moments based spillovers across gold and oil markets abstract in this paper we use intraday futures market data on gold and oil to compute returns realized volatility volatility jumps realized skewness and realized kurtosis using these daily metrics associated with two markets over the period of december 2 1997 to may 26 2017 we conduct linear nonparametric and time varying rolling tests of causality with the latter two approaches motivated due to the existence of nonlinearity and structural breaks while there is hardly any evidence of spillovers between the returns of these two markets strong evidence of bidirectional causality is detected for realized volatility which seems to be resulting from volatility jumps evidence of spillovers are also detected for the crash risk variables i e realized skewness and for realized kurtosis as well with the effect on the latter being relatively stronger based on a moments based test of causality evidence of co volatility is deduced whereby we find that extreme positive and negative returns of gold and oil tend to drive the volatilities in these markets in our robustness check we identify a causal chain in the realized volatility from oil to gold via the financial stress our results have important implications for not only investors but also policymakers

loss aversion and learning to bid bidding challenges learning theories even with the same bid experiences vary stochastically the same choice can result in either a gain or a loss in such an environment the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics we analyse the impact of loss aversion in a simple auction using the experienced weighted attraction model of learning our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees apart from that the experiment shows that loss aversion is not specific to rare decision making

a cointegration analysis of petroleum futures prices abstract this paper presents evidence concerning the number of common stochastic trends in a system of three petroleum futures prices crude oil heating oil and unleaded gasoline using daily data from 3 december 1984 to 30 april 1993 johansen s maximum likelihood approach for estimating long run relations in multivariate vector autoregressive models is used the results indicate the presence of only one common trend

on the efficiency of futures markets another view abstract one definition of market efficiency holds that today s price of an item contains all the price information that there is about that item that is today s price contains information about people s expectations about the future however in estimating price equations analysts almost exclusively look to the past in developing price forecasting models this paper examines the question how do futures prices affect today s price for heating oil that is do futures markets add to the efficiency of markets by conveying information from the future to the present

one security many markets determining the contributions to price discovery when homogeneous or closely linked securities trade in multiple markets it is often of interest to determine where price discovery the incorporation of new information occurs this article suggests an econometric approach based on an implicit unobservable efficient price common to all markets the information share associated with a particular market is defined as the proportional contribution of that market s innovations to the innovation in the common efficient price applied to quotes for the thirty dow stocks the technique suggests that the preponderance of the price discovery takes place at the new york stock exchange nyse a median 92 7 percent information share although most of the classic paradigms in market microstructure concern a security that trades in a single centralized market such situations are becoming increasingly rare in practice fragmentation the dispersal of trading in a security to multiple sites has emerged as a dominant institutional trend this process is of concern to financial economists and regulators because price information and price discovery the impounding of new information into the security price arguably the most important products of a security market have many attributes of public goods as the process of fragmentation accelerates it may be important to determine where the price information and price discovery are being produced 1 this paper suggests a practical econometric approach to this problem the technique is illustrated with an application to u s equity markets many stocks listed on the new york stock exchange nyse trade concurrently on the regional exchanges and the national association of securities dealers national market system nasd nms since a share of ibm stock is the same security whether purchased on the midwest or pacific exchange this is a particularly clear instance of multiple markets nevertheless the expres

the winner s curse experiments with buyers and with sellers this paper explores the winner s curse phenomena as it was studied experimentally by kagel and levin experiments with the winner s curse are complicated by the fact that subjects can lose money and the experimenter has only a limited means of collecting it from them thus subjects enjoy only limited liability which has theoretical implications for behavior in the kagel and levin experiments subjects were removed from the bidders competition after losses reached a predetermined value this experimental procedure has unknown implications for the results so ambiguity exists about whether the winner s curse was actually observed in this study their results were replicated in an environment in which subjects were not removed the case in which competitors are sellers is also studied bankruptcy cannot be a problem in sellers competition in both cases the winner s curse is observed thus the limited liability cannot be an explanation for the phenomenon reported by kagel and levin in addition the paper examines the bidding behavior of all individuals and shows that this behavior does not fit any of the tested theories either on the aggregate or individual level the winner s curse did not disappear over time during the conduct of the research

winner s curse without overbidding abstract we report the results of a series of second price auction experiments where each bidder s signal is given by a normally distributed value plus a normally distributed error while bidders values differ in one treatment they are the same in another which allows for a direct test of the winner s curse irrespective of confounding factors bidders may also fall prey to a news curse when they do not sufficiently take into account that signals and errors are correlated we find that the effects of the winner s curse are mitigated by a news curse and loss or risk aversion

a comparison of petroleum futures versus spot prices as predictors of prices in the future abstract even though studies have indicated that the futures market leads the spot market in price discovery this paper hypothesizes that the predictive significance of each should be the same a number of different statistical tests are presented to test this hypothesis when deseasonalized data is employed the predictive significance of each series is found to be the same but when actual prices are employed futures prices did correctly anticipate the observed seasonal pattern

