risk aversion and the recommended hedging ratio in a recent article in this journal kahl reviewed the existing literature on the determination of optimal futures and cash market positions the optimal hedging ratios were found to depend on whether the cash position was treated as endogenous or predetermined and some general implications were set forth the surprising conclusion was that the optimal hedging ratio is independent of the individual s risk aversion even though the optimal positions in the cash and futures markets are themselves not independent of the risk parameter kahl demonstrates that this conclusion

an equilibrium model of asset trading with sequential information arrival in an effort to better understand the dynamic market price adjustment process this paper develops a model which describes the impact of new information on a financial market the primary emphasis is on the price change volume relationship in the presence of a margin requirement we find that the margin requirement significantly affects the relation of price change to volume furthermore this relationship is shown to be affected by the number of investors in the market the degree of information dissemination differences in interpretation of information and the implicit cost of the margin requirement

microfinance literature a sustainability level perspective survey abstract since the early microcredit programs up to the present microfinance has grown exponentially as it has the academic interest on it as a research subject considering that this sector has impact in terms of sustainability any research in the field requires an analysis with wide criteria which should include the economic environmental social and governance dimensions eesg as well as their interrelationships the objectives of this survey are to investigate the contributions of microfinance sectoral scholarly research to sustainability through a systematic literature review using content analysis method contextualizing the scientific production and studying its terminology according to the eesg criteria and under global reporting initiative framework and finally to identify research gaps and to propose future research paths

a theory of trading volume a theory of trading volume is developed based on assumptions that market agents frequently revise their demand prices and randomly encounter potential trading partners the model describes two distinct ways informational events affect trading volume one is consistent with conjectures made by empirical researchers that investor disagreement leads to increased trading but the observation of abnormal trading volume does not necessarily imply disagreement and volume can increase even if investors interpret the information identically if they also have had divergent prior expectations simulation tests support the model and are used to contrast the random pairing environment with costless market clearing volume is lower in the costly market and volume increases caused by an informational event persist after the event period this is consistent with existing empirical evidence and suggests that markets do not immediately clear all orders or that investors have demands to recontract

financial exit routes from the poverty trap a study of four uk cities potentially community development finance institutions cdfis represent a promising complement to the welfare system in its attempts to reduce poverty since they provide finance to the financially excluded and potentially remove a barrier to their acquisition of assets drawing on a new survey of around 360 households in four uk cities surveyed both before and after the 2008 09 recession it is found that a major factor determining whether low income households receiving cdfi loans are able to exit from poverty is their ability to save this is found to be determined by a variety of attitudinal and institutional factors including the rationality of their coping strategies the nature and extent of social networks and the extent of their access to money advice it is argued that some of these causal factors are amenable to policy

impact assessment methodologies for microfinance theory experience and better practice abstract microfinance programs and institutions are increasingly important in development strategies but knowledge about their impacts is partial and contested this paper reviews the methodological options for the impact assessment ia of microfinance following a discussion of the varying objectives of ia it examines the choice of conceptual frameworks and presents three paradigms of impact assessment the scientific method the humanities tradition and participatory learning and action pla key issues and lessons in the practice of microfinance ias are then explored and it is argued that the central issue in ia design is how to combine different methodological approaches so that a fit is achieved between ia objectives program context and the constraints of ia costs human resources and timing the conclusion argues for a greater focus on internal impact monitoring by microfinance institutions

mainstreaming microfinance social performance management or mission drift summary what scope is there for the pursuit of explicit development goals in the context of increasing integration of specialized microfinance and commercial banking sectors this question and the idea of mission drift is first analyzed using a model that distinguishes between institutions financial and social performance possibilities preferences and assessment systems the model is used to review findings from action research with an international sample of poverty oriented microfinance institutions that suggest some simple steps for improved social performance management it is then used to illustrate the relationship between social and financial performance more widely across the retail financial services sector and to offer pointers for more policy analysis at this level

market efficiency in agricultural futures markets market efficiency and unbiasedness are tested in four agricultural commodity futures markets live cattle hogs corn and soybean meal using cointegration and error correction models with gqarch in mean processes results indicate each market is unbiased in the long run although cattle hogs and corn futures markets exhibit short run inefficiencies and pricing biases models for cattle and corn outperform futures prices in out of sample forecasting results also suggest short run time varying risk premiums in cattle and hog futures markets

