stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

evaluating natural resource investments notwithstanding impressive advances in the theory of finance over the past 2 decades practical procedures for capital budgeting have evolved only slowly the standard technique which has remained unchanged in essentials since it was originally proposed see dean 1951 bierman and smidt 1960 derives from a simple adaptation of the fisher 1907 model of valuation under certainty under this technique expected cash flows from an investment project are discounted at a rate deemed appropriate to their risk and the resulting present value is compared with the cost of the project this standard textbook technique reflects modern theoretical developments only insofar as estimates of the discount rate may be obtained from crude application of single period asset pricing theory but see brennan 1973 bogue and roll 1974 turnbull 1977 constantinides 1978 the inadequacy of this approach to capital budgeting is widely acknowledged although not widely discussed its obvious deficiency is its the evaluation of mining and other natural resource projects is made particularly difficult by the high degree of uncertainty attaching to output prices it is shown that the techniques of continuous time arbitrage and stochastic control theory may be used not only to value such projects but also to determine the optimal policies for developing managing and abandoning them the approach may be adapted to a wide variety of contexts outside the natural resource sector where uncertainty about future project revenues is a paramount concern

jump processes in natural gas markets abstract many analysts believe that natural gas will have an increasingly important role in the next few decades accordingly understanding the underpinnings of natural gas prices is likely to be critical both to policy analysts and to market participants at present it is common to assume that these prices follow a geometric brownian motion i e that log returns the inter temporal differences in the natural log of prices are normally distributed possibly allowing for some form of mean reversion increasingly however it has been recognized that the arrival of new information can lead to unexpectedly rapid changes or jumps in spot prices the implication is that the presumption of normally distributed log returns may be suspect in particular the prospect for abnormally fat tails becomes important this article investigates the potential presence of jumps in two key natural gas prices the spot price at the henry hub in the u s and the spot price for natural gas at the national balancing point in the u k we found compelling empirical evidence for the importance of jumps in both markets though jumps appear to be more important in the u k

what do market calibrated stochastic processes indicate about the long term price of crude oil abstract stochastic process models of commodity prices are important inputs in energy investment evaluation and planning problems in this paper we focus on modeling and forecasting the long term price level since it is the dominant factor in many such applications to provide a foundation for our modeling approach we first evaluate the empirical characteristics of crude oil price data from 1990 to 2013 using unit root and variance ratio tests statistical evidence from these tests shows only weak support for the applicability of stationary mean reverting type processes up through 2004 with non stationary brownian motion type processes becoming more plausible when the data from 2005 to 2013 is added we then apply a kalman filtering method with maximum likelihood approach to estimate the model parameters for both a single factor geometric brownian motion gbm process as well as the two factor schwartz and smith 2000 process the latter process decomposes the spot price into unobservable factors for the long term equilibrium level and short term deviation and it accommodates aspects of both a gbm process and a mean reverting process both empirical and simulated data are analyzed with these models and we quantify the increases in both the drift rate and volatility of these processes that result from developments in the crude oil markets since the middle of the last decade we conclude by comparing and contrasting both historical accuracy and forecasts from the parameterized models and show that when the emphasis is on the long term expectations a single factor gbm forecast may be sufficient

oil prices inflation and interest rates in a structural cointegrated var model for the g 7 countries sharp increases in the price of oil are generally seen as a major contributor to business cycle asymmetries moreover the very recent highs registered in the world oil market are causing concern about possible slowdowns in the economic performance of the most developed countries in this paper a structural cointegrated var model has been considered for the g 7 countries in order to study the direct effects of oil price shocks on output and prices and the reaction of monetary variables to external shocks our results can be summarized as follows i a stationary money demand as suggested by the classic theory of money can be identified for most countries ii according to the estimated coefficients of the structural part of the model for all countries except japan and u k the null hypothesis of an influence of oil prices on the inflation rate cannot be rejected inflation rate shocks are transmitted to the real economy by increasing interest rates iii impulse response analysis suggests for most countries the existence of an instantaneous temporary effect of oil price innovations on prices iv impulse response functions indicate different monetary policy reactions to inflationary and growth shocks v the simulation exercises directed to estimate the total impact of the 1990 oil price shock indicate that for some countries u s a significant part of the effects of the oil price shock is due to the monetary policy reaction function for other countries canada france and italy however the total impact is offset at least in part by an easing of monetary conditions

