what has driven oil prices since 2000 a structural change perspective abstract this paper characterizes weekly international oil price fundamentals since 2000 by analyzing the transformation of the market mechanism based on structural change perspective using endogenously determined break tests that allow for changes in both level and trend we divide the price fluctuations in the international oil market after 2000 into three stages relatively calm market period january 07 2000 to march 12 2004 the bubble accumulation period march 19 2004 to june 06 2008 and the global economic crisis period june 13 2008 to september 11 2009 the results show the existence of structural breaks refutes the utility of investigation of the full sample period as a whole and in different structural periods the main drivers of oil price changes and their way of influence and degree are significantly distinct then we demonstrate the evolving process of market mechanism since 2000 through establishing comparative models we also quantitatively measure the roles of speculation and episodic events in oil price fluctuations

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

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

inter firm social dilemmas with agency risk abstract many social dilemmas involve decisions made by firms we design a laboratory experiment that represents firms principal agent problem and includes an inter firm social dilemma and stochastic agent performance agents unobservable effort affects the likelihood of a bad outcome occurring such as a regulatory violation this harms the agent s principal but can also damage others thus creating an inter firm social dilemma in our baseline treatment we omit the agency problem and principals make their firm s effort decision directly in the second treatment principals can only offer an unconditional wage contract to their agent although a non contractual ex post bonus can be paid in a third treatment principals can condition wages on the stochastic outcome and a fourth treatment combines the conditional wage with a non contractual bonus we find that principals use a combination of a conditional wage and the non contractual ex post bonus to help overcome the agency problem and incentivize agents to choose higher effort fixed wage unconditional contracts lead to significantly lower effort levels even when augmented with bonuses similarly conditional contracts on their own also perform poorly only the combination of conditional wage contracts and discretionary bonuses is effective in limiting agency risk to address the inter firm social dilemma problem

impacts of exchange rate volatility and international oil price shock on china s regional economy a dynamic cge analysis abstract a multi regional dynamic computable general equilibrium model is constructed in this paper to explore the macroeconomic effects of international oil price shocks and rmb exchange rate changes on china the results show that 1 in terms of regional development differences the decrease in international oil prices and depreciation of rmb are both conducive to economic growth although the impact of rmb devaluation is more obvious increases in international oil prices will further widen the output gap between the rich and the poor regions whereas oil price decreases and rmb devaluation will narrow the regional development differences 2 in terms of employment the depreciation of the exchange rate and the decline in international oil prices will help increase the employment rate in most regions but oil price hikes will be most beneficial for improving oil industry employment in the northeast 3 the impact of oil price volatility is asymmetric compared with rising oil prices falling oil prices have significantly greater effects on gdp industrial output employment and other aspects furthermore the impacts of exchange rate fluctuations and oil price changes on the regional economy exhibit a time lag

optimal incentive contracts under inequity aversion we analyze the classic moral hazard problem with the additional assumption that agents are inequity averse the presence of inequity aversion alters the structure of optimal contracts when the concern for equity becomes more important there is convergence towards linear sharing rules the sufficient statistics result is violated depending on the environment contracts may be either overdetermined i e include non informative performance measures or incomplete i e neglect informative performance measures finally our model delivers a simple rationale for team based incentives implying wage compression 2010 elsevier inc

hedgers funds and small speculators in the energy futures markets an analysis of the cftc s commitments of traders reports the commodity futures trading commission cftc s commitments of traders cot data are examined for crude oil unleaded gasoline heating oil and natural gas futures contracts the collection procedures for the cot data are first examined followed by granger causality tests to determine if relationships between trader positions and market prices exist a positive correlation between returns and positions held by noncommercial traders and a negative correlation between commercial positions and market returns are found furthermore positive returns result in an increase in noncommercial net positions in the following week whereas the net long positions held by commercial hedgers decline following price increases however traders net positions do not lead market returns in general

incomplete contracts and strategic ambiguity why are observed contracts so often incomplete in the sense that they leave contracting parties obligations vague or unspecified traditional answers to this question invoke transaction costs or bounded rationality in contrast the authors argue that such incompleteness is often an essential feature of a well designed contract specifically once some aspects of performance are unverifiable it is often optimal to leave other verifiable aspects of performance unspecified the authors explore the conditions under which this occurs and investigate the structure of optimal contracts when these conditions are satisfied copyright 1998 by american economic association