market expectations of the effects of the tax reform act of 1986 on banking organizations abstract this study investigates market expectations regarding the effect of the tax reform act of 1986 on the banking industry the evidence shows that overall the tax reform did not adversely affect the stocks of banking institutions the findings suggest that overall banking organizations were expected to largely mitigate any negative effects of the tax reform on their cash flow by rebalancing and or repricing their portfolios of assets and liabilities the most significant provision of the new act was the limitation on foreign tax credits interestingly the markets did not expect any adverse valuation effects from the recapture of loan loss reserves or the elimination of the interest deductibility for carrying tax exempt securities

stochastic dominance vs mean variance portfolio analysis an empirical evaluation most of the work in portfolio theory in the past decade has been based on the principle of utility maximization where either the investor s utility function is assumed to be a second degree polynomial with a positive first derivative and a negative second derivative or the probability functions are assumed to be normal if at least one of these conditions holds it can be shown that choosing among risky assets on the basis of their mean and variance only is consistent with the von neumann morgenstern utility maximization model thus given the above assumptions the incorporation of higher moments of a distribution and the adoption of alternative approaches to portfolio selection have largely been ignored in favor of the more familiar mean variance approaches

microenterprise credit programs deja vu abstract microenterprises in low income countries are the target of an increasing number of credit programs these efforts resemble earlier problematic attempts to assist operators of small farms with credit similarities discussed include target group definition assumptions policies and project justifications authors go on to list a dozen lessons from the experience with small farmer credit that might apply to microenterprise credit efforts authors then conclude that debt is not an effective tool for helping most poor people to enchance their economic conditions be they operators of small farms or microenterprises

the impact of short selling on the price volume relationship evidence from hong kong this paper considers the relationship between traded volume and volatility allowing for the impact of short sales the evidence supports a nonlinear bidirectional relationship between volume and volatility short selling is found to have a significant impact on this relationship and our results suggest i that the hong kong market displays greater volatility following a period of short selling and ii that asymmetric responses to positive and negative innovations to returns appear to be exacerbated by short selling

short interest and the asymmetry of the price volume relationship in the canadian stock market abstract several studies have revealed an asymmetry in the price volume relationship in the equities markets this paper verifies this relationship using canadian data and presents an alternative test of the costly short sales hypothesis based on the volume of outstanding short interest in the stock market contrary to previous studies the empirical tests in this study do not rely on futures markets data but rather measure and compare the effects of relative short interest positions on the price volume relationship for positive and negative price changes the results suggest that the greater the ratio of short positions to the number of shares outstanding the greater the trading volume associated with price increases relative to that accompanying price decreases

optimal storage by crop producers when post harvest marketing strategies are restricted by disallowing speculative purchases sales out of storage becomes an irreversible decision and the dynamic marketing problem becomes analogous to the optimal exercise of a financial option the optimal marketing strategy is to hold at low prices and to sell at high prices with a cutoff price function marking the boundary between low and high prices a method for estimating the cut off price function is developed and applied to illinois soybean prices the decision rule is demonstrated to result in substantial gains from storage copyright 2002 oxford university press

tails curtailed accounting for nonlinear dependence in pricing margin insurance for dairy farmers livestock gross margin insurance for dairy cattle lgm dairy is a risk management tool for protecting milk income over feed cost margins in this article we examine the assumptions underpinning the method used to determine lgm dairy premiums analysis of the milk feed dependence structure is conducted using copula methods a rich set of tools that allow modelers to capture nonlinearities in dependence among variables of interest we find a significant relationship between milk and feed prices that increases with time to maturity and severity of negative price shocks extremal or tail dependence is the propensity of dependence to concentrate in the tails of a distribution a common theme in financial and actuarial applications and in agricultural crop revenue insurance is that tail dependence increases the risk to the underwriter and results in higher insurance premiums we present to our knowledge the first case in which tail dependence may actually reduce actuarially fair premiums for an agricultural risk insurance product we examine hedging effectiveness with lgm dairy and show that even in the absence of basis or production risk hedging horizon plays an important role in the ability of this tool to smooth farm income over feed cost margins over time rating methodology that accounts for tail dependence between milk and feed prices extends the optimal hedging horizon and increases hedging effectiveness of the lgm dairy program