capabilities and industrial policy lessons from the new zealand movie industry this article examines the new zealand government s creation of an internationally successful industry the activities of the new zealand film commission are examined with regard to the effect they had on the entrepreneurs they nurtured factors that contributed to success include the market driven nature of the policy and an emphasis on capability building support is found for the suggestion that government agencies should act like venture capitalists negative aspects of government intervention included political capture and smoke stake chasing

limited attention and the role of the venture capitalist abstract this research analyzes the venture capitalist s incentives to maximize the profits of the entrepreneurs of ventures and the limited partners of a venture fund venture capital is a professionally managed pool of capital invested in equity linked private ventures entrepreneurs turn to venture capitalists for financing because high technology startup firms have low or negative cash flows which prevent them from borrowing or issuing equity in addition venture capitalists are actively involved in management of the venture to assure its success this solves the problem of startup firms that do not have the cash flows to hire management consultants venture capital contracts have three main characteristics 1 staging the commitment of capital and preserving the option to abandon 2 using compensation systems directly linked to value creation and 3 preserving ways to force management to distribute investment proceeds these characteristics address three fundamental problems 1 sorting the venture capital among the entrepreneurial ventures 2 providing incentives to motivate venture capitalists to maximize the value of the funded ventures and 3 providing incentives to motivate entrepreneurs to maximize the value of the ventures venture capitalists fund only about a dozen projects a year out of a thousand evaluated each project may receive several rounds of financing payoffs to vcs can be very high or be a complete loss the typical venture capital vc firm is organized as a limited partnership with the venture capitalists serving as general partners and the investors as limited partners general partner vcs act as agents for the limited partners in investing their funds vcs invest their human capital by placing their reputation on the line the goal is to begin to convert the investment into cash or marketable securities which are distributed to the partners vc management companies receive a management fee equal to a percentage usually 2 5 of the capital of each fund they also receive a percentage 15 30 of the profits of each fund called carried interest periodic reports are made by the vc firm to the limited partners usually these are only costs of managing the fund and so revenues are negative most contracts specify the percentage of time that the vc will devote to managing the fund the analysis of this research deals with the incentives of the vc who has limited attention to be allocated between improving current ventures and evaluating new ventures for possible funding the analysis shows that the vc as agent for both the entrepreneur and the general partners does not have the incentives required to maximize their profits the vc allocates attention among ventures and venture funds less frequently than required to maximize the entrepreneurs and limited partners profits however the vc does maximize the total profits of all ventures because the vc considers the opportunity cost of attention the vc s allocation of attention is efficient the implication of this result is that although the entrepreneurs and limited partners could be made better off with a different allocation of the vc s time this would be an inefficient use of the vc s time

pricing used products for remanufacturing remanufacturing is one of recovery options for used products as remanufacturing requires a continuous supply of used products the economic incentive is required to attract customers to return their used products called cores and the problem of pricing a core becomes an important issue such a pricing problem is analogous to pricing an option which can be used to sell the remanufactured cores called core products as sales price of core products follows a geometric brownian motion we propose a model here to evaluate the acquisition price of cores this model links core acquisition price with the sale price of core product but assumes other costs such as logistics and remanufacturing to be deterministic we have presented a numerical example to show its applicability since the model proposed here is generic it is believed that the proposed model can be used in setting the core prices in many situations

geometric brownian motion and structural breaks in oil prices a quantitative analysis the purpose of this paper is to present a quantitative analyses of oil price s path we try to argue that despite its parsimony and simplicity geometric brownian motion can perform well as a proxy for the movement of oil prices and for a state variable to evaluate oil deposits we base our argument on evidences of very low speed of mean reverting or long half life since unit root tests only can reject its null hypothesis in a sample longer than 100 years on the other hand we reject the null hypothesis of unit root with two endogenous breaks showing that the usual rejection can be attributed to omitted structural breaks we conclude that the average half life of oil price between 4 and 8 years depending on the model chosen is long enough to allow a good approximation as a geometric brownian motion

