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Optimal hedging under departures from the cost of carry valuation: evidence from the spanish stock index futures market

2011-01-26T16:43:52Z

Title: Optimal hedging under departures from the cost of carry valuation: evidence from the spanish stock index futures market Author(s): Lafuente, Juan A. Abstract: This paper provides an a~alytical discussion of the optimal hedge ratio when discrepancies between the futures trading price and its theoretical valuation according to the cost-of-carry model occurs. Under the assumption of a geometric Brownian motion for spot prices we model the mispricing by a new specific noise in the theoretical dynamic of futures market. Empirical evidence above the model is provided for the Spanish stock index futures. Ex-post simulations reveal that hedging effectiveness applying the estimated ratio is similar to the achieved with a systematic unitary hedge ratio, the optimal one when a mispricing does not appear. However, a small number of futures contracts is needed.

Influences of institutional pressures on corporate social responsibility attitude and corporate social responsibility outcomes

2013-02-07T14:28:20Z

Title: Influences of institutional pressures on corporate social responsibility attitude and corporate social responsibility outcomes Author(s): Kunapatarawong, Rasi; Martínez-Ros, Ester [emros] Abstract: We study the antecedents that help explaining how firms should deal with CSR in this modern economy where there is a heightened demand for firms to behave in a socially responsible manner, and also why some firms succeed with their CSR initiatives while others fail. We believe (1) different types of demands from various stakeholder groups, (2) managers‟ attitude, and (3) disaggregation of CSR dimensions to be three important issues playing a role in creating robust CSR. Our results unveil that external and internal institutional pressures alone do not have significant relationships with both types of CSR: firm-benefit CSR and mutually-benefiting CSR. Instead these forces affect CSR attitude of managers, which successively, influences the kinds of CSR they consider and engage in

Reconsidering optimal experimental design for conjoint analysis

2013-03-12T13:03:42Z

Title: Reconsidering optimal experimental design for conjoint analysis Author(s): Esteban Bravo, Mercedes [mesteban]; Leszkiewicz, Agata; Vidal-Sanz, José M. [jvidal] Abstract: he quality of Conjoint Analysis estimations heavily depends on the alternatives presented in the experiment. An efficient selection of the experiment design matrix allows more information to be elicited about consumer preferences from a small number of questions, thus reducing experimental cost and respondent's fatigue. The statistical literature considers optimal design algorithms (Kiefer, 1959), and typically selects the same combination of stimuli more than once. However in the context of conjoint analysis, replications do not make sense for individual respondents. In this paper we present a general approach to compute optimal designs for conjoint experiments in a variety of scenarios and methodologies: continuous, discrete and mixed attributes types, customer panels with random effects, and quantile regression models. We do not compute good designs, but the best ones according to the size (determinant or trace) of the information matrix of the associated estimators without repeating profiles as in Kiefer's methodology. We handle efficient optimization algorithms to achieve our goal, avoiding the use of widespread ad-hoc intuitive rules.

Modelling and Measuring Price Discovery in Commodity Markets

2012-11-27T17:42:27Z

Title: Modelling and Measuring Price Discovery in Commodity Markets Author(s): Figuerola-Ferretti, Isabel; Gonzalo, Jesús [jgonzalo] Abstract: In this paper we present an equilibrium model of commodity spot (st) and futures (ƒt) prices, with finite elasticity of arbitrage services and convenience yields. By explicitly incorporating and modelling endogenously the convenience yield, our theoretical model is able to capture the existence of backwardation or contango in the long-run spot-futures equilibrium relationship, st = β2ƒt + β3 When the slope of the cointegrating vector β2 > 1(β2 < 1) the market is under long run backwardation (contango). It is the first time in this literature in which the theoretical possibility of finding a cointegrating vector different from the standard β2 = 1 is formally considered. Independent of the value of β2 this paper shows that the equilibrium model admits an economically meaningful Error Correction Representation, where the linear combination of (st) and (ƒt) characterizing the price discovery process in the framework of Garbade and Silber (1983). coincides exactly with the permanent component of the Gonzalo and Granger (1995) Permanent Transitory decomposition. This linear combination depends on the elasticity of arbitrage seIVices and is determined by the relative liquidity traded in the spot and futures markets. Such outcome not only provides a theoretical justification for this Permanent-Transitory decomposition; but it offers a simple way of detecting which of the two prices is dominant in the price discovery process. All the results are testable. as can be seen in the application to spot and futures non-ferrous metals prices (Al, Co, Ni, Pb, Zn) traded in the London Metal Exchange (LME). Most markets are in backwardation and futures prices are "information dominant" in highly liquid futures markets (Al, Cu, Ni, Zn).