an investigation of transactions data for nyse stocks using transactions data the behavior of returns and characteristics of trades at the micro level is examined a minute by minute market return series is formed and tested for normality and autocorrelation evidence of differences in return distributions is found among overnight trades trades during the first 30 minutes following the market opening trades at the close and trades during the remainder of the day the latter distribution is found to be normal unusually high returns and standard deviations of returns are found at the beginning and the end of the trading day when the beginningand end of the day effects are omitted autocorrelation in the market return series is reduced substantially a number of patterns in trading are reported this paper empirically investigates the nature of the return generating process and the characteristics of trade size price changes trading frequency and trading interval at the level of individual trades for a large sample of nyse stocks previous studies of market indices have used daily weekly or monthly

microenterprise finance is there a conflict between growth and poverty alleviation abstract microenterprise finance has generated enormous enthusiasm among aid donors and nongovernment organizations ngos as an instrument for reducing poverty in a manner that is financially self sustaining although something of a consensus has emerged concerning the principles by which such institutions should be designed however we know little about their impact the paper reports on a research project which estimated the impact of 13 microfinance institutions in seven developing countries on poverty and other target variables and attempted to relate such impact to the institutions design features for each of the institutions studied the impact of lending on the recipient household s income tended to increase at a decreasing rate as the recipient s income and asset position improved a relationship which can easily be explained in terms of the greater preference of the poor for consumption loans their greater vulnerability to asset sales forced by adverse income shocks and their limited range of investment opportunities there are significant outliers to this general pattern in particular very poor people who have been able to achieve significant loan impact but they are the exception rather than the rule and the relationship is significant at the 1 level for all the institutions studied except the malawi mudzi fund this relationship defines in the short term an impact frontier which serves as a tradeoff lenders can either focus their lending on the poorest and accept a relatively low total impact on household income or alternatively focus on the not so poor and achieve higher impact the position and slope of the estimated impact curve vary however with the design of the institution for well designed schemes impact at all levels of income is higher than for ill designed schemes hence for many lender institutions the tradeoff can often be moved by appropriate innovations in institutional design in particular modifications to savings loan collection and incentive arrangements for borrowers and staff

the informational effects of restrictions on short sales some empirical evidence in a world of heterogeneous investors a competitive financial market has two major functions first it is the mechanism by which ownership of the existing supply of risky assets is distributed among investors this is the role which is analyzed in detail by the standard capital asset pricing model capm and its many extensions the second important market function is to aggregate the diverse information held by different investors into a single price most versions of the capm eliminate the information aggregation function by assuming that investors hold homogeneous beliefs with respect to the probability distribution of asset returns exceptions which deal with some aspects of the problem are lintner 7 grossman 4 grossman and stiglitz 5 and figlewski 1 3

price mean reversion seasonality and options markets options on agricultural commodities with maturities exceeding one year seldom trade one possible reason to explain this lack of trading is that we do not have an accurate option pricing model for products where mean reversion in spot price levels can be expected standard option pricing models assume proportionality between price variance and time to maturity this proportionality is not a valid assumption for commodities whose supply response brings prices back to production costs the model proposed here incorporates mean reversion in spot price levels and includes a correction for seasonality mean reversion and seasonality are both observed in the soybean market the empirical analysis lends strong support to the model

the relation between price changes and trading volume a survey this paper reviews previous and current research on the relation between price changes and trading volume in financial markets and makes four contributions first two empiri cal relations are established volume is positively related to the magnitude of the price change and in equity markets to the price change per se second previous theoretical research on the price volume relation is summarized and critiqued and major insights are emphasized third a simple model ofthe price volume relation is proposed that is consis tent with several seemingly unrelated or contradictory observations and fourth several directions for future research are identified

optimal hedging with a subjective view an empirical bayesian approach the standard optimal hedging model has been the preferred theoretical model of normative hedging behavior in empirical applications the model is often implemented with the parameter certainty equivalent pce procedure however the pce procedure completely ignores parameter estimation risk and subjective views we develop an empirical bayesian optimal hedging model that not only effectively accommodates parameter estimation risk but also provides hedgers with a theoretically intuitive yet quantitatively rigorous framework to blend their subjective views and a marketwide or firmwide consensus in determining optimal hedging positions ratios

interest rates in savings groups thrift or threat summary savings group sg models are praised for achieving financial inclusion for the poorest at a very low cost promoted by international ngos sg models are inspired by indigenous savings and credit associations roscas sg models however differ in that they prescribe lending the pooled savings to group members for an interest the interest rate aims to 1 boost capital accumulation 2 allocate scarce capital efficiently and 3 remunerate and incentivize savers this paper builds on a six month fieldwork conducted in dr congo consisting of direct observations of sg meetings and interviews with sg participants and practitioners we study the gaps between sg practitioners objectives and sg participants perceptions and practices related to the interest rate our research pays particular attention to the local context and local norms that interfere with sg practitioners objectives our analysis highlights three gaps first sg participants turn savings into credit for security purposes rather for rapid capital accumulation second credit allocation decisions are guided by fairness and security concerns rather than efficiency third sg participants often regard the accumulated interest as belonging to the group and to active borrowers rather than to passive savers our results invite development actors to pay greater attention to the potential risks of the sg approach for its participants despite the common appellation savings groups this microfinance innovation builds upon credit and strongly encourages its members to go into debt