modeling returns and volatility transmission between oil price and us nigeria exchange rate article i nfo this paper models returns and volatility transmission between oil price op and us nigeria exchange rate exr consequently it provides five main innovations i it analyzes op and exr using the recently devel oped test by narayan and popp 2010 np which allows for two structural breaks in the data series ii it employs the narayan and liu 2011 nl garch unit root test to evaluate robustness of np test iii it con siders the newly developed var garch model to capture the spillover effects in the returns and volatility of op and exr iv it modifies the var garch model to account for structural breaks obtained from the np procedure and v using the results obtained from the var garch model it examines the optimal weights of holding oil and foreign exchange fx assets and also computes the hedging ratios in the presence of oil risk based on the np and nl tests it finds robust structural breaks that coincide with the period of global fi nancial crisis as well as period of fx crisis in nigeria also it establishes a bidirectional returns and spillover transmission between oil and fx markets finally its findings reveal evidence of hedging effectiveness involving oil and fx markets in nigeria and thus the inclusion of oil into a diversified portfolio of fx will improve its risk adjusted return performance

an empirical analysis of risk incentives and the delegation of worker authority the authors empirically test prendergast s 2002 theory that incorporates the delegation of worker authority into the principal agent model to explain the lack of consistent empirical support for a tradeoff between risk and incentives using data from the 1998 british wers the authors investigate whether there is 1 evidence of a risk incentives tradeoff as predicted by the principal agent model 2 evidence of a positive relationship between incentive pay and the delegation of worker authority 3 evidence of a positive relationship between risk and authority 4 support for the main testable implication of prendergast s model namely that the evidence favoring a risk incentives tradeoff should strengthen when authority controls are added to the empirical model the answers are affirmative for all four questions thereby providing evidence clarifying the relationship between risk and incentive pay and how managers optimally bundle incentive pay and the delegation of worker decision rights to cope with

energy conservation investment do consumers discount the future correctly we argue that the apparently high discount rates attributed to investors making energy conservation investments are not irrational or the result of some market failure rather they may result from an investor recognizing that many conservation investments entail substantial sunk costs in the presence of these costs and uncertainty over future conservation savings consumers should use a higher hurdle rate for investment than if there were no uncertainty simulations suggest that the hurdle rate should be about four times greater than the standard rate an implication of our model is that tax subsidies for the purchase of conservation capital are likely to be ineffective we discuss alternative policy approaches which are more likely to increase energy efficient investment namely mandatory efficiency standards and energy taxes

the extreme value in crude oil and us dollar markets abstract this study constructs a flexible range based volatility model by considering extreme value information to explore the volatility and dependence structures between the oil price and the us dollar exchange rate an asset allocation strategy is implemented to evaluate the economic value and confirm the efficiency of this model the empirical results indicate that the use of extreme value information can not only enhance the explanatory power of volatility structures but also sort out the asymmetric volatility effect in the oil market besides investors can obtain extra benefits of between 72 and 713 annualized basis points by incorporating extreme value information into their asset allocation strategies less risk averse investors can generate higher benefits the empirical results have potentially important implications for asset allocation and risk management

on the identification of cointegrated systems in small samples a modelling strategy with an application to uk wages and prices abstract this paper discusses the practical application of identification in cointegrated systems it will argue that in a common realistic modelling situation of a limited data set and the theory requirements of a fairly rich model the techniques proposed in the existing literature are almost impossible to implement successfully there are crucial decisions to be made over the order in which various restrictions are imposed in the move from a general unrestricted vector error correction model vecm to the fully over identified vecm we will argue that imposing exogeneity restrictions at the earliest possible stage of the model reduction process and then restricting the dynamic adjustment of the model hugely increases the power of tests of overidentifying restrictions on the long run cointegrating vectors in practice this means that a thorough use of economic theory at an early stage rather than treating a model as a pure statistical artefact can yield enormous benefits

egalitarianism and competitiveness competition is a cornerstone of economic life some environments are however more competitive than others and individuals are often confronted with the decision whether to self select into a competitive environment an important example is occupational choice a self employed lawyer is in constant competition for clients whereas a lawyer working as a civil servant in a public authority is not likewise some people vigorously compete for promo tion to better paid jobs associated with a high prestige while others don t understanding who self selects into competitive environments and who shies away from them is thus important in this paper we test the hypothesis that individu als with a preference for egalitarian outcomes are more reluctant to self select into competitive environments our hypothesis is based on i the observation that payoff inequalities among winners and losers arise as a natural by product of competition and ii the empirical literature showing that a nonnegligible share of children and adults is willing to incur costs to reduce earnings inequalities see e g christopher dawes et al 2007 ernst fehr helen bernhard and bettina rockenbach 2008 we analyze data from several economic experiments implemented in a household survey study with mothers of preschool children we

