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Futures Prices (future + price)
Selected Abstracts"Marking-to-Market" and Treasury-Bill Futures Prices: Some Empirical EvidenceFINANCIAL REVIEW, Issue 1 2000Seungmook Choi G13 Abstract Financial economists have not found empirical evidence of a "marking-to-market" effect in Treasury-bill futures contracts, despite a firm theoretical basis for its existence. Therefore, we speculate that confounding effects, possibly due to liquidity preferences, influence futures-forward price spreads. By using an empirical specification that allows for both effects, we present empirical evidence that Treasury-bill futures-forward price spreads are sensitive to the volatility of the underlying commodity in ways predicted by the theory of the marking-to-market effect. [source] Stock Index Futures Prices and the Asian Financial Crisis,INTERNATIONAL REVIEW OF FINANCE, Issue 3-4 2007TAUFIQ HASSAN ABSTRACT This study reports new findings on the behavior of index futures (FKLI: code name of Kuala Lumpur Index Futures contract) prices and also records the effect of a major financial crisis on the prices. Since the inception of trading in 1995, the FKLI has been selling at a discount, which gradually increased till early 1997; further, at the onset of the financial crisis in July 1997, FKLI prices were at a high premium relative to its theoretical values. This significant mispricing of the contract declined after the initial overreaction to the crisis. Herding behavior during crisis, liquidity constraint and imposition of trading restrictions are some plausible explanations for the mispricing. This study also investigates whether trades by foreign investors had any impact when compared with prices by domestic investors. We find that foreign investors had a negative influence on permanent price changes while the domestic investors had a positive effect. [source] Quasi-rational and ex ante price expectations in commodity supply models: an empirical analysis of the US broiler marketJOURNAL OF APPLIED ECONOMETRICS, Issue 4 2003Matthew T. Holt A statistically optimal inference about agents' ex ante price expectations within the US broiler market is derived using futures prices of related commodities along with a quasi-rational forecasting regression equation. The modelling approach, which builds on a Hamilton-type framework, includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components. We therefore infer the relative importance of various informational sources in expectation formation. Results show that, in addition to the quasi-rational forecast, the true supply shock, future prices, and ex post commodity price forecast errors have, at times, been influential in broiler producers' price expectations. Copyright © 2003 John Wiley & Sons, Ltd. [source] Order Flow and Liquidity around NYSE Trading HaltsTHE JOURNAL OF FINANCE, Issue 4 2000Shane A. Corwin We study order flow and liquidity around NYSE trading halts. We find that market and limit order submissions and cancellations increase significantly during trading halts, that a large proportion of the limit order book at the reopen is composed of orders submitted during the halt, and that the market-clearing price at the reopen is a good predictor of future prices. Depth near the quotes is unusually low around trading halts, though specialists and/or floor traders appear to provide additional liquidity at these times. Finally, specialists appear to ,spread the quote' prior to imbalance halts to convey information to market participants. [source] Investor Sentiment and Return Predictability in Agricultural Futures MarketsTHE JOURNAL OF FUTURES MARKETS, Issue 10 2001Changyun Wang This study examines the usefulness of trader-position-based sentiment index for forecasting future prices in six major agricultural futures markets. It has been found that large speculator sentiment forecasts price continuations. In contrast, large hedger sentiment predicts price reversals. Small trader sentiment hardly forecasts future market movements. An investigation was performed into various sentiment-based timing strategies, and it was found that the combination of extreme large trader sentiments provides the strongest timing signal. These results are generally consistent with the hedging-pressure theory, suggesting that hedgers pay risk premiums to transfer nonmarketable risks in futures markets. Moreover, it does not appear that large speculators in the futures markets possess any superior forecasting ability. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:929,952, 2001 [source] Natural gas prices and the gas storage report: Public news and volatility in energy futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 3 2004Scott C. Linn This study examines the short-term volatility of natural gas prices through an examination of the intraday prices of the nearby natural gas futures contract traded on the New York Mercantile Exchange. The influence on volatility of what many regard as a key element of the information set influencing the natural gas market is investigated. Specifically, we examine the impact on natural gas futures price volatility of the Weekly American Gas Storage Survey report compiled and issued by the American Gas Association during the period January 1, 1999 through May 3, 2002 and the subsequent weekly report compiled and issued by the U.S. Energy Information Administration after May 6, 2002. We find that the weekly gas storage report announcement was responsible for considerable volatility at the time of its release and that volatility up to 30 minutes following the announcement was also higher than normal. Aside from these results, we document pronounced price volatility in this market both at the beginning of the day and at the end of the day and offer explanations for such behavior. Our results are robust to the manner in which the mean percentage change in the futures price is estimated and to correlation of these changes both within the day and across days. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:283,313, 2004 [source] Robust estimation of the optimal hedge ratioTHE JOURNAL OF FUTURES MARKETS, Issue 8 2003Richard D. F. Harris When using derivative instruments such as futures to hedge a portfolio of risky assets, the primary objective is to estimate the optimal hedge ratio (OHR). When agents have mean-variance utility and the futures price follows a martingale, the OHR is equivalent to the minimum variance hedge ratio,which can be estimated by regressing the spot market return on the futures market return using ordinary least squares. To accommodate time-varying volatility in asset returns, estimators based on rolling windows, GARCH, or EWMA models are commonly employed. However, all of these approaches are based on the sample variance and covariance estimators of returns, which, while consistent irrespective of the underlying distribution of the data, are not in general efficient. In particular, when the distribution of the data is leptokurtic, as is commonly found for short horizon asset returns, these estimators will attach too much weight to extreme observations. This article proposes an alternative to the standard approach to the estimation of the OHR that is robust to the leptokurtosis of returns. We use the robust OHR to construct a dynamic hedging strategy for daily returns on the FTSE100 index using index futures. We estimate the robust OHR using both the rolling window approach and the EWMA approach, and compare our results to those based on the standard rolling window and EWMA estimators. It is shown that the robust OHR yields a hedged portfolio variance that is marginally lower than that based on the standard estimator. Moreover, the variance of the robust OHR is as much as 70% lower than the variance of the standard OHR, substantially reducing the transaction costs that are associated with dynamic hedging strategies. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:799,816, 2003 [source] The dynamics of the relationship between spot and futures markets under high and low variance regimesAPPLIED STOCHASTIC MODELS IN BUSINESS AND INDUSTRY, Issue 6 2009Ming-Yuan Leon Li Abstract This investigation is one of the first studies to examine the dynamics of the relationship between spot and futures markets using the Markov-switching vector error correction model. Three mature stock markets including the U.S. S&P500, the U.K. FTSE100 and the German DAX 30, and two emerging markets including the Brazil Bovespa and the Hungary BSI, are used to test the model, and the differences between the two sets of markets are examined. The empirical findings of this study are consistent with the following notions. First, after filtering out the high variance regime, the futures price is shown to lead the spot price in the price discovery process, as demonstrated by prior studies; conversely, the spot market is more informationally efficient than the futures market under the high variance condition. Second, the price adjustment process triggered by arbitrage trading between spot and futures markets during a high variance state is greater in scale than that based on a low variance state, and the degree of the co-movement between spot and futures markets is significantly reduced during the high variance state. Third, a crisis condition involved in the high variance state is defined for the two emerging markets, whereas an unusual condition is presented for the three mature markets. Last, the lagged spot,futures price deviations perform as an information variable for the variance-turning process. However, the portion of the variance-switching process accounted for by this signal variable is statistically marginal for the three mature markets selected for this study. Copyright © 2008 John Wiley & Sons, Ltd. [source] Asymmetric Futures Price Distribution and Bid-Ask Quotes,ASIA-PACIFIC JOURNAL OF FINANCIAL STUDIES, Issue 6 2009Lars Nordén Abstract This study presents a model for estimating the asymmetry of the futures price with respect to the futures bid-ask spread. Analysis of Data from the Swedish OMXS 30 index futures market shows clear evidence of futures price asymmetry, where the futures price in general tends to be closer to the bid than to the ask quote. Moreover, in a futures market environment with a relatively low liquidity, the futures price tends to be closer to the bid quote, whereas the futures price is virtually symmetrically located within the futures spread when liquidity is relatively high. [source] U.S. Monetary Policy Surprises and Currency Futures Markets: A New LookFINANCIAL REVIEW, Issue 4 2008Tao Wang G14 Abstract Intraday currency futures prices react to both surprises in the federal funds target rate (the target factor) and surprises in the anticipated future direction of Federal Reserve monetary policy (the path factor) in similar magnitude, and the reaction is short-lived. Dollar-denominated currency futures prices drop significantly in response to positive surprises (i.e., unexpected increases) in the target and path factors, but have generally little response to negative surprises. A monetary policy tightening during expansionary periods leads to an appreciation