macroeconomic factors and oil futures prices a data rich model i study the dynamics of oil futures prices in the nymex using a large panel dataset that includes global macroeconomic indicators financial market indices quantities and prices of energy products i extract common factors from the panel data series and estimate a factor augmented vector autoregression for the maturity structure of oil futures prices i find that latent factors generate information that once combined with that of the yields improves the forecasting performance for oil prices furthermore i show that a factor correlated to purely financial developments contributes to the model performance in addition to factors related to energy quantities and prices

are oil shocks permanent or temporary panel data evidence from crude oil and ngl production in 60 countries this paper examines the unit root properties of crude oil production for 60 countries employing a range of panel data unit root tests for the period 1971 to 2003 the study first employs a number of panel data tests that do not accommodate structural breaks and then proceeds to apply the lagrange multiplier lm panel unit root test with one structural break the results of the panel data tests without a structural break are inconclusive with at best mixed support for joint stationarity the findings from the lm panel unit root test with a structural break however are conclusive suggesting that for a world panel and smaller regional based panels crude oil and ngl production are jointly stationary

an identification robust test for time varying parameters in the dynamics of energy prices summary we test for the presence of time varying parameters tvp in the long run dynamics of energy prices for oil natural gas and coal within a standard class of mean reverting models we also propose residual based diagnostic tests and examine out of sample forecasts in sample lr tests support the tvp model for coal and gas but not for oil though companion diagnostics suggest that the model is too restrictive to conclusively fit the data out of sample analysis suggests a random walk specification for oil price and tvp models for both real time forecasting in the case of gas and long run forecasting in the case of coal copyright 2010 john wiley sons ltd

detecting instability in the volatility of carbon prices this article investigates the presence of outliers in the volatility of carbon prices we compute three different measures of volatility for european union allowances based on daily data egarch model option prices implied volatility and intraday data realized volatility based on the methodology developed by zeileis et al 2003 and zeileis 2006 we detect instability in the volatility of carbon prices based on two kinds of tests retrospective tests ols recursive based cusum processes f statistics and residual sum of squares and forward looking tests by monitoring structural changes recursively or with moving estimates we show evidence of strong shifts mainly for the egarch and iv models during the time period overall we suggest that yearly compliance events and growing uncertainties in post kyoto international agreements may explain the instability in the volatility of carbon prices

on the stochastic properties of carbon futures prices pricing carbon is a central concern in environmental economics due to the worldwide importance of emissions trading schemes to regulate pollution this paper documents the presence of small and large jumps in the stochastic process of the co 2 futures price the large jumps have a discrete origin i e they can arise from various demand factors or institutional decisions on the tradable permits market contrary to the existing literature we show that the stochastic process of carbon futures prices does not contain a continuous component brownian motion the results are derived by using high frequency data in the activity signature function framework todorov and tauchen in j econom 154 125 138 2010 todorov and tauchen in j bus econ stat 29 356 371 2011 the implication is that the carbon futures price should be modeled as an appropriately sampled centered levy or poisson process the pure jump behavior of the carbon price might be explained by the lower volume of trades on this allowance market compared to other highly liquid financial markets

short term variations and long term dynamics in commodity prices in this article we develop a two factor model of commodity prices that allows meanreversion in short term prices and uncertainty in the equilibrium level to which prices revert although these two factors are not directly observable they may be estimated from spot and futures prices intuitively movements in prices for long maturity futures contracts provide information about the equilibrium price level and differences between the prices for the short and long term contracts provide information about short term variations in prices we show that although this model does not explicitly consider changes in convenience yields over time this short term long term model is equivalent to the stochastic convenience yield model developed in gibson and schwartz 1990 we estimate the parameters of the model using prices for oil futures contracts and apply the model to some hypothetical oil linked assets to demonstrate its use and some of its advantages over the gibson schwartz model