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

smooth transition regime shifts and oil price dynamics abstract the interaction between rational hedgers and informed oil traders is parameterized and tested empirically with the help of a complex non linear smooth transition regime shift ccc garch procedure in spite of their gyrations futures price changes are usually self correcting well informed producers and consumers will ensure that crude oil prices and thus the prices of the corresponding futures contracts fluctuate within a long run equilibrium range determined by market fundamentals during a steep price upswing however shifts in positions in the futures markets by well informed optimizing agents that usually dampen price changes result in destabilizing positive feedback trading futures price changes that can be classified as speculative are due to destabilizing hedgers reactions to movements in the variability of the return of their covered cash position the paper provides in this way an innovative interpretation of the 2008 oil price bubble

a new way of measuring the wti brent spread globalization shock persistence and common trends abstract the standard cointegration and the persistence of the spread of the brent wti price have been widely analyzed however no studies have been able to present evidence of both issues jointly so far a novel focus is presented in this paper from the application of the fractionally cointegrated vector autoregressive fcvar approach which allows the rigidity of the standard cointegration to be solved as result of the application of the fcvar model we identify several degrees of globalization by analyzing the order of integration of the error correction term indeed by using permanent transitory decomposition analysis we present what drives the relationship between both oil crude prices information the findings shown here reveal that the brent wti market is strongly globalized nevertheless the brent wti price spread follows a long memory process and the brent drives the brent wti price structure these results sustain some corollaries on economic policies for economic agents policy makers and business operators

when will occur the crude oil bubbles abstract in this paper we apply a recursive unit root test to investigate whether there exist multiple bubbles in crude oil price the method is best suited for a practical implementation of a time series and delivers a consistent date stamping strategy for the origination and termination of multiple bubbles the empirical result indicates that there exist six bubbles during 1986 2016 when the oil price deviate from its intrinsic value based on market fundamentals specifically oil price contains the fundamentals and bubble components the dates of the bubbles correspond to specific events in the politics and financial markets the authorities should actively fight speculative bubbles or just observe their evolutions and speculation activities may decrease which is favour of the stabilisation of the staple commodities including crude oil price these findings have important economic and policy implications to recognise the cause of bubbles and take corresponding measures to reduce the impact on the real economy cause of the fluctuation of crude oil price

revisiting the trade off between risk and incentives the shocking effect of random shocks despite its central role in the theory of incentives empirical evidence of a trade off between risk and incentives remains scarce we reexamine this trade off in a workplace lab environment and find that in line with theory principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier unexpectedly agents produce substantially more in the noisy environment than in the baseline despite weaker incentives in addition principals earnings are significantly higher in the noisy environment we show that these findings can be accounted for when agents maximize a non cara utility function or when they exhibit loss aversion data and the online appendix are available at https doi org 10 1287 mnsc 2017 2914 this paper was accepted by uri gneezy behavioral economics

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

cointegration between oil spot and future prices of the same and different grades in the presence of structural change the purpose of this study is to examine whether crude oil spot and futures prices of the same and different grades are cointegrated using a residual based cointegration test that allows for one structural break in the cointegrating vector and high frequency data we choose the us wti and the uk brent as the representative crudes for this analysis since these two crudes have well established spot and futures markets we find that spot and future prices of the same grade as well as spot and futures prices of different grades are cointegrated we examine potential causes of structural change as revealed by the cointegration test in terms of events that have impacted on world oil markets as well as discuss the implications of the results for hedge managers investors and regulators

theories of behavior in principal agent relationships with hidden action abstract in a laboratory experiment we investigate behavior in a principal agent situation with moral hazard we evaluate the predictive success of two theories one is the standard agency theory which assumes that the agent will accept any contract offer that satisfies his participation constraint typically requiring zero expected utility the other is the fair offer theory suggested by keser and willinger 2000 principals principles when agents actions are hidden international journal of industrial organization 18 1 163 185 which requires that the principal provide full insurance against losses to the agent and leave him a share of at most 50 of the generated surplus the treatment variable of our experiment is the cost of effort as effort costs increase expected net surplus of a contract decreases we observe that fair offer theory generally predicts observed contract offers better than standard agency theory however the predictive success of the fair offer theory decreases while the one of standard agency theory increases with decreasing expected net surplus

