models 1 tinic and west 17 for example report that the risk return relation described by the capital asset pricing model capm also exhibits a similar seasonality in january a result rozeff and kinney 16 report as well more importantly however they show that only one month january shows a consistently positive and reliable relation between expected return and risk once the data for january are excluded from the analysis of the risk return tradeoff the estimates of risk premia are no longer reliably different from zero although tinic and west do not offer an explanation for their findings their results raise serious questions about the empirical tests of the capm and ultimately its validity as a viable model to explain the pricing of risky assets the purpose of this paper is to investigate the impact of stock return seasonality on the empirical tests of the arbitrage pricing theory apt a number of researchers argue on both theoretical and empirical grounds that the apt is a good alternative to the capm although there is a growing body of empirical literature on the apt the empirical tests of the apt thus far have produced inconclusive results and a good deal of controversy it now seems appropriate to

time frequency dynamics of return spillover from crude oil to agricultural commodities we explore return spillover from crude oil to ethanol corn soybean and wheat on daily data during 17 may 2005 27 june 2018 this study is unique in capturing the time frequency dynamics of return

data frequency and the number of factors in stock returns abstract determining the number of factors that explain stock returns plays an important role in empirical tests of the arbitrage pricing theory this paper examines the sensitivity of the number of factors to different data frequencies using daily weekly and monthly returns the empirical results are consistent with the null hypothesis that the number of factors is the same for different data frequencies once daily returns are adjusted for nonsynchronous trading the evidence also identifies only one or two factors

the seasonal stability of the factor structure of stock returns this paper investigates the month by month stability of a daily returns and correlation coefficients of stock returns b correlation and covariance matrices c number of return generating factors and d the apt pricing relationship the results show that there is a january effect and a small firm effect in stock returns correlation matrices are more stable than covariance matrices but both types of matrices are not stable across months and across the sample groups the number of return generating factors is rather stable most of the time and for most of the sample groups but there is some significant instability that is related to the average correlation coefficients among stocks the apt pricing relationship does not seem to be supported by the two stage process using the maximum likelihood factor analysis the seasonality of common stock returns has received considerable attention in financial economics research studies by officer 23 rozeff and kinney 29 gultekin and gultekin 11 and others have investigated the stock returns of the u s and other countries on a monthly basis they generally have found that on average january returns are significantly higher than the returns for other months banz 1 and reinganum 25 26 have found abnormally high returns in small market value firms and keim 17 has related this to the first few trading days of january schwert 30 points out the current difficulty of explaining these empirical regularities and the need for further investigations several studies have examined seasonality in risk premiums rozeff and kinney 29 found that seasonality appeared in the risk premiums obtained from a twoparameter capm and that january displayed a relatively large risk premium compared with the other months keim 16 also found seasonality in the risk premiums more recently tinic and west 32 examined the risk premiums of the two parameter capm and observed the previously reported seasonality and high january premium they also found that january is the only month in which there is a consistently positive statistically significant relationship between expected return and risk very recently using the two stage procedure with the

general factor models and the structure of security returns based on markowitz s pioneering study 40 sharpe 56 and lintner 38 advanced the first positivist formulations of the capital asset pricing model capm their models were subsequently refined by mossin 45 fama 15 black 1 and others even though the capm has been studied extensively it has not been empirically validated according to roll 48 the capm cannot be tested in an unambiguous fashion because of a number of intractable measurement and computational difficulties and the joint nature of the hypotheses to be tested

network models of spatial oligopoly with an application to deregulation of electricity generation because of the existence of transmission costs and significant scale economies in power production deregulation of electricity generation would lead to spatial oligopolistic markets this paper uses linear programs to obtain short run spatial price equilibria for a deregulated bulk power market in upstate new york these models unlike most previous models of imperfect competition capture spatial variations in production costs and demand functions we present two models one calculates a nash bertrand equilibrium in which each firm believes that rivals will not react to price changes this equilibrium represents the most intense level of competition to be expected the other model yields limit prices that are designed to discourage new firms from entering the market