why do oil prices jump or fall this paper discusses theories that can explain the zig zags of oil prices in general and in particular the recent jump more precisely the following explanations are discussed homo oeconomicus pure profit maximization if demand is dynamic and convex price reaction function price increases and respectively declines depend on capacity utilization cartelization contingent on output or revenues of which the latter can lead to backward bending supply segments and multiple equilibria statistical descriptions mean reversion homo politicus i e arguments for price hikes that are rational public choice despite the long run economic loss finally two approaches are presented that emphasize demand uncertainty one extending the above mentioned dynamic demand framework and the other considers a dynamic game of non competitive suppliers with lumpy investments summing up a demand shock seems to be the most suitable explanation of today s high prices indeed a shock given that international energy agency iea and department of energy doe were promising just a couple of years ago that we are going to have lots of oil at low prices while others and in particular politics have surprisingly little or no explanatory power

oil price dynamics 2002 2006 abstract oil price dynamics during 2002 2006 have been characterized by high volatility high intensity jumps and strong upward drift and were concomitant with underlying fundamentals of oil markets and world economy namely pressure on oil prices resulting from rigid crude oil supply and expanding world demand for crude oil a change in the oil price process parameters would require a change in underlying fundamentals market expectations extracted from call and put option prices anticipated no change in underlying fundamentals in the short term markets expected oil prices to remain volatile and jumpy and with higher probabilities to rise rather than fall above the expected mean

estimating the influence of u s ethanol policy on plant investment decisions a real options analysis with two stochastic variables abstract u s ethanol policies have contributed to changes in the levels and the volatilities of revenues and costs facing ethanol firms the implications of these policies for optimal investment behavior are investigated through an extension of the real options framework that allows for the consideration of volatility in both revenue and cost components as well as the correlation between them the effects of policy affecting plant revenues dominate the effects of those policies affecting production costs in the absence of these policies much of the recent expansionary periods would have not existed and market conditions in the late 1990s would have led to some plant closures we also show that regardless of plant size u s ethanol policy has narrowed the distance between the optimal entry and exit curves implying a more narrow range of inactivity and indicative of a more volatile evolution for the industry than would have existed otherwise

estimating and forecasting the real prices of crude oil a data rich model using a dynamic model averaging dma approach given that oil price fluctuations have been of great interest for macroeconomics in the recent years due to its important implications for future inflation economic growth and policy making the aim of this paper is to estimate and forecast west texas intermediate wti crude oil prices using a large monthly dataset that covers the period from march 1983 to december 2011 to achieve this aim forecasting with factor models offers a usual approach that utilizes large datasets however a forecasting model which simply includes all factors in state space equation and does not allow for time varying may be not suitable with a highly volatile market such as oil market to overcome these limitations an approach that accounts both for parameter and model uncertainty is employed in particular this study uses the dynamic model averaging dma approach suggested by koop and korobilis 2012 the key element of the dma approach is that it allows both for model and parameter to vary at each point of time by doing so the dma is robust to structural breaks empirical findings show that dma approach outperforms any other alternative model used in the forecasting exercise results also show that there is model but not parameter variation in this oil price forecasting exercise finally the findings suggest that the dma approach provides a better proxy of expected spot prices than future prices

valuation of commodity futures and options under stochastic convenience yields interest rates and jump diffusions in the spot this paper investigates the effects of stochastic convenience yields stochastic interest rates and jumps in the spot price on the pricing of commodity futures forwards and futures options numerical examples show that one factor prices differ materially from the stochastic convenience yield two factor prices when convenience yield is considerably above its long term average the extension to a three factor model with stochastic interest rates leads to a different futures price but the forward price is unchanged the extension ofthe three factor model to include jumps in the spot price process does not affect forward or futures prices but it can have an impact on options prices the model is applied to price the present value of future cash flows from a real asset