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

financialisation oil and the great recession abstract this article addresses the role of world oil price hike of 2007 08 in serving to transform the financial and banking crisis into what is commonly referred to the great recession existing literature on the global crisis of 2007 09 tends to view it as a financial or banking phenomenon with analyses focusing mainly on state policies governance mechanisms and market dynamics in transforming the banking crisis of 2007 08 into the economic recession of 2008 12 13 although often attributing the global meltdown to wider phenomenon of financialisation rarely do existing perspectives delve into the role of the commodity sector in the global credit crunch in this paper we aim to fill this gap by inquiring into the role played by oil as a financial asset class in the political economy of the global crisis

does the s p500 index lead the crude oil dynamics a complexity based approach abstract taking the complex property of nonlinear feedback connectivity into consideration the goal of this paper is to apprehend the interdependences between the financial and energy sectors our contribution is both theoretical and methodological we conduct a multivariate analysis employing nonlinear tools namely the partial transfer entropy and the asymmetric mackey glass causality test in particular we build a system comprising the petroleum complex crude oil gasoline and heating oil the s p500 index and the 1 month futures spot spread for crude oil by adopting a rolling window approach we observe a persistent lead lag relationship between the s p500 index and the market participants expectations for crude oil from 2004 to 2009 depending on the bubble period in the stock market it appears that the resulting coupling becomes subject to the deterioration of global economic activity induced by large common shocks

oil exploration and perceptions of scarcity the fallacy of early success abstract it has been suggested that oil exploration may lead to false perceptions of decreasing scarcity we perform a simulation of the exploration process using bayesian updating the approach enables us to isolate the information effect on the success rate and also to quantify the subjective expectation of the total resource size the area under exploration consists of a number of regions which may differ in their oil content exploration is performed with the goal to maximize the expected success rate the resulting information about the distribution of oil and the total resource size is assumed public knowledge a number of scenarios with variations in the dimensions of the area under exploration the oil distribution and initial beliefs are considered the results indicate that the information effect on the success rate is significant but brief it might have a considerable impact on price but is an unlikely mechanism behind a long term declining price trend however the information effect on expectations is gradual and persistent since exploration is performed in regions where the expected success rate is the highest the historical success rate will not be representative of the area as a whole an explorer will tend to overestimate the total resource size thereby suggesting an alternative mechanism for false perceptions of decreasing scarcity a mechanism that could be called the fallacy of early success

oil price shocks and the dispersion hypothesis recent research by david lilien shows that a significant fraction of aggregate unemployment can be explained by the dispersion of employment growth across industries this paper presents two new results in this area first it is shown that a significant fraction of the variation in lilien s dispersion index is due to the differential impact of oil shocks across industries second and more important it is shown that once the dispersion in employment growth due to oil shocks is accounted for the residual dispersion has no explanatory power for unemployment

u s stock returns and oil prices the tale from daily data and the 2008 2009 financial crisis abstract using daily data from january 1999 to december 2011 we examine u s stock returns s p 500 dow jones nasdaq and russell 2000 based on a wide range of information including equity vix volatility inflation expectations interest rates gold prices and the usd euro exchange rate the focus is on oil price returns which have been previously found to exert mostly negative effects on u s stock returns identifying the crisis of 2008 2009 as a significant period of economic contraction and subsequent recovery we check the stability of the stock oil relationship by garch and mgarch dcc models prior to the financial crisis stock returns are slightly negatively affected by oil prices and by the usd euro for the subsample of mid 2009 onwards however stock returns are positively affected by oil prices and a weaker usd euro as with inflation expectations we interpret these findings as u s stocks responding positively to expectations of recovery worldwide our proposed explanation is due to the changing correlation between stock markets and oil either by standard garch models or by mgarch dcc models allowing the implied correlation to vary over time