of the domestic currency, while a monetary policy loosening during recessionary periods tends to have no significant impact. [source] Can the choice of interpolation method explain the difference between swap prices and futures prices?ACCOUNTING & FINANCE, Issue 2 2005Rob Brown G13 Abstract The standard model linking the swap rate to the rates in a contemporaneous strip of futures interest rate contracts typically produces biased estimates of the swap rate. Institutional differences usually require some form of interpolation to be employed and may in principle explain this empirical result. Using Australian data, we find evidence consistent with this explanation and show that model performance is greatly improved if an alternative interpolation method is used. In doing so, we also provide the first published Australian evidence on the accuracy of the futures-based approach to pricing interest rate swaps. [source] Did Futures Markets Stabilise US Grain Prices?JOURNAL OF AGRICULTURAL ECONOMICS, Issue 1 2002Joseph Santos Though economists are divided over whether, in practice, futures markets reduce spot price volatility, observers of nascent nineteenth century US futures markets essentially praised the stabilising effects of this financial innovation. Indeed, such praise is understandable, particularly if, as the Chicago Board of Trade (CBOT) and others assert, "violent" spot price fluctuations were common prior to, but not after, the 1870s; the same decade that grain trade historians typically associate with the birth of the modern futures contract. And whereas these events may be unrelated, the claim is intriguing because it requires that nineteenth century futures prices fulfil their price discovery function, a property that many modern futures markets do not possess. This paper explores what role, if any, the advent of futures trading may have had on spot price volatility. I corroborate the CBOT's assertion regarding diminished spot price volatility around the 1870s and show that early futures prices did indeed fulfil their price discovery function. Moreover, I address two alternative hypotheses that relate the decline in spot price volatility to the Civil War. Ultimately, I maintain that the evolution of futures markets is the principal proximate reason why commodity spot price volatility diminished. [source] Model-free evaluation of directional predictability in foreign exchange marketsJOURNAL OF APPLIED ECONOMETRICS, Issue 5 2007Jaehun Chung We examine directional predictability in foreign exchange markets using a model-free statistical evaluation procedure. Based on a sample of foreign exchange spot rates and futures prices in six major currencies, we document strong evidence that the directions of foreign exchange returns are predictable not only by the past history of foreign exchange returns, but also the past history of interest rate differentials, suggesting that the latter can be a useful predictor of the directions of future foreign exchange rates. This evidence becomes stronger when the direction of larger changes is considered. We further document that despite the weak conditional mean dynamics of foreign exchange returns, directional predictability can be explained by strong dependence derived from higher-order conditional moments such as the volatility, skewness and kurtosis of past foreign exchange returns. Moreover, the conditional mean dynamics of interest rate differentials contributes significantly to directional predictability. We also examine the co-movements between two foreign exchange rates, particularly the co-movements of joint large changes. There exists strong evidence that the directions of joint changes are predictable using past foreign exchange returns and interest rate differentials. Furthermore, both individual currency returns and interest rate differentials are also useful in predicting the directions of joint changes. Several sources can explain this directional predictability of joint changes, including the level and volatility of underlying currency returns. Copyright © 2007 John Wiley & Sons, Ltd. [source] Quasi-rational and ex ante price expectations in commodity supply models: an empirical analysis of the US broiler marketJOURNAL OF APPLIED ECONOMETRICS, Issue 4 2003Matthew T. Holt A statistically optimal inference about agents' ex ante price expectations within the US broiler market is derived using futures prices of related commodities along with a quasi-rational forecasting regression equation. The modelling approach, which builds on a Hamilton-type framework, includes endogenous production and allows expected cash price to be decomposed into anticipated and unanticipated components. We therefore infer the relative importance of various informational sources in expectation formation. Results show that, in addition to the quasi-rational forecast, the true supply shock, future prices, and ex post commodity price forecast errors have, at times, been influential in broiler producers' price expectations. Copyright © 2003 John Wiley & Sons, Ltd. [source] The Monday effect in U.S. cotton pricesAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 3 2009Stephen P. Keef There is an extensive literature on the Monday effect with stock indices. It is regularly reported that the return on Monday is correlated with the return on the prior Friday. The bad Monday effect occurs when the return on the preceding Friday is negative. Cotton is an economically important commodity in the United States and around the world. This investigation into the daily price seasonality in the U.S. cotton market is based on spot