study on carbon capture and storage ccs investment decision making based on real options for china s coal fired power plants in this paper a quadrinomial model based on the theory of real options is developed to evaluate the investment in carbon capture and storage ccs retrofitting for existing coal fired power plants in china uncertainties in carbon price fossil fuel price investment cost and government subsidy are considered an existing typical 600 mw supercritical pulverized coal fired scpc plant is taken as a case study to illustrate the proposed model and the effects of government subsidy under different scenarios on the critical carbon price to invest in ccs are analyzed the results indicate that the real options approach has an advantage over the application of traditional net present value npv method when handling uncertainty and government subsidy has significant effects on reducing critical carbon price for investment in ccs the critical carbon prices are 103 56 rmb ton with 100 subsidy and 217 95 rmb ton without subsidy while the current average carbon price is 85 2 rmb ton this means that the current trading environment is not positive enough to attract investment in ccs retrofitting these conclusions provide theoretical foundation for decision making of ccs investment and related policy making

option valuation of claims on real assets the case of offshore petroleum leases this paper extends financial option theory by developing a methodology for the valuation of claims on a real asset an offshore petroleum lease several theoretical and practical problems not present in applying option pricing theory to financial assets are addressed most importantly we show the necessity of combining option pricing techniques with a model of equilibrium in the market for the underlying asset petroleum reserves the advantages of this approach over conventional discounted cash flow techniques are emphasized the methodological development provides important insights for both company behavior and government policy promising empirical results are reported

trends in world energy prices the correct identification of the time series path of non renewable energy resources has far reaching consequences for economists and policymakers alike this study builds on the existing literature by employing a data series that includes a sample period of institutional change and recently developed unit root testing procedures besides crude oil natural gas and coal prices are also examined aiming to further the knowledge of non renewable energy resource time paths in order to inform future research and update the conclusions of past studies the unit root tests allow for structural breaks and are based on the procedures developed by zivot and andrews 1992 lumsdaine and papell 1997 and lee and strazicich 2003 finally we investigate whether the trend changes signs in the regimes which are bounded by the structural breaks and quantify the prevalence of the trends over the sample period considered the results show that the trend is not well represented by a single positive or negative trend the variability of the trend suggests that forecasting energy prices should not typically occur about a single trend

non linearities in the dynamics of oil prices abstract examining stationarity is of particular importance and represents the first step in empirical time series research non stationarity invalidates many of the results obtained from standard techniques and therefore requires special treatment because oil prices play an important role in affecting economic variables this paper examines the stationarity of real oil prices brent dubai wti and the world over the period 1973 2 2011 2 real oil prices are expressed in the currencies of seven asian countries indonesia japan korea malaysia the philippines singapore and thailand and in the u s dollar while using linear unit root tests without structural breaks shows no evidence of stationarity allowing for breaks shows very limited evidence of stationarity we argue that these results are attributed to the presence of nonlinearities in the behavior of oil prices testing for nonlinearity shows significant evidence of nonlinearity in all the cases with evidence of exponential smooth transition autoregression estar nonlinearity type in most cases applying unit root tests that account for two types of nonlinearities smooth transition and nonlinear deterministic trends reveals evidence of stationarity in all the cases

off shore enhanced oil recovery in the north sea the impact of price uncertainty on the investment decisions although co2 capture and storage ccs is considered a key solution for co2 emission mitigation it is currently not economically feasible co2 enhanced oil recovery can play a significant role in stimulating ccs deployment because co2 is used to extract additional quantities of oil this study analyzes the investment decision of both a carbon emitting source and an oil company separately by adopting a real options approach it is shown that when uncertainty is integrated in the economic analysis co2 and oil price threshold levels at which investments in co2 capture and enhanced oil recovery will take place are higher than when a net present value approach is adopted we also demonstrate that a tax on co2 instead of an emission trading system results in a lower investment threshold level for the investment in the co2 capture unit furthermore we determine a minimum co2 selling price between the two firms and show that co2 eor has the potential to pull ccs into the market by providing an additional revenue on the capture plant however when co2 permit prices are above an identifiable level the eu ets does not necessarily result in the adoption of ccs and stimulates oil production

waiting to invest investment and uncertainty the textbook analysis that accepts all projections with positive net present values as positive is quite generally wrong the ability to delay a project means that almost every project competes with itself postponed with uncertain interest rates even the simplest of projects has an option value the effect of interest rate uncertainty on the optimal delay of investment is sizable this implies that the rate of aggregate investment will depend on both the level of the real interest rate and the degree of interest rate uncertainty furthermore it is not necessarily true that investment rises with a fall in interest rates copyright 1992 by university of chicago press