national accounts and environmental resources in the paper optimal growth theory is used to derive the appropriate definition of the net national product concept when there are environmental resources and environmental damage to take into account the basic conclusions are that conventional defined np should be corrected by deducting environmental damage and adding the value of the net change of all resources

how do dynamic responses of exchange rates to oil price shocks co move from a time varying perspective abstract with globalization and financialization exchange rates could be sensitive to oil price shocks due to differences of exchange rate policy oil dependence status and other factors the responses of exchange rates to oil price shocks could be either similar or heterogeneous therefore in this paper we integrate a hybrid research framework to investigate the co movement of responses to oil price shocks of four major exchange rate of currencies included in the special drawing rights basket from january 2000 to september 2018 from a time varying aspect and considering the asymmetric effect of the oil price shocks the main results are as follows compared with the general oil price shocks unexpected oil price shocks could have greater influence on currency markets over time with the asymmetric effect happening only when extreme market situations and unexpected oil price shocks appear simultaneously pairwise exchange rates tend to move in either a negatively or a positively similar way rather than in an unrelated manner in 50 of the sampled market time the co movement situation of exchange rates response could be captured by specific small numbers of co movement modes with the euro us dollar usd and great british pound usd tending to co move in more stable manner and having the potential to serve as an early warning of risk while other pairwise exchange rates are characterized by time varying features

executive compensation and principal agent theory the empirical literature on executive compensation generally fails to specify a model of executive pay on which to base and test hypotheses regarding its determinants in contrast this paper analy

the relationship between oil prices and exchange rates revisiting theory and evidence abstract this paper reviews existing theoretical and empirical research on the relationship between oil prices and exchange rates we start with theoretical transmission channels which point to bi directional causality empirical research is classified and shows that the evidence varies substantially depending on sample country choice and empirical method yet there are some common patterns i strong links between exchange rates and oil prices are frequently observed over the long run and ii either exchange rates or oil prices are a potentially useful predictor of the other variable in the short run but the effects are strongly time varying we also identify some important avenues for future research

humps in the volatility structure of the crude oil futures market new evidence abstract this paper analyses the volatility structure of commodity derivatives markets the model encompasses hump shaped unspanned stochastic volatility which entails a finite dimensional affine model for the commodity futures curve and quasi analytical prices for options on commodity futures using an extensive database of crude oil futures and futures options spanning 21 years we find the presence of hump shaped partially spanned stochastic volatility in the crude oil market the hump shaped feature is more pronounced when the market is more volatile and delivers better pricing as well as hedging performance under various dynamic factor hedging schemes

the economic value of co movement between oil price and exchange rate using copula based garch models article i nfo the us dollar is used as the primary currency of international crude oil trading as such the recent substantial depreciation in the us dollar has resulted in a corresponding increase in crude oil prices in addition oil price and exchange rate returns have been shown to be skewed and leptokurtic and to exhibit an asymmetric or tail dependence structure therefore this study proposes dynamic copula based garch models to explore the dependence structure between the oil price and the us dollar exchange rate more importantly an asset allocation strategy is implemented to evaluate economic value and confirm the efficiency of the copula based garch models in terms of out of sample forecasting performance a dynamic strategy based on the cgarch model with the student t copula exhibits greater economic benefits than static and other dynamic strategies in addition the positive feedback trading activities are statistically significant within the oil market but this information does not enhance the economic benefits from the perspective of an asset allocation decision finally a more risk averse investor generates a higher fee for switching from a static strategy to a dynamic strategy based on copula based garch models

measuring regional diversification of environmental externalities in agriculture and the effectiveness of their reduction by eu agri environmental programs in poland abstract the problem of externalities is an important aspect of contemporary discussion about the directions of agricultural development and agricultural policy nonetheless measuring agri environmental externalities is a difficult task and rarely undertaken in scientific research in our research we have constructed a synthetic indicator that allows measuring agri environmental externalities at the regional level taking into account both positive and negative effects at the same time we also studied the extent to which our synthetic indicator can be used to inform about the effectiveness of subsidies paid to farmers in the european union under agri environmental programs in reduction of externalities generated by agriculture we concluded that the use of subsidies under agri environmental programs has a positive impact on reducing externalities generated by agricultural production measured by our indicator

