|
on Financial Markets |
|
Issue of 2016‒09‒18
three papers chosen by |
| By: | Joachim R. Groeger |
| Abstract: | In this paper I empirically investigate prediction markets for binary options. Advocates of prediction markets have suggested that asset prices are consistent estimators of the "true" probability of a state of the world being realized. I test whether the market reaches a "consensus." I find little evidence for convergence in beliefs. I then determine whether an econometrician using data beyond execution prices can leverage this data to estimate the consensus belief. I use an incomplete specification of equilibrium outcomes to derive bounds on beliefs from order submission decisions. Interval estimates of mean beliefs cannot exclude aggregate beliefs equal to 0.5. |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:1609.03471&r=fmk |
| By: | Baldi, Lucia; Peri, Massimo; Vandone, Daniela |
| Abstract: | The recent global food crisis has caused an increase in agricultural market volatility, raising important questions on the determinants of this instability. Many studies have analyzed this issue focusing on main factors affecting price volatility, as past volatility and trends, transmission across prices, oil price volatility, export concentration, stock levels and yields (Balcombe, 2010). Existing empirical literature identifies different drivers of volatility; among them, financialization and speculation are by far one of the most important. Indeed, with the introduction of agricultural commodity as an alternative asset class in investment portfolios, and the consequent increasing integration between commodity markets and major financial markets, there has been a growing convergence of risk-adjusted returns on assets class across markets, and an increase in the risk of volatility spillovers from outside to commodity markets due to portfolio rebalancing of institutional investors (Adams and Gluck, 2015). Since the beginning of the new millennium, in fact, there has been a steady flows of financial investments in commodities. As reported by Irwin and Sanders (2011), commodity investments have grown between 2003 and 2009 from 15 billion to 250 billions of dollars. Investments in these markets is made through different financial instruments, driven by different motivations: in futures, both for hedging and speculative purposes, and also in commodity index funds and hedge funds, mainly for portfolio diversification purposes. Increase in investing in the latter two types of investments, however, has been much stronger, compared to the past (Cheng et al. 2014). This process of massive increase in investments in commodities through financial instruments, knows as “commodity finanziarization”, has generated a gradual integration between commodities market and financial markets which, in turn, has risen spillover volatility between markets due to investors’ rebalancing of portfolio’s asset classes. |
| Keywords: | Agribusiness, Agricultural Finance, Demand and Price Analysis, |
| Date: | 2016–05 |
| URL: | http://d.repec.org/n?u=RePEc:ags:iefi16:244461&r=fmk |
| By: | Takayuki Mizuno (National Institute of Informatics, School of Multidisciplinary Sciences, SOKENDAI (The Graduate University for Advanced Studies), PRESTO, Japan Science and Technology Agency, The Canon Institute for Global Studies); Takaaki Ohnishi (Graduate School of Information Science and Technology The University of Tokyo, The Canon Institute for Global Studies); Tsutomu Watanabe (Graduate School of Economics, University of Tokyo, The Canon Institute for Global Studies) |
| Abstract: | The distributions of market capitalization across stocks listed in the NASDAQ and Shanghai stock exchanges have power law tails. The power law exponents associated with these distributions fluctuate around one, but show a substantial decline during the dot-com bubble in 1997-2000 and the Shanghai bubble in 2007. In this paper, we show that the observed decline in the power law exponents is closely related to the deviation of the market values of stocks from their fundamental values. Specifically, we regress market capitalization of individual stocks on financial variables, such as sales, profits, and asset sizes, using the entire sample period (1990 to 2015) in order to identify variables with substantial contributions to fluctuations in fundamentals. Based on the regression results for stocks in listed in the NASDAQ, we argue that the fundamental value of a company is well captured by the value of its net asset, therefore a price book-value ratio (PBR) is a good measure of the deviation from fundamentals. We show that the PBR distribution across stocks listed in the NASDAQ has a much heavier upper tail in 1997 than in the other years, suggesting that stock prices deviate from fundamentals for a limited number of stocks constituting the tail part of the PBR distribution. However, we fail to obtain a similar result for Shanghai stocks. |
| Date: | 2016–09 |
| URL: | http://d.repec.org/n?u=RePEc:cfi:fseres:cf392&r=fmk |