the relationship between oil prices and the nigerian stock market an analysis based on fractional integration and cointegration abstract we examine the relationship between oil prices and the stock market in nigeria we focus on the degree of persistence of the series and based on the similarities observed between the two series a fractionally cointegrated framework is proposed the results indicate that the two series display a similar order of integration which is close to although above 1 testing for cointegration this is decisively rejected since the order of integration in the equilibrium relationship was similar to that of the individual series however testing for long memory with oil prices acting as a weakly exogenous regressor we obtained significant evidence of a positive relationship between the two variables though with a short memory effect this relation being significant only during the following three months

a characterization of oil price behavior evidence from jump models abstract this paper is concerned with the statistical behavior of oil prices in two ways it firstly applies a combined jump garch model in order to characterize the behavior of daily weekly as well as monthly oil prices secondly it relates its empirical results to implications of hotelling type resource extraction models the empirical analysis shows that oil prices are characterized by garch as well as conditional jump behavior and that a considerable portion of the total variance is triggered by sudden extreme price movements this finding implies that first oil price signals are not reliable and as a consequence both finding optimal extraction paths and decisions regarding the transmission to alternative technologies are likely to be compromised second this behavior is in stark contrast to the notion of deterministic trends in the price of oil

is subsidizing entry an optimal policy public subsidies in support of new firm foundation are among the most frequently used instruments of industrial policy in the euro zone this paper analyses their effectiveness and efficiency vis a vis some features of the overall process of industry dynamics in italian manufacturing to this end the survival and growth patterns of new small firms are investigated using a unique dataset on electrical and electronic engineering in italy as regards survival our results confirm the findings of other studies namely that the hazard rates are particularly high in the early stages of firm s life cycle as far as growth is concerned the study s main finding is that gibrat s law fails to hold in the years immediately following start up when smaller firms must rush in order to achieve a size large enough to enhance their likelihood of survival conversely in later stages of firm s life cycle the law cannot be rejected these results radically question the use of subsidies as an optimal policy for the support of new entries since the subsidy brings about a major bias in the process of market selection including substitution and deadweight effects and hampers the post entry scale adjustment of newborn firms

neutrality and efficiency of petroleum revenue tax a theoretical assessment we use an irreversible investment model of oil development to show how a fiscal regime can be both neutral with respect to development decisions and efficient in recouping economic rents we find that there is a unique rate for calculating the tax deductibility of capital costs which ensures economic neutrality while tax efficiency involves high rates of tax on profits after these deductions using parameters of the uk petroleum revenue tax prt numerical calculations in our simplified model suggest that prt was both neutral and relatively efficient in conclusion the tax efficiency of prt is compared with that of a neutral resource rent tax

switching from oil to gas production in a depleting field abstract we derive an optimal decision rule with regards to making an irreversible switch from oil to gas production the approach can be used by petroleum field operators to maximize the value creation from a petroleum field with diminishing oil production and remaining gas reserves assuming that both the oil and gas prices follow a geometric brownian motion we derive an analytical solution for the exercise threshold we also propose an explicit solution for the option value that is new to the literature numerical examples are used to demonstrate the threshold and option value for a generic petroleum field both the threshold and option value solutions are relevant for application to other real options cases with similar features e g other types of switching options or a perpetual spread option

oil price hikes and development triggers in peace and war the theory of irreversible investment predicts that development of an oil field should take place when a unique price trigger is passed at the start of the 1990 91 gulf war however oil prices promptly doubled only to fall back to their previous level when peace returned six months later to incorporate such large but transitory price hikes we evaluate the profitability of an oil field contingent on war and peace and calculate separate triggers in each case for plausible parameter values we find that the switch between these development triggers is about 45 of the price hike caused by the war the price hike is therefore equivalent to a permanent price increase of only a quarter of its size copyright 1996 by royal economic society