on levies to reduce the nitrogen surplus the case of dutch pig farms pig farms in the netherlands pay a zero or low price for using the environment as a consequence the environment is overused the dutch government wants to reduce the emissions of nitrogen and phosphorus possible instruments are regulation and levies in this study a levy on feed and a levy on the nitrogen surplus are investigated by incorporating a bad output in the production model the model is estimated using panel data of dutch pig farms over the period 1975 1989 levies on nitrogen turn out to be more cost effective than levies on feed

on the link between forward energy prices a nonlinear panel cointegration approach abstract this paper investigates the relationship between forward prices of oil gas coal and electricity using a nonlinear panel cointegration framework to this end we consider a panel of 35 maturities and control for the economic and financial environment using equity futures prices estimating the cointegrating relationship we find that oil gas and coal forward prices are positively linked while the negative link between oil and electricity prices is consistent with a substitution effect between the two energy sources on the long run estimating panel smooth transition regression pstr models we show that the forward oil price adjustment process toward its equilibrium value is nonlinear and asymmetric putting forward the key role played by self sustaining dynamics and speculation phenomena

oil and us dollar exchange rate dependence a detrended cross correlation approach abstract this paper examines the relationship between oil prices and the us dollar exchange rate using detrended cross correlation analysis for a wide set of currencies in the periods before and since the onset of the recent global financial crisis we characterized the oil price exchange rate relationship at different time scales and documented two main findings first the cross correlation analysis indicated that oil price exchange rate correlations were negative and low having in general lower values for longer time scales second negative dependence between oil and the us dollar increased after the onset of the global financial crisis for all time scales thereby providing evidence of both contagion and interdependence this empirical evidence has important implications for monetary and fiscal policies asset management and risk assessment

interaction between oil and us dollar exchange rate nonlinear causality time varying influence and structural breaks in volatility abstractthis article examines the nonlinear granger causality and time varying influence between crude oil prices and the us dollar usd exchange rate using the hiemstra and jones hp test the diks and panchenko dp test and the time varying parameter structural vector autoregression model by applying the iterated cumulative sums of squares icss algorithm and the dcc garch model the effects of structural breaks in volatility of the two markets are also investigated the empirical analysis indicates that first crude oil prices are the nonlinear granger cause of the usd exchange rate but not vice versa second the usd exchange rate exerts a stronger and more stable negative influence on crude oil prices in the short term and the influence gradually weakens after 2012 finally ignoring structural breaks can increase the negative volatility correlation between the oil and usd exchange rate markets which is particularly remarkable during the financial crisis

financial liquidity geopolitics and oil prices abstract this paper aims simultaneously to study the global dynamic relationship of oil prices financial liquidity and geopolitical risk on the one hand and the economic performance of oil exports dependent economies on the other global and country specific dynamics are studied together in a global vector autoregression gvar model that allows different lag structures for different variables in different countries global impulse response functions from the estimated model suggest that new waves of high oil prices are unlikely despite the likely continuation of high global financial liquidity and heightened geopolitical risk which had driven earlier episodes of very high oil prices with oil remaining at modest to low prices by recent historical standards we study the prospects for economic growth in oil export dependent economies through dramatic increases in domestic investment as planned under visions 2030 of some arab countries and conclude that unfortunately success is unlikely

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

rational destabilizing speculation positive feedback trading and the oil bubble of 2008 abstract this article examines how the interaction of different participants in the crude oil futures markets affects the crude oil price efficiency normally the commercial market participants such as oil producers and oil consumers act as arbitrageurs and ensure that the price of crude oil remains within the fundamental value range however institutional investors that invest in crude oil to diversify their portfolios and or hedge inflation can destabilize the interaction among commercial participants and liquidity providing speculators we argue that institutional investors can impose limits to arbitrage particularly during the financial crisis when the investment demand for commodities is particularly strong in support we show that commercials hedgers had significantly reduced their short positions leading to the 2008 oil bubble they were potentially aggressively offsetting their short hedges as a result by essentially engaging in a positive feedback trading commercial hedgers at least contributed to the 2008 oil bubble these findings have been mainly overlooked by the existing research

external effects of agricultural production in italy and environmental accounting this paper deals with the valuation of some negative external effects arising from agricultural production in italy external effects are treated in a transformation function as a bad output additional to the normal output of a production activity in this case we can distinguish a price component or shadow price of the external effect and a quantity component and estimate them separately in order to calculate the price component of the external effects we first estimate one point on the marginal external costs curve and then try to obtain the whole curve i e external costs associated to different levels of emissions in different years as to the quantity component net emissions of nitrogen phosphorus and potassium have been estimated the aggregate value of external effects is then calculated for thirty years from 1961 to 1991 and deducted from the value added of the agricultural sector as a first step towards the correction of national accounting aggregates to take environmental degradation into account