prices from Memphis and futures prices from the New York Cotton Exchange. The regression methodologies employ adjustments to control for undesirable properties in the error terms. There are three main conclusions. First, the close-to-close changes in the futures price and in the spot price exhibit a negative Monday effect. Second, a negative bad Monday effect is observed on Mondays using close-to-close prices. The effect is present during the weekend nontrading period and continues into trading on Mondays. Third, the negative bad Monday effect does not appear to weaken in close-to-close prices and during the weekend over the period examined (1987,2003). However, there is weak evidence of a temporal decline during trading on Mondays. [EconLit Citations: G12, G14, Q14]. © 2009 Wiley Periodicals, Inc. [source] Forecasting the price of crude oil via convenience yield predictionsJOURNAL OF FORECASTING, Issue 7 2007Thomas A. KnetschArticle first published online: 14 NOV 200 Abstract The paper develops an oil price forecasting technique which is based on the present value model of rational commodity pricing. The approach suggests shifting the forecasting problem to the marginal convenience yield, which can be derived from the cost-of-carry relationship. In a recursive out-of-sample analysis, forecast accuracy at horizons within one year is checked by the root mean squared error as well as the mean error and the frequency of a correct direction-of-change prediction. For all criteria employed, the proposed forecasting tool outperforms the approach of using futures prices as direct predictors of future spot prices. Vis-à-vis the random-walk model, it does not significantly improve forecast accuracy but provides valuable statements on the direction of change. Copyright © 2007 John Wiley & Sons, Ltd. [source] A speculative bubble in commodity futures prices?AGRICULTURAL ECONOMICS, Issue 1 2010Cross-sectional evidence Commitment's of traders; Index funds; Commodity futures markets Abstract Recent accusations against speculators in general and long-only commodity index funds in particular include: increasing market volatility, distorting historical price relationships, and fueling a rapid increase and decrease in the level of commodity prices. Some researchers have argued that these market participants,through their impact on market prices,may have inadvertently prevented the efficient distribution of food aid to deserving groups. Certainly, this result,if substantiated,would counter the classical argument that speculators make prices more efficient and thus improve the economic efficiency of the food marketing system. Given the very important policy implications, it is crucial to develop a more thorough understanding of long-only index funds and their potential market impact. Here, we review the criticisms (and rebuttals) levied against (and for) commodity index funds in recent U.S. Congressional testimonies. Then, additional empirical evidence is added regarding cross-sectional market returns and the relative levels of long-only index fund participation in 12 commodity futures markets. The empirical results provide scant evidence that long-only index funds impact returns across commodity futures markets. [source] Are commodity prices chaotic?AGRICULTURAL ECONOMICS, Issue 2 2002Arjun Chatrath Abstract We conduct tests for the presence of low-dimensional chaotic structure in the futures prices of four important agricultural commodities. Though there is strong evidence of non-linear dependence, the evidence suggests that there is no long-lasting chaotic structure. The dimension estimates for the commodity futures series are generally much higher than would be for low dimension chaotic series. Our test results indicate that autoregressive conditional heteroskedasticity (ARCH)-type processes, with controls for seasonality and contract-maturity effects, explain much of the non-linearity in the data. We make a case that employing seasonally adjusted price series is important in obtaining robust results via some of the existing tests for chaotic structure. Finally, maximum likelihood methodologies, that are robust to the non-linear dynamics, lend strong support to the Samuelson hypothesis of maturity effects in futures price changes. [source] Futures trading and the storage of North American natural gasOPEC ENERGY REVIEW, Issue 1 2006Apostolos Serletis This paper tests the theory of storage in North American natural gas markets, using the Fama and French (1988) indirect test. In particular, we test the theory's prediction that when inventory is high, large inventory responses to shocks imply roughly equal changes in spot and futures prices, whereas when inventory is low, smaller inventory responses to shocks imply larger changes in spot prices than in futures prices. Our tests on spot and futures North American natural gas prices confirm these predictions of the theory of storage. [source] The Impact of Collateralization on Swap RatesTHE JOURNAL OF FINANCE, Issue 1 2007MICHAEL JOHANNES ABSTRACT Interest rate swap pricing theory traditionally views swaps as a portfolio of forward contracts with net swap payments discounted at LIBOR rates. In practice, the use of marking-to-market and collateralization questions this view as they introduce intermediate cash flows and alter credit characteristics. We provide a swap valuation theory under marking-to-market and costly collateral and examine the theory's empirical implications. We find evidence consistent with costly collateral using two different approaches; the first uses single-factor models and Eurodollar futures prices, and the second uses a formal term structure model and Treasury/swap data. [source] Delivery horizon and grain market volatilityTHE JOURNAL OF FUTURES MARKETS, Issue 9 2010Berna Karali We study the difference in the volatility dynamics of CBOT corn, soybeans, and oats futures prices across different delivery horizons via a smoothed Bayesian estimator. We find that futures price volatilities in these markets are affected by inventories, time to delivery, and the crop progress period and that there are important differences in the effects across delivery horizons. We also find that price volatility is higher before the harvest starts in most cases compared to the volatility during the planting period. These results have implications for hedging, options pricing, and the setting of margin requirements. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark 30:846,873, 2010 [source] Do volatility determinants vary across futures contracts?THE JOURNAL OF FUTURES MARKETS, Issue 3 2010Insights from a smoothed Bayesian estimator We apply a new Bayesian approach to multiple-contract futures data. It allows the volatility of futures prices to depend upon physical inventories and the contract's time to delivery,and it allows those parametric effects to vary over time. We investigate price movements for lumber contracts over a 13-year period and find a time-varying negative relationship between lumber inventories and lumber futures price volatility. The Bayesian approach leads to different conclusions regarding the size of the inventory effect than does the standard method of parametric restrictions across contracts. The inventory effect is smaller for the most recent contracts when the inventory levels are larger. In contrast, the Bayesian approach does not lead to substantively different conclusions about the time-to-delivery effect than do traditional classical methods. © 2009 Wiley Periodicals, Inc. Jrl Fut Mark 30:257,277, 2010 [source] Testing the martingale hypothesis for futures prices: Implications for hedgersTHE JOURNAL OF FUTURES MARKETS, Issue 11 2008Cédric de Ville de Goyet The martingale hypothesis for futures prices is investigated using a nonparametric approach where it is assumed that the expected futures returns depend (nonparametrically) on a linear combination of predictors. We first collapse the predictors into a single-index variable where the weights are identified up to scale, using the average derivative estimator proposed by T. Stoker (1986). We then use the Nadaraya,Watson kernel estimator to calculate (and visually depict) the relationship between the estimated index and the expected futures returns. We discuss implications of this finding for a noninfinitely risk-averse hedger. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:1040,1065, 2008 [source] A multicommodity model of futures prices: Using futures prices of one commodity to estimate the stochastic process of anotherTHE JOURNAL OF FUTURES MARKETS, Issue 6 2008Gonzalo Cortazar This article proposes a multicommodity model of futures prices of more than one commodity that allows the use of long-maturity futures prices available for one commodity to estimate futures prices for the other. The model considers that commodity prices have common and commodity-specific factors. A procedure for choosing the number of both types of unobservable-Gaussian factors is presented. Also, it is shown how commodities with and without seasonality may be jointly modeled and how to estimate the model using Kalman filter. Results for the West Texas Intermediate,Brent and for the West Texas Intermediate,unleaded gasoline models presented show strong improvements over the traditional individual-commodity models, with much lower out-of-sample errors and better volatility estimates, even when using fewer factors. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:537,560, 2008 [source] Forecasting oil price movements: Exploiting the information in the futures marketTHE JOURNAL OF FUTURES MARKETS, Issue 1 2008Andrea Coppola Relying on the cost of carry model, the long-run relationship between spot and futures prices is investigated and the information implied in these cointegrating relationships is used to forecast out of sample oil spot and futures price movements. To forecast oil price movements, a vector error correction model (VECM) is employed, where the deviations from the long-run relationships between spot and futures prices constitute the equilibrium error. To evaluate forecasting performance, the random walk model (RWM) is used as a benchmark. It was found that (a) in-sample, the information in the futures market can explain a sizable portion of oil price movements; and (b) out-of-sample, the VECM outperforms the RWM in forecasting price movements of 1-month futures contracts. © 2008 Wiley Periodicals, Inc. Jrl Fut Mark 28:34,56, 2008 [source] Order imbalance and the dynamics of index and futures pricesTHE JOURNAL OF FUTURES MARKETS, Issue 12 2007Joseph K.W. Fung This study uses transaction records of index futures and index stocks, with bid/ask price quotes, to examine the impact of stock market order imbalance on the dynamic behavior of index futures and cash index prices. Spurious correlation in the index is purged by using an estimate of the "true" index with highly synchronous and active quotes of individual stocks. A smooth transition autoregressive error correction model is used to describe the nonlinear dynamics of the index and futures prices. Order imbalance in the cash stock market is found to affect significantly the error correction dynamics of index and futures prices