price movements and price discovery in futures and cash markets r isk transfer and price discovery are two of the major contributions of futures markets to the organization of economic activity working 1962 evans 1978 p 80 and silber 1981 risk transfer refers to hedgers using futures contracts to shift price risk to others price discovery refers to the use of futures prices for pricing cash market transactions working 1948 wiese 1978 p 87 and lake 1978 p 161 the significance of both contributions depends upon a close relationship between the prices of futures contracts and cash commodities this paper examines the characteristics of price movements in cash or spot markets and futures markets for storable commodities section ii presents an analytical model of simultaneous price dynamics which suggests that over short intervals of time the correlation of price changes is a function of the elasticity of arbitrage between the physical commodity and its counterpart futures contract greater elasticity fosters more highly correlated price changes and thereby facilitates the risk transfer function the elasticity of supply of arbitrage services is constrained by among other things storage and transaction costs thus futures contracts will not in general provide perfect risk transfer facilities over short time horizons the essence of the price discovery function of futures markets hinges on whether new information is reflected first in changed futures prices or in changed cash prices hoffman 1932 pp 258259 the model in section ii provides a framework for analyzing whether one market is dominant in terms of information flows and price discovery in section iii we develop a model based on section ii which is appropriate for estimating the lead lag relationship between cash prices and futures prices section iv presents empirical estimates of the parameters of the model for seven different storable commodities wheat corn oats frozen orange juice concentrates copper gold and silver the cost of arbitrage between cash and futures differs across these commodities for this reason we are not surprised to find inter commodity differences in the correlation of short run price changes and in the substitutability of futures contracts for cash market positions with respect to the price discovery function of futures markets we find that while futures markets dominate cash markets cash prices do not merely echo futures prices there are reverse information flows from cash markets to futures markets as well

goodwill can hurt a theoretical and experimental investigation of return policies in auctions abstract will generous return policies in auctions benefit bidders we investigate this issue using second price common value auctions theoretically we find that the symmetric bidding equilibrium is unique unless returns are free and when returns are free there exist multiple equilibria with different implications for sellers moreover more generous return policies mitigate the winner s curse but also push the bids higher thus hurting bidders by eroding their surplus in the experiment bids increase and bidders earnings decrease with more generous return policies as predicted with free returns many bidders bid above the highest possible value subsequently returning the item regardless of value though consistent with equilibrium behavior this is not optimal for sellers

skills in the marketplace market efficiency social orientation and ability in a field based experiment abstract neoclassical economic theory predicts that markets will clear leaving little or no marginal gains from trade laboratory experiments have largely confirmed this prediction though the results of recent field experiments have been mixed especially in developing countries i create a multiround trading market in uganda to explore the efficiency of trading and test whether traders personal traits are associated with market efficiency and individual bargaining success to test the effects of individual traits i utilize data on measures of the traders human and physical capital risk and time preferences and social orientation specifically pro and antisocial behavior and aggression i find that the buyers and sellers relative levels of social orientation and human capital are associated with levels of market efficiency within rounds measures of social orientation however are less associated with individual success i also find that rents obtained in the experiment are strongly associated with the wealth levels of participants two years later but this association is limited to those who were randomly assigned to be buyers in the experiment i present evidence that this association is driven by greater buyer bargaining ability

testing for common features in north american energy markets abstract using recent advances in the field of applied econometrics we explore the strength of shared trends and shared cycles between north american natural gas and crude oil markets in doing so we use daily data from january 1991 to april 2001 on spot u s henry hub natural gas and wti crude oil prices the results show that there has been decoupling of the prices of these two sources of energy as a result of oil and gas deregulation in the united states we also investigate the interconnectedness of north american natural gas markets and find that north american natural gas prices are largely defined by the u s henry hub price trends

a weak form evaluation of the efficiency of the rotterdam and italian oil spot markets abstract we examine whether the efficient market hypothesis can be applied to the rotterdam and italian oil markets by analysing the log price changes observed in those markets for monthly data during the period january 1980 to december 1987 the objective is to investigate the leptokurticity in observed distributions of low price changes the stable paretian distributions have been used to test the leptokurtic distributions

speculation and the 2008 oil bubble the dcot report analysis abstract this article analyzes the cftc s disaggregated commitments of traders dcot report to get more insights into the behavior of different traders during the 2008 oil bubble the analysis shows that 1 the money manager category perfectly played the oil bubble got in early and started selling shortly before the bubble peak 2 the producer merchant processor user category and the nonreportable category were covering their short positions into the peak of the bubble 3 the swap dealer category benefited while the price of oil was rising but incurred heavy losses as the price of oil collapsed 4 we find no indications of speculation by any group of traders via the positive feedback trading or rational destabilization and 5 we do however criticize the commercial hedgers for failing to arbitrage the soaring oil prices in 2008

effects of nymex trading on ipe brent crude futures markets a duration analysis abstract recent developments in the energy markets and the surge and dip in crude oil prices over the last few years have renewed the interest in the workings of the two main price setting markets london s international petroleum exchange ipe and new york s mercantile exchange nymex the interaction of these two markets when both of them are open synchronous trading and when only london is open asynchronous trading is important in view of the fact that most participants take positions in both markets this paper looks at how london is affected by new york by analysing the transaction duration of the ipe brent futures contract both when the nymex wti futures contract is being traded and when nymex is closed using tick by tick data obtained from ipe transaction durations are found to form two distinctive and inverted u shaped patterns autoregressive conditional duration acd model first introduced by engle and russell is applied to the data parameters of ipe morning and afternoon are significantly different from each other underlining the dominant effects of nymex on ipe trading the results from the current analysis reinforce previous results by the authors which indicate that nymex is a leading price setter in crude oil futures prices and has a dominant effect on the ipe traded contracts