correlations and volatility spillovers between oil prices and the stock prices of clean energy and technology companies abstract in this paper multivariate garch models are used to model conditional correlations and to analyze the volatility spillovers between oil prices and the stock prices of clean energy companies and technology companies four different multivariate garch models bekk diagonal constant conditional correlation and dynamic conditional correlation are compared and contrasted the dynamic conditional correlation model is found to fit the data the best and generates results showing that the stock prices of clean energy companies correlate more highly with technology stock prices than with oil prices on average a 1 long position in clean energy companies can be hedged for 20 cents with a short position in the crude oil futures market

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

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

disentangling the determinants of real oil prices in this study we quantify the impacts of economic fundamentals and derivative market speculation on the real price of crude oil using a structural var with sign restriction we determine that oil demand from the us and china particularly the latter one plays a crucial role in oil price changes after the year 2000 the contribution of speculation does not exceed 10 of oil price variations in our sample period

principals principles when agents actions are hidden abstract we examine the behavior of subjects in a simple principal agent game with hidden action while subjects in the role of agents tend to choose the actions which maximize their expected profits subjects in the role of principals offer contracts which differ from the theoretical predictions we identify three principles of contract design 1 the agent s remuneration for the better outcome is at least as high as the remuneration for the worse outcome 2 the agent must not risk making a loss 3 the net profit of the agent should not be higher than the net profit of the principal

feedback traders and stock return autocorrelations evidence from a century of daily data the authors investigate whether the degree of autocorrelation shown by high frequency stock returns changes with volatility this may result from nontrading effects feedback trading strategies or variable risk aversion the authors results indicate that when volatility is low daily and hourly stock returns exhibit positive autocorrelation but when it is high returns exhibit negative serial correlation they also find an important asymmetry negative serial correlation is more likely after price declines this is consistent with price declines being more likely to induce positive feedback trading the authors also find no significant relation between margin requirements and the autocorrelation of returns copyright 1992 by royal economic society

the dynamics of crude oil price differentials abstract crude oil price differentials are modelled as a two regime threshold autoregressive tar process using the method proposed by caner and hansen caner m hansen b e threshold autoregression with a unit root econometrica 2001 69 1555 1596 while standard unit root tests suggest that the prices of crude oil of different varieties move closely together such that their price differential is stationary the tar results indicate strong evidence of threshold effects in the adjustment process to the long run equilibrium these findings suggest that crude oil prices are linked and thus at the very general level the oil market is one great pool adelman m a international oil agreements the energy journal 1984 5 1 9 however differences in the dynamics of adjustment suggest that within this one pool oil markets are not necessarily integrated in every time period and hence the dynamics of crude oil price differentials may not follow a stationary process at all times although the development of a liquid futures market around the crude oil benchmarks has helped make some distant markets more unified arbitrage is not costless or risk free and temporary breakdowns in the benchmarks can lead to decoupling of crude oil prices

oil and energy price volatility it is commonly believed that since the 1973 oil crisis oil and energy prices have been more volatile than other commodity prices this study examines monthly producer prices for thousands of products over the period january 1945 through august 2005 the results show that crude oil refined petroleum and natural gas prices are more volatile than prices for about 95 of products sold by domestic producers relative to crude commodities however crude oil prices are currently more volatile than about 65 of other products and oil price volatility first exceeded the median for crude commodities following the 1986 drop in oil prices