practice what you preach microfinance business models and operational efficiency the microfinance sector has room for pure for profit microfinance institutions mfis non profit organizations and social for profit firms that aim to pursue a double bottom line depending on their business model these institutions target different types of borrowers change the size of their loans and adjust their loan pricing we introduce a simple approach that accommodates a wide range of business models and allows us to estimate the operational efficiency of mfis our empirical results show that mfis with a high depth of outreach are most efficient resulting in higher levels of outreach and profits for the same input mix

profit margin hedging some extension economists and others recommend profit margin hedging as a way to choose the timing of crop sales however the theory behind this strategy recommendation is not well developed this article determines the producer s utility function and price processes where profit margin hedging is optimal profit margin hedging is shown to be an optimal strategy under a highly restricted target utility function even in an efficient market profit margin hedging is profitable if prices are mean reverting copyright 2010 oxford university press

a risk return model with risk and return measured as deviations from a target return two attribute risk and return models are very popular in the economics and finance literature for analyzing decisions under uncertainty their popularity stems primarily from the intuitive appeal of the dichotomy into risk and return and from the ease with which the concepts can be diagrammed in two dimensions the most commonly used risk return model is the mean variance model in which risk is measured as the variance and return by the mean of the probability distribution over outcomes the mean variance model has a number of shortcomings which are widely known but of particular concern here are the facts that 1 mean variance dominance is neither necessary nor sufficient for second degree stochastic dominance 2 unless the form of the probability distribution is restricted mean variance is consistent with von neumann morgenstern utility theory only if the utility function is quadratic and 3 as peter fishburn has noted

microfinance in africa is it either the problem or the solution abstract this article is based on research undertaken on microenterprises in the informal sector in kenya malawi and ghana it seeks to provoke critical reflection on the uncritical enthusiasm that lies behind much proselytizing of microfinance for informal sector microenterprise it questions whether the extensive donor interest in microenterprise finance really addresses the problems of microentrepreneurs or whether it offers the illusion of a quick fix it suggests that the real problems are more profound and cannot be tackled solely by capital injections but require fundamental structural changes of the socioeconomic conditions that define informal sector activity and a fuller understanding of the psyche of informal sector entrepreneurs

the role of microfinance in household livelihood adaptation in satkhira district southwest bangladesh summary there is increasing interest in the potential of microfinance to foster climate change adaptation however existing literature over relies upon theoretical arguments rather than empirical evidence and until now the emphasis has been on potential positive linkages we address these weaknesses by empirically examining the role of microfinance in adaptation drawing from household level quantitative and qualitative data gathered from satkhira district southwest bangladesh we find evidence that microfinance facilitates coping by reducing sensitivity to environmental and climate hazards credit is especially important because its availability is uncorrelated with the occurrence of flooding unlike many other traditional coping responses we also find evidence that microfinance facilitates adaptation by helping households to overcome financial barriers of adopting adaptation options which reduce exposure or sensitivity however credit limits are likely to restrict its role to incremental adaptations which may not meaningfully reduce vulnerability transformational adaptations at times required access to bank credit which the poorest cannot access this restricts their ability to effectively adapt and are penalized financially by having to obtain loans to cope we also find evidence that microfinance can lead to maladaptation when used in non profit generating activities as income streams are not produced to help repay associated costs almost a fifth of all loans were obtained for repaying existing loans thus microfinance may undermine longer term adaptive capacity

the hedging role of options and futures under joint price basis and production risk this paper analyzes the optimal production and hedging decisions for firms facing futures price basis and production risk assuming futures and options can be used using constant absolute risk aversion utility and normal distributions the authors derive an exact solution and show that joint production and price risk lead to a hedging role for options risk averse firms that can use each hedging instrument will generally have higher expected output using iowa data for soybeans the parameters of the joint distribution of future prices cash prices and yields are estimated and the results are used to approximate optimal hedging decisions for soybean producers copyright 1995 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association