dynamic market strategy under threat of competitive entry an analysis of the pricing and production policies open to the multinational company there is extensive evidence indicating that firms price discriminatorily over their market areas where price discrimination is defined to exist when the pattern of delivered prices departs from that which would be generated by f o b pricing see greenhut greenhut and li 8 hwang 10 phlips 16 underlying this evidence is an equally extensive body of theory which attempts to explain why such discriminatory pricing rules should be adopted both in competitive and monopolistic markets see capozza and van order 3 greenhut and greenhut 7 norman 15 one limitation of this theory is that it is essentially static even when competitive reactions and interdependencies are introduced there is no truly dynamic analysis rather the theory concentrates on comparing long run equilibria with perhaps some limited comment on how those equilibria might be achieved the analysis of price changes over time has received some attention notably by gaskins 6 jacquemin and thisse 11 and phlips 17 in these cases however analysis is spaceless while some analogies are drawn between intertemporal and spatial price discrimination these analogies are inevitably weak the major objective of this paper is to treat the spatial and temporal problems simultaneously we ask whether the pricing rules and market choice of a firm operating over a spatially extensive market area will vary when it is placed in a dynamic setting in particular we investigate the pricing behaviour of a firm to which we shall refer as the leading firm when it is subject to the threat of competitive entry in certain of its markets our model owes much to the analysis by gaskins 6 but we show that gaskins analysis applies to only part of the spatial market area once we allow for the costs of distance in particular we show that if the firm enjoys a substantial long run cost advantage in particular markets it will adopt a pricing rule identical to that derived in the static monopolistic case this can be expected to be a very

a critical reexamination of the empirical evidence on the arbitrage pricing theory a reply the paper by dhrymes friend and gultekin dfg in this issue criticizes empirical work on the arbitrage pricing theory apt conducted by ourselves rr 3 and by a number of others we are honored that such eminent professors as dfg have taken an interest in our work unfortunately the dfg paper contains analysis which might foster misconceptions in the casual reader our purpose here is to present a brief nontechnical comment we are confident that those who are inclined to study the dfg paper in detail will be able to discern its merit for themselves the introductory section and the concluding section viii of dfg stress three points first that the method of rr has major pitfalls and is seriously flawed second that individual factors should not be tested for their pricing influence and third that more than three to five factors can be found by increasing the size of the group analyzed we will comment on the reasonableness of the second and third point in some detail the first is a value judgment and as such cannot be disputed on logical grounds we would be the last to object to a reasoned opinion judiciously drawn by dispassionate and unbiased scholars but of course we do not agree with the particular opinion expressed by dfg in sections i and ii dfg repeat the standard development of the apt and make much of the argument that the apt as a null hypothesis in a statistical test is independent of any rotation of the factors they stress their view that the only meaningful tests are those of whether any factors are priced rather than those which test whether some of them are priced and others are not rr raise and analyze precisely this same point 1 and in fact our awareness of this issue led us to conduct f tests of the joint significance of all factor prices see our tables iv and vi despite the rotation problem tests of individual factor pricing have meaning since the factors are extracted in the order of their importance in explaining the covariance matrix of returns it is not only perfectly valid it is also interesting to ascertain if they each have an influence upon pricing the number of statistically significant estimated priced factors can be different than the number of true factors because of chance rotation in the

what drives the bitcoin price a factor augmented error correction mechanism investigation this article aims to determine what drives the price of bitcoin to achieve this aim a large set of data is analysed using vec models augmented by factors representing unobservable economic forces

is bitcoin a hedge a safe haven or a diversifier for oil price movements a comparison with gold abstract this study assesses the roles of bitcoin as a hedge a safe haven and or a diversifier against extreme oil price movements in comparison to the corresponding roles of gold we use a quantile on quantile regression approach to capture the dependence structure between the considered market returns under different bitcoin market conditions while considering nuances of oil price movements compared to gold our findings show that both bitcoin and gold would serve the roles of a hedge a safe haven and a diversifier for oil price movements however this property seems to be sensitive to the bitcoin s and gold s different bear normal or bull market conditions and to whether the oil price is in a downside normal or upside regime by controlling for new and relevant u s and global uncertainty indicators we confirm that both bitcoin and gold but not oil are assets where investors may park their cash during times of political and economic turmoil the conditional value at risk covar approach to risk management is then conducted providing robust evidence of the usefulness of each of the bitcoin and gold in expanded oil portfolios in terms of diversification opportunities and downside risk reductions