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

bidirectional causality in oil and gas markets abstract do events in the natural gas market cause repercussions in the crude oil market this paper studies linkages between the two markets using high frequency intraday oil and gas futures prices by analyzing the effect of weekly oil and gas inventory announcements on price volatility we show a bidirectional causal relationship both inventory gluts and shortages have a cross commodity effect on price volatility not only for the next month nearby futures contract but also for the following six months contracts

using stockpile delegation to improve china s strategic oil policy a multi dimension stochastic dynamic programming approach abstract there has been much attention paid to oil security in china in recent years although china has begun to establish its own strategic petroleum reserve spr to prevent potential losses caused by oil supply interruptions the system aiming to ensure china s oil security is still incomplete this paper describes and provides evidence for the benefits of an auxiliary strategic oil policy choice which aims to strengthen china s oil supply security and offer a solution for strategic oil operations with different holding costs in this paper we develop a multi dimension stochastic dynamic programming model to analyze the oil stockpile delegation policy which is an intermediate policy between public and private oil stockpiles and is appropriate for the chinese immature private oil stockpile sector the model examines the effects of the oil stockpile delegation policy in the context of several distinct situations including normal world oil market conditions slight oil supply interruption and serious oil supply interruption operating strategies that respond to different oil supply situations for both the spr and the delegated oil stockpile were obtained different time horizons interruption times and holding costs of delegated oil stockpiles were examined the construction process of china s spr was also taken into account

crude oil commodity or financial asset abstract we examine the relation among daily returns to crude oil prices equity prices and commodity markets by modifying previous efforts in two important ways expanding the model to include the equity price for an oil producing firm conocophillips which ameliorates omitted variable bias and estimating the expanded model using the kalman filter which reduces uncertainty associated with ols estimates from rolling windows consistent with the notion of a commodity price beta for oil industry stocks there is a positive correlation between returns to the spot price of wti and conocophillips this correlation indicates not all price changes in crude oil are expected to persist indeed some of the price reductions associated with the asian financial crisis and the price increase associated with the 2008 price spike are not included in our estimate for long run prices in 2008 q4 the correlations between daily returns to crude oil and equities flip from negative to positive we hypothesize that this flip is triggered by a large reduction in interest rates in the fourth quarter of 2008 which is associated with a reduction in convenience yields and a change from backwardation to contango in futures markets these changes increase the returns to holding crude oil as a financial asset relative to holding oil as a commodity

oil price dynamics and speculation a multivariate financial approach abstract this paper assesses empirically whether speculation affects oil price dynamics the growing presence of financial operators in the oil markets has led to the diffusion of trading techniques based on extrapolative expectations strategies of this kind foster feedback trading that may cause considerable departures of prices from their fundamental values we investigate this hypothesis using a modified capm following shiller 1984 and sentana and wadhwani 1992 first a univariate garch 1 1 m is estimated assuming the risk premium to be a function of the conditional oil price volatility the single factor model however is outperformed by the multifactor icapm merton 1973 which takes into account a larger investment opportunity set analysis is then carried out using a trivariate ccc garch m model with complex nonlinear conditional mean equations where oil price dynamics are associated with both stock market and exchange rate behavior we find strong evidence that oil price shifts are negatively related to stock price and exchange rate changes and that a complex web of time varying first and second order conditional moment interactions affects both the capm and feedback trading components of the model despite the difficulties we identify a significant role played by speculation in the oil market which is consistent with the observed large daily upward and downward shifts in prices a clear evidence that it is not a fundamental driven market thus from a policy point of view given the impact of volatile oil prices on global inflation and growth actions that monitor speculative activities on commodity markets more effectively are to be welcomed

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

the effect of risk on the ceo market this article presents a market equilibrium model of ceo assignment pay and incentives under risk aversion and moral hazard each of the three outcomes can be summarized by a single closed form equation in the presence of moral hazard assignment is distorted from positive assortative matching on firm size as firms with higher risk or disutility choose less talented ceos such firms also pay higher salaries in the cross section but economywide increases in risk or the disutility of being a ceo do not affect pay the strength of incentives depends only on the disutility of effort and is independent of risk and risk aversion if the ceo can affect firm risk incentives rise and are increasing in risk and risk aversion we calibrate the losses from various forms of poor corporate governance such as failures in monitoring and inefficiencies in ceo assignment jel g34 j33 this article presents a market equilibrium model of ceo assignment pay and incentives risk averse managers of different talents are hired in a competitive market by heterogeneous firms which vary in their size risk and level of effort required the level of pay drives the assignment of talent to firms the strength of incentives induces the efficient effort level and is determined by an optimal contracting approach our main contribution is to incorporate risk into a ceo market equilibrium in a tractable manner a large empirical literature has shown that risk is a firstorder determinant of compensation contracts demsetz and lehn 1985 garen 1994 core and guay 1999 oyer and schaefer 2004 peters 2009 peters and wagner 2009 but most theories assume risk neutrality this assumption is