oil prices the role of refinery utilization futures markets and non linearities we test the hypothesis that real oil prices are determined in part by refinery capacity non linearities in supply conditions and or expectations and that observed changes in these variables can account for the rise in prices between 2004 and 2006 results indicate that the refining sector plays an important role in the recent price increase but not in the way described by many analysts the relationship is negative such that higher refinery utilization rates reduce crude oil prices this effect is associated with shifts in the production of heavy and light grades of crude oil and price spreads between them non linear relationships between opec capacity and oil prices as well as conditions on the futures markets also account for changes in real oil prices together these factors allow the model to generate a one step ahead out of sample forecast that performs as well as forecasts implied by far month contracts on the new york mercantile exchange and is able to account for much of the 27 rise in crude oil prices between 2004 and 2006

does opec influence crude oil prices testing for co movements and causality between regional crude oil prices using high frequency data the co movements among crude oil prices are analysed in order to address the question of regionalization of the world crude oil market time series econometrics in the form of error correction modelling is applied for daily crude oil price data covering the time period 1988 to 2004 and in this framework topics like weak and strong exogeneity among three major oil prices represented by brent opec and texas wti are addressed the empirical results are that causality is most likely bi directional among these crude oil prices and hence rejecting a regionalization hypothesis of the global oil market and also an influence from the opec oil price towards bent and wti which are usually claimed to have a benchmark role

an analysis of price discovery between bitcoin futures and spot markets abstract this paper analyzes the bitcoin price discovery process we collect data on futures and spot prices for the period december 2017 to may 2018 and compute hasbrouck s information share and gonzalo and granger s common factor component to quantify the contribution of each market to the price discovery process both measures coincide in suggesting that the bitcoin futures market dominates the price discovery process we also find that both prices are driven by a common factor that is given by a weighted combination of the futures and spot market finally we observe that deviations from the equilibrium condition equating the futures and spot log price have predictive ability for the return on the bitcoin spot price but not on the futures price

efficiency in auctions with private and common values an experimental study this discussion has resulted in a publication in the american economic review 2002 92 3 625 43 auctions are generally not efficient when the object s expected value depends on private and common value information we report a series of first price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders while some subjects fall prey to the winner s curse they weigh their private and common value information in roughly the same manner as rational bidders with observed efficiencies close to predicted levels increased competition and reduced uncertainty about the common value positively affect revenues and efficiency the public release of information about the common value also raises efficiency although less than predicted

market information and price volatility in petroleum derivatives spot and futures markets some new york evidence abstract this paper examines the relationship between petroleum futures trading market information and spot prices it tests the hypothesis that there is increased spot market information with futures trading of various petroleum derivatives for weekly data during the period january 1970 to july 1985 at the new york mercantile exchange increased market information with futures trading is indicated by the insignificance of coefficients of past prices in spot price regressions in periods with futures trading however the estimates of the coefficient of variation indicate that price volatility tends to increase with futures trading thus traders seem better informed with futures trading although the advantages of increased market information might potentially be undermined by increased price volatility as in the case of regular gasoline

have commodities become a financial asset evidence from ten years of financialization the financialization of commodity markets over the last decade has changed the behavior of commodity prices in fundamental ways in this paper we uncover the gradual transformation of commodities from a physical to a financial asset although economic demand and supply factors continue to play an important role recent indicators associated with financialization have emerged since 2008 we show that financial variables have become the main driving factors explaining the variation in commodity returns and volatility today our findings have important implications for portfolio analysis and for the effectiveness of hedging in commodity markets

theory experiment and the federal communications commission spectrum auctions abstract the fcc uses the simultaneous multi round auction sma to assign spectrum licenses congress mandated that the sma be compared to an auction that allows combinatorial bids we review the theoretical and experimental evidence relevant to the sma procedures and their inherent defects results from experiments evaluating the sma in comparison to a combinatorial auction designed by charles river and associates show that several of the sma rules hinder efficiency and create a trade off between efficiency and auction length the combinatorial auction outperforms the sma when license values are superadditive but requires more time to complete and is not robust

super experienced bidders in first price common value auctions rules of thumb nash equilibrium bidding and the winner s curse super experienced bidders have learned to overcome the winner s curse but still earn less than 50 of nash equilibrium profits subjects deviate from the complicated nash strategy employing piecew

on the existence of predatory pricing an experimental study of reputation and entry deterrence in the chain store game a single monopolist plays a sequence of eight periods against a series of different entrants there are two types of monopolists weak monopolists whose single period best response is to acquiesce after entry and strong monopolists whose dominant strategy is to fight entry data show high levels of predatory pricing defined as weak monopolists fighting all entrants in early periods both with and without experimenter induced strong monopolists we reject a number of predictions of the asymmetric information sequential equilibrium model of kreps and wilson 1982 and find important deviations from more general sequential equilibrium models as well

the role of trader positions in spot and futures prices for wti abstract we extend the analysis of causal relations between trader positions and oil prices and the process of price discovery by estimating a cointegrating vector autoregression cvar model that expands the cash and carry relation between spot and futures prices to quantify long and short run relations among oil prices trader positions interest rates and oil inventories results indicate that oil inventories and trader positions are needed to generate cointegration between spot and futures prices the presence of trader positions and oil inventories suggest that both play a role in price discovery furthermore the cointegrating relation for price loads into the equation for both oil prices and trader positions this suggests a bi directional simultaneous adjustment process between oil prices and trader positions this expands the unidirectional causal relation from oil prices to trader positions that is generated by previous studies additional results suggest that price discovery occurs in the market for heavily traded near month futures contracts but discovery for thin far month futures markets occurs in the spot market together these results suggest mechanisms by which speculation could affect oil prices but the results presented here are moot regarding their effects

the effect of shill bidding upon prices experimental evidence this paper explores through a series of experiments the effect of shill bidding upon revenues and prices in auctions we study the practice of shill bidding in a common value framework our findings are consistent with the prediction that if bidders are aware of the possibility of seller participation in an auction profits will be reduced on average we also study factors that affect bidder and seller participation decisions shill bidding can alleviate the problem of the winner s curse by lowering the price and it can thus provide benefits to bidders

risk perception in psychology and economics abstract the concept of rationality has been basic to most economic analysis its content has been successively refined over the generations as applied to the static world of certainty it has turned out to be a weak hypothesis not easily refuted and therefore not very useful as an explanation though not literally a tautology but recent decades have seen the development of stronger versions applied to a world in which time and uncertainty are real among its most important manifestations have been criteria for consistency in allocation over time the expected utility hypothesis of behavior under uncertainty and what may be termed the bayesian hypothesis for learning that is the consistent use of conditional probabilities for changing beliefs on the basis of new information these hypotheses have been used widely in offering explanations of empirically observed behavior though as not infrequently in economics the theoretical development has gone much further than the empirical implementation these hypotheses have also been used increasingly in normative analysis as a component of benefit cost studies therefore frequently referred to as benefit risk studies the value of reducing mortality rates from diseases for example has been studied by assuming that choice of occupations is made inter alia by comparing wage differences with mortality differences

price discovery in energy markets abstract in this study we empirically analyze the price discovery process in the futures and spot markets for crude oil heating oil and natural gas using daily closing prices we use two different information share measures that are based on the methods proposed by gonzalo and granger 1995 and lien and shrestha 2014 both measures indicate that almost all the price discovery takes place in the futures markets for the heating oil and natural gas however for the crude oil the price discovery takes place both in the futures and spot markets as a whole our study indicates that futures markets play an important role in the price discovery process

the dynamics of a nonlinear relationship between crude oil spot and futures prices a multivariate threshold regression approach abstract this paper segments daily data from january of 1986 to april of 2007 into three periods based on certain important events both periods i and ii indicate that the spot prices in general are higher than futures prices as was well known in the literature only period iii 2001 9 11 2007 4 30 displays a reverse phenomenon futures prices in general exceed spot prices when the absolute value of a basis futures spot is greater than the threshold value in the arbitrage area regime 1 and 3 at least one of the error correction coefficients representing adjustment towards equilibrium is statistically significant that is there exists a tendency in the oil market in which prices move toward equilibrium with respect to the short run dynamic interaction between spot price change st and futures price change ft our results indicate that when the spot price is higher than futures price and the basis is less than certain threshold value regime 3 there exists at least one causal relationship between st and ft conversely when the futures price is higher than spot price and the basis is higher than certain threshold value regime 1 there exists at least one causal relationship between st and ft finally we use the method suggested by diebold and mariano diebold francis x mariano roberto s 1995 comparing predictive accuracy journal of business and economic statistics 13 3 253 263 to compare the predictive power between the linear and nonlinear models our empirical results indicate that the in sample prediction of the nonlinear model is clearly superior to that of the linear model

crack spread hedging accounting for time varying volatility spillovers in the energy futures markets crude oil heating oil and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader a conceptual model is developed for a trader hedging the crack spread various hedge ratio estimation techniques are compared to a multivariate garch model that directly incorporates the time to maturity effect often found in futures markets modelling of the time variation in hedge ratios via the multivariate garch methodology and thus taking into account volatility spillovers between markets is shown to result in significant reductions in uncertainty even while accounting for trading costs copyright 2002 john wiley sons ltd

speculative bubbles in recent oil price dynamics evidence from a bayesian markov switching state space approach abstract motivated by repeated spikes and crashes during previous decades we investigate whether the heavily financialized market for crude oil has been driven by speculative bubbles in our theoretical modeling we draw on the convenience yield approach in order to approximate the fundamental value of the oil price we separate the oil price fundamental from the bubble component by expressing a standard present value oil price model in state space form we then introduce two markov regimes into the state space representation in order to distinguish between two distinct phases in the bubble process namely one in which the oil price bubble is a stable process and one in which the bubble explodes we estimate the entire markov switching state space specification using an econometrically robust bayesian markov chain monte carlo mcmc methodology based on inferential techniques designed for statistically separating both markov regimes in the bubble process from each other we find robust evidence for the existence of speculative bubbles in recent oil price dynamics

the eurobond market and corporate financial policy abstract on average significant positive abnormal returns are associated with eurobond issues during the period 1975 1985 the cross sectional and time series distributions of the abnormal returns are consistent with the hypothesis that impediments to the adjustment of asset supplies to new demand conditions are large enough to create profitable financing opportunities for firms our analysis demonstrates how profitable financing opportunities can persist on the eurobond market and when they are most likely to arise

explaining crude oil prices using fundamental measures abstract oil is the world s most important commodity and improving the understanding of drivers of its price is a longstanding research objective this article analyses real oil prices during 1984 2007 using a monthly dataset of fundamental and market parameters that cover financial markets global economic growth demand and supply of oil and geopolitical measures the innovation is to incorporate proxies for speculative and terrorist activity and dummies for major industry events and quantify price impacts of each new findings are positive links between oil prices and speculative activity bond yields an interaction term incorporating opec market share and oecd import dependence and the number of us troops and frequency of terrorist attacks in the middle east shocks also prove significant with a 6 18 per barrel impact on price for several months

does china factor matter an econometric analysis of international crude oil prices abstract whether china s crude oil imports are the culprit of oil price volatility these years has not been quantitatively confirmed therefore this paper empirically investigates the role of china s crude oil net imports in brent price changes from october 2005 to november 2013 based on an econometric analysis the results indicate that during the sample period china s crude oil imports do not significantly affect brent price changes no matter in the long run or short run therefore the blame for china s crude oil imports to cause the dramatic fluctuations of international oil price has no solid evidence also there exists significant uni directional causality running from the brent price to china s crude oil imports at the 5 level besides the response of the brent price to china s crude oil imports is found positive but slight and the brent price responds more significantly to us dollar exchange rate and oecd commercial inventory than to china s crude oil imports in the short run finally the contribution of china s crude oil imports to brent price movement is about 10 which is less than that of us dollar exchange rate but larger than that of indian crude oil imports or oecd commercial inventory

investigation of production sales and inventory relationships using multicointegration and non symmetric error correction models the accumulated sum of a stationary series is called integrated if a linear combination of some of the integrated series is stationary it is said to be cointegrated this paper presents empirical results on inventories to consider the possibility of a deeper form of cointegration called multicointegration which is introduced in granger and lee 1989 a vector integrated series is multicointegrated if the accumulated sum of its stationary cointegrated linear combination is again cointegrated with itself inventory which is the accumulated sum of production minus sales is probably cointegrated with production and sales the empirical results generally support the presence of multicointegration of production and sales in many u s industries and industrial aggregates the results also favour the non symmetric error correction model providing evidence that the strength of attraction is different on both sides of the attractor a modified s s rule for inventory control is investigated in the context of a non symmetric error correction model and the results generally do not support the s s rule sufficient evidence is found to conclude that multicointegration is a useful concept in the area of inventory determination

revisiting the relationship between spot and futures oil prices evidence from quantile cointegrating regression article i nfo since most real decisions depend upon current market states or whether it is advantageous to the participants themselves this paper revisits the relationship between spot and futures oil prices of west texas intermediate covering 1986 to 2009 with an innovative approach named quantile cointegration different to previous perspectives we target the issues of cointegrating relationships causalities and market efficiency based on different market states under different maturities of oil futures in our empirical analysis except for market efficiency long run cointegrating relationships and causalities between spot and futures oil prices have significant differentials among futures maturities and the performances of spot oil markets furthermore the response of spot prices to shocks in 1 month futures oil prices is much steeper in high spot prices than in low spot prices this phenomenon is consistent with the prospect theory kahneman and tversky 1979 in that the value function is generally steeper for losses than for gains

price discount inventories and the distortion of wti benchmark abstract applying a rolling estimation to the hasbrouck information share model this study investigates the changing status of wti benchmark over time results show the ability of wti in reflecting market conditions decreases sharply and wti s efficiency in processing information has been surpassed by brent s since the second half of 2004 in the short run the wti distortion is related to its price discount problem but the distortion cannot be indicated by contangos in the long run wti s price discount problem coexists with a positive forward curve and both have harmed the price discovery role of wti the rising inventories in cushing significantly deteriorate wti s ability in serving as a world benchmark

learning in common value auctions some initial observations abstract inexperienced bidders in first price common value auctions suffer from a winner s curse losing money on average with experience bidders approximate the nash equilibrium the mechanisms underlying this adjustment are 1 a market selection effect as the most aggressive bidders are less likely to return for subsequent sessions and 2 players who lose money bid less experiential learning and those who would have lost money had they won the auction with the high bidder s signal bid less observational learning

selection bias demographic effects and ability effects in common value auction experiments inexperienced women along with economics and business majors are much more susceptible to the winner s curse as are subjects with lower sat act scores there are strong selection effects in bid function estimates for inexperienced and experienced subjects due to bankruptcies and bidders who have lower earnings returning less frequently as experienced subjects these selection effects are not identified using standard econometric techniques but are identified through experimental treatment effects ignoring these selection effects leads to misleading estimates of learning

pure martingale and joint normality tests for energy futures contracts abstract in this study we empirically analyze to see if the pure martingale hypothesis holds for three energy related commodities crude oil heating oil and natural gas we also test this hypothesis for five different hedging horizons 1 day 1 week 4 week 8 week and 12 week our empirical results show that the pure martingale hypothesis holds for all three commodities and all five horizons this implies that the expected return on futures contract can be ignored in determining the optimal hedge ratio we also test to see if the joint normality between futures and spot returns holds for the same three commodities and five hedging horizons we reject the joint normality hypothesis for all three commodities and five hedging horizons this implies that hedgers with different utility function have different optimal hedge ratios thus in general one needs to take into account of hedger s utility function when deriving optimal hedge ratio our results are robust to pre and post financial crisis as well as some other specifications considered in the paper

investor protection and corporate governance recent research has documented large differences among countries in ownership concentration in publicly traded firms in the breadth and depth of capital markets in dividend policies and in the access of firms to external finance a common element to the explanations of these differences is how well investors both shareholders and creditors are protected by law from expropriation by the managers and controlling shareholders of firms we describe the differences in laws and the effectiveness of their enforcement across countries discuss the possible origins of these differences summarize their consequences and assess potential strategies of corporate governance reform we argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank centered and market centered financial systems