unit root properties of crude oil spot and futures prices in this article we examine whether wti and brent crude oil spot and futures prices at 1 3 and 6 months to maturity contain a unit root with one and two structural breaks employing weekly data over the period 1991 2004 to realise this objective we employ lagrange multiplier lm unit root tests with one and two endogenous structural breaks proposed by lee and strazicich 2003 minimum lagrange multiplier unit root test with two structural breaks review of economics and statistics 85 1082 1089 2004 minimum lm unit root test with one structural break working paper no 04 17 department of economics appalachian state university we find that each of the oil price series can be characterised as a random walk process and that the endogenous structural breaks are significant and meaningful in terms of events that have impacted on world oil markets

market efficiency of oil spot and futures a mean variance and stochastic dominance approach this paper examines the market efficiency of oil spot and futures prices by using both mean variance mv and stochastic dominance sd approaches based on the west texas intermediate crude oil data for the sample period 1989 2008 we find no evidence of any mv and sd relationships between oil spot and futures indices this infers that there is no arbitrage opportunity between these two markets spot and futures do not dominate one another investors are indifferent to investing spot or futures and the spot and futures oil markets are efficient and rational the empirical findings are robust to each sub period before and after the crises for different crises and also to portfolio diversification

business environment economic agglomeration and job creation around the world based on a comprehensive worldwide firm survey this paper looks at how the business environment and economic agglomeration affect job creation holding constant conventional determinants of firm growth such as firm ownership size and age the analysis finds that economic agglomeration is most important especially modern telecommunications access to export markets concentration of economic activity in large cities and capacity agglomeration the concentration of large firms in a city although the business environment affects job growth less than agglomeration does some elements of the business environment matter such as labor flexibility unionization and local skill levels there is strong heterogeneity in job creation across firm size and age

venture capitalist certification in initial public offerings this paper provides support for the certification role of venture capitalists in initial public offerings consistent with the certification hypothesis a comparison of venture capital backed ipos with a control sample of nonventure capital backed ipos from 1983 through 1987 matched as closely as possible by industry and offering size indicates that venture capital backing results in significantly lower initial returns and gross spreads in effect the presence of venture capitalists in the issuing firms serves to lower the total costs of going public and to maximize the net proceeds to the offering firm in addition we document that venture capitalists retain a significant portion of their holdings in the firm after the ipo the ability of third party specialists to certify the value of securities issued by relatively unknown firms in capital markets that are characterized by asymmetric information between corporate insiders and public investors has attracted much academic interest in recent years several authors including james 1990 blackwell marr and spivey 1990 and barry muscarella peavy and vetsuypens 1991 have developed and tested models based at least in part on the formal certification hypothesis presented in booth and smith 1986 a related body of work represented by deangelo 1981 beatty and ritter 1986 titman and trueman 1986 johnson and miller 1988 carter 1990 simon 1990 and carter and manaster 1990 has examined how investment bankers and auditors help resolve the asymmetric information inherent in the initial public offering ipo process in this paper we examine whether the presence of venture capitalists as investors in a firm going public can certify that the offering price of the issue reflects all available and relevant inside information we hypothesize that venture capitalists can perform this function that it will be an economically

design of innovation policy through diagnostic analysis identification of systemic problems or failures activities in innovation systems are the determinants of the development and diffusion of innovations examples are rd it provides a framework for identification of systemic problems or failures in innovation systems

uk industrial policy old tunes on new instruments this paper discusses the current labour government s industrial policy as most recently reflected in its document on manufacturing strategy in the context of industrial policy in the uk over the last 50 years and the form that it has taken elsewhere in europe it concludes that the thematic priorities for uk industrial policy in the 1960s international competitiveness innovation competition and skills continue to be the key themes of uk policy today the paper presents data that illustrate the gaps that exist in key indicators of performance between the uk and its main economic competitors the difference between the 1960s and the 2000s is that there are new instruments of policy two areas in particular are focused on competition policy and technology policy and an attempt is made to assess the likely effectiveness of these new instruments the paper concludes that the international evidence base for these new approaches is reasonably robust but that it is still too soon to tell if they are having the hoped for impact on the performance of the uk economy copyright 2002 oxford university press