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

price differences among crude oils the private costs of supply disruptions i quantify the causes for price differences among crude oils that are set by the law of one price with a special emphasis on country risk for crude oils that are part of the same market i estimate cointegrating relations which represent their long run relation and error correction models which represent the rate at which the market eliminates disequilibrium in their prices results indicate that positive values of country risk impose a 0 51 price penalty on a barrel of crude oil from an unreliable supplier that increases with the variance in risk and the price of crude oil these price penalties are the first empirical estimates for how the market values the private costs of oil supply disruptions beyond country risk the price effects of sulfur content density distance between supply ports and opec membership confirm the importance of oil supply choke points opec s ability to influence prices and differences in refinery technology because private costs of a supply disruption attach only to nations with a non zero country risk previous estimates for the social costs of a supply disruption may be too large

unbiasedness and time varying risk premia in the crude oil futures market abstract this paper presents some empirical evidence on market efficiency and unbiasedness in the crude oil futures market and some related issues on the basis of monthly observations on spot and futures prices of the west texas intermediate wti crude oil several tests are carried out on the relevant hypotheses the evidence suggests that futures prices are neither unbiased nor efficient forecasters of spot prices furthermore a garch m 1 1 model reveals the existence of a time varying risk premium

an investigation of cost differences between public sales and private placements of debt abstract we examine the cost differences between public sales and private placements of debt for a sample of public utility issues the lowest cost method depends on a firm s transaction costs which comprise flotation costs agency costs and the costs of searching the market our findings suggest that firms minimize the cost of issuing securities by selecting the market providing the lowest transaction costs

the impact of international price shocks on china s nonferrous metal companies a case study of copper copper is one of the most important nonferrous metals for modern society which should be utilized in a sustainable way because of its non renewable nature this paper addresses the relationship between price shocks from the international copper market and china s listed copper companies international copper market price shocks are disentangled into supply shocks aggregate demand shocks and specific demand shocks using the structural vector autoregression method then the asymmetric impact of those shocks on the stock prices of china s listed copper companies is examined the results indicate that demand shocks are the dominant factor influencing copper price fluctuations with their impact on stock prices being significantly higher than those of supply shocks in the long run supply shocks and demand shocks both have significant asymmetric impacts on stock prices while in the short run specific demand shocks have an asymmetric impact on stock prices

oil prices speculation and fundamentals interpreting causal relations among spot and futures prices abstract a consensus that the world oil market is unified begs the question where do innovations in oil prices enter the market here we investigate where changes in the price of crude oil originate and how they spread by examining causal relationships among prices for crude oils from north america europe africa and the middle east on both spot and futures markets results indicate that innovations first appear in spot prices for dubai fateh and spread to other spot and futures prices while other innovations first appear in the far month contract for west texas intermediate and spread to other exchanges and contracts links between spot and futures markets are relatively weak and this may have allowed the long run relationship between spot and future prices to change after september 2004 together these results suggest that market fundamentals initiated a long term increase in oil prices that was exacerbated by speculators who recognized an increase in the probability that oil prices would rise over time

cross game learning experimental evidence from first price and english common value auctions abstract experience in first price auctions improves performance in english auctions but experience in english auctions has no transfer value to first price auctions these results are discussed in terms of psychologists models of learning generalizability and the learning literature in economics

risk appetite and oil prices abstract we demonstrate that oil prices and their volatility are no longer determined solely by real economic shocks to supply of and demand for oil but are also driven by shocks originating in the economic uncertainty and risk appetite of investors that prevail in the equity market the contribution of the latter factor has become particularly remarkable since the mid 2000s to establish these results we dismantle the squared vix index determined in the s p 500 options market into the conditional variance in stock returns to proxy for economic uncertainty and the equity variance risk premium to proxy for risk appetite using threshold garch structural vector auto regression and causality models we provide evidence about the link between risk appetite oil price returns and volatility furthermore investors appetite for risk drives changes in the ovx which measures perceptions about future oil volatility but not vice versa our results provide a better understanding of the relationship between oil the vix and its two proposed components in particular we show that changes in the risk appetite of investors are an important determinant not only for the price of equities but also for that of the most important energy resource oil

inexperienced and experienced players in an oligopolistic market game with minimal information we consider an oligopolistic market game in which the players are competing firms in the same market of a homogeneous consumption good the consumer side is represented by a fixed demand function the firms decide how much to produce of a perishable consumption good and they decide upon a number of information signals to be sent into the population in order to attract customers due to the minimal information provided the players do not have a well specified model of their environment given a simple mode of adaptive behavior which we showed in a previous paper explained the data relatively well our main objective here is to analyze whether experienced players behave differently to inexperienced players copyright 1999 by oxford university press

does the liquidity of a debt issue increase with its size evidence from the corporate bond and medium term note markets to investigate the liquidity of large issues this study tests for yield differences between corporate bonds and medium term notes mtns in the sample mtns have an average issue size of 4 million compared with 265 million for bonds among mtns that have the same issuance date the same maturity date and the same corporate issuer we find no relation between size and yields moreover bonds and mtns have statistically equivalent yields thus rather than suggesting that large issues have greater liquidity these findings indicate that large and small securities issued by the same borrower are close substitutes the objective of this study is to test for a relation between the size of corporate debt offerings and their yields if investors value large offerings for their greater liquidity then large issues will have lower yields than small issues alternatively if investors view securities of the same borrower as close substitutes there may be no relation between issue size and yields to investigate whether issue size is a significant determinant of liquidity we test for yield differences between medium term notes mtns and bonds of the same corporate issuers in most respects mtns are similar to corporate bonds however mtns have an average issue size of around 5 million in contrast most offerings in the bond market raise at least 100 million thus if liquidity increases with issue size bonds will have lower yields than mtns and large mtns will have lower yields than small mtns the data we use consist of 4 182 mtns and 68 bonds offered by four large borrowers between october 1987 and december 1992 the issues in the sample range in size from 102 000 to 1 2 billion a disperse distribution that allows us to make reliable inferences about the relation between issue size and yields to test for a size effect within the mtn market we create subsamples of mtns that have the same issuance date the same maturity date and the same corporate issuer mtns in these subsamples are identical except for their yields and size on average yields on large mtns in the subsamples are 0 35 basis point higher than yields on small mtns a finding that is inconsistent with the liquidity hypothesis we also test for a yield difference between bonds

determinants of opec production implications for opec behavior we estimate models that identify the economic and organizational determinants of crude oil production by individual opec nations to clarify the interpretation of econometric results we model production with specifications that resolve the statistical ordering of variables and estimate models with techniques that can cope with stochastic trends in the time series we also analyze the short run dynamics for asymmetries that may carry important insights about opec behavior results indicate that quotas are an important determinant of production and their effects generally are symmetric which implies that opec is an organization that influences production and ultimately prices real prices generally have a positive effect on production and the size of this effect may depend on spare capacity which implies that opec behaviors also embody competitive elements finally all nations other than saudi arabia show some form of production sharing behavior which may imply that opec shares mismatches between the call for opec production and opec quotas

spillover effects in energy futures markets price discovery in crude oil and refined oil products has been extensively undertaken in organised futures markets for over a decade now there are two dominant such markets today the first one in the new york mercantile exchange and the second in london s international petroleum exchange with the demise of opec as the leading price setter for crude and products nymex light sweet crude and brent crude have usurped the role of benchmark grades for price setting to date considerable work has been done to scrutinise the degree to which these two markets price efficiently but little with regard to the way the two markets interact participants in these markets move with relative ease from one market to the other and usually take positions in both of them it is of interest therefore to investigate the information transmission mechanism by looking at spillover effects and perhaps identify which market is the true price leader this paper is a first attempt to look at such a problem in the energy market although similar studies have been done on stock market indices it is found that substantial spillover effects do exist when both markets are trading simultaneously although ipe morning prices seem to be considerably affected by the close of the previous day on nymex q 2001 elsevier science b v all rights reserved

investor yield and gross underwriting spread comparisons among u s dollar domestic yankee eurodollar and global bonds abstract the characteristics and features of domestic foreign eurobonds and global bonds differ from one another as do their regulation we develop regression models to compare investor yield differences that should logically exist at issuance for these bond market segments for u s dollar denominated bonds our empirical results show that ceteris paribus both privately placed and rule 144a eurodollar issues yield more than publicly placed bonds yankee bonds yield insignificantly more than domestic bonds and the bearer feature common to eurodollar bonds is not prized enough by institutional investors for them to accept a lower yield relative to domestic or yankee bonds we do not find a statistically significant difference between the investor yield spread on u s dollar global bonds and u s domestic bonds or yankee bonds or eurodollar bonds we also study underwriting costs of publicly traded bonds and find ceteris paribus that eurodollar bonds are far more costly for the firm to issue than domestic bonds yankee bonds or global bonds domestic and yankee bonds are more expensive than global bonds and there is no significant cost difference between domestic and yankee bonds

incentives in experiments a theoretical analysis experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks we provide a theoretical framework for analyzing this question assuming statewise mo

speculative trading and oil price dynamic a study of the wti market abstract the aim of this paper is to study the oil price dynamic in west texas intermediate wti market in the us by using statistical and econometric tools we first attempt to identify the long term relationship between wti spot prices and the prices of futures contracts on the new york mercantile exchange nymex subsequently we model the short term dynamic between these two prices and this analysis points up several breaks on this basis a short term markov switching vectorial error correction model ms vecm with two distinct states standard state and crisis state has been estimated finally we introduce the volumes of transactions observed on the nymex for the wti contracts and we estimate the influence of the non commercial players we conclude that the hypothesis of an influence of non commercial players on the probability for being in the crisis state cannot be rejected in addition we show that the rise in liquidity of the first financial contracts as measured by the volume of open interest is a key element to understand the dynamics in market prices

first price common value auctions bidder behavior and the winner s curse first price common value auctions bidder behavior and the winners curse john h kagel dan levin raymond c battalio and donald j meyer experimental auction markets are characterized by a strong winner s curse in early auction periods as high bidders consistently lose money failing to account for the adverse selection problem inherent in winning the auction with experience and bankruptcy on the part of the worst offenders subjects earn positive average profits but these are far below nash equilibrium predictions as a sizable minority of bids exceed the expected value of the item conditional on having the highest estimate of value individual bidding behavior is explored to identify the mechanism whereby market outcomes no longer display the worst effects of the winner s curse i introduction numerous occurrences of the winner s curse have been reported in bidding for items of uncertain value resulting in below normal or even negative average profits for bidders the winner s curse results from bidders failure to account for the adverse selection problem inherent in winning auctions for items of uncertain value capen clapp and campbell 1971 claim that the winner s curse resulted in low profits for oil companies in the 1960s in bidding on offshore oil and gas leases regarding corporate takeovers and mergers roll 1986 proposes a hubris hypothesis acquiring firms generally fall prey to the winner s curse paying too much on average for their targets he claims that from the samples he has observed the hubris hypothesis explains merger data as well as tax factors synergy or inefficient target management cassing and douglas 1980 find that many baseball players in the free agency market have been overpaid on account of the winner s curse and dessauer 1981 reports a similar finding of overbidding in auctions for the book publishing rights based on these occurrences it appears that many agents are not fully cognizant of the intricacies involved with bidding on alternatives that have uncertain worth the winner s curse results from the fact that although bidders may hold unbiased estimates of the auctioned item s value this estimate can be overly optimistic given that participants bids are influenced by their estimates of value in other words the winner s curse results from an adverse selection problem that bidders fail to account for fully in submitting their bids the existence of a winner s curse implies a breakdown of rational expectations on the bidder s part as discussed by milgrom 1981 and identifies a market that is out of equilibrium a winner s curse need not result from bidding on items with uncertain value provided proper adjustments are made one adjustment to the adverse selection problem is to deflate the expected value of the item and hence the bid before any action is taken for example cox and isaac 1984 show that agents who maximize expected utility will revise their expectations downward and submit bids that are strictly less than the expected value conditional on the event of winning when agents behave in this fashion a winner s curse does not result in the sense of bidders paying more on average than the items are worth this paper focuses on sealed bid auctions for objects of uncertain value a market institution for which theoretical predictions and empirical evidence concerning a winner s curse are mixed current theoretical development excludes the possibility of bidders paying more on average than the items are worth yet some empirical evidence in the sale of oil tracts as seen in capen clapp and campbell 1971 lohrenz and dougherty 1983 and mead moseidjord and sorenson 1983 suggests that the winner s curse may be present a series of experiments is designed and conducted in order to answer the following empirical research questions does the winner s curse exist in this auction framework and if it does what is its duration its relation to agent experience in the market and its breadth of impact across agents

the impact of the asian crisis on the behavior of us and international petroleum prices the strong long run relationships among the petroleum spot and futures prices have weakened after the asian crisis as manifested in less co integration among these prices in the post crisis period the directional causal relationships have either changed the direction as in the case of wti crude or weakened somewhat as in the case of nymex gasoline and heating oil these changes should complicate the job of those who try to benefit from predicting the movements of petroleum prices after the asian crisis in the international gasoline spot markets movements in the nymex gasoline price are found to precede movements in the gulf coast and rotterdam gasoline prices in the pre crisis period and the movements of these prices and those of the singapore price in the post crisis period implying that the nymex price is the gasoline leader in both periods the monday friday day of the week effect is only significant for the nymex gasoline 1 month and 3 month futures prices and the gulf coast gasoline spot economic and political shocks related to the spot prices have greater impacts on all prices than shocks related to the futures prices regardless of the petroleum type and the time period

is the spot market for oil products efficient some rotterdam evidence abstract this paper presents evidence relating to the efficiency of the rotterdam market for oil products analysis of daily weekly and monthly price changes for gas oil during the period 1978 1983 results in the rejection of the efficiency hypothesis ie relative price changes have been serially dependent on the basis of this observation a very simple trading rule is developed this rule is tested out simulating market transactions during the first two quarters of 1984 the financial outcome of this game turns out to be rather rewarding

the relationship between crude oil spot and futures prices cointegration linear and nonlinear causality the present study investigates the linear and nonlinear causal linkages between daily spot and futures prices for maturities of one two three and four months of west texas intermediate wti crude oil the data cover two periods october 1991 october 1999 and november 1999 october 2007 with the latter being significantly more turbulent apart from the conventional linear granger test we apply a new nonparametric test for nonlinear causality by diks and panchenko after controlling for cointegration in addition to the traditional pairwise analysis we test for causality while correcting for the effects of the other variables to check if any of the observed causality is strictly nonlinear in nature we also examine the nonlinear causal relationships of vecm filtered residuals finally we investigate the hypothesis of nonlinear non causality after controlling for conditional heteroskedasticity in the data using a garch bekk model whilst the linear causal relationships disappear after vecm cointegration filtering nonlinear causal linkages in some cases persist even after garch filtering in both periods this indicates that spot and futures returns may exhibit asymmetric garch effects and or statistically significant higher order conditional moments moreover the results imply that if nonlinear effects are accounted for neither market leads or lags the other consistently videlicet the pattern of leads and lags changes over time

the effect of the financial sector on the evolution of oil prices analysis of the contribution of the futures market to the price discovery process in the wti spot market abstract the aim of this article is to empirically measure the contribution of the futures market to the price discovery process in the spot market for benchmark crude oils specifically that for west texas intermediate wti for this purpose we test the hypothesis that the recent evolution of the financial markets has affected the future oil market so as to increase its contribution to the price discovery process of the spot market we modeled the relation between wti spot and future prices as a cointegration relation by using the kalman filter technique it was possible to obtain a time varying measure of the contribution of future markets to the price discovery mechanism the results show that in the case of wti the contribution of the futures market has been increasing especially between 2003 and 2008 and then again after the start of 2009 evidencing the growing importance of factors particular to the financial markets in determining oil prices in recent years during 2009 the spot prices adjusted to agents future expectations rather than to the current supply and demand conditions

an information diffusion based model of oil futures price abstract inspired by the increasing evidence of financialization speculation in commodity pricing this paper constitutes a first attempt to build an information diffusion based asset pricing framework for the oil futures market with gradual information dissemination slowly decaying uncertainty about the asset s future fundamentals generates persistent conditional volatility and a drift in asset return volatility based proxies for information flows are proposed to examine empirically the asset pricing implications the results confirm a significant intertemporal relationship between return on the price of oil futures information diffusion and volatility components an important implication of our study is that the slow diffusion of information generates predictability in price dynamics a forecasting model is then constructed and tested in relation to our theory it is found that the lagged series of the pricing factors possess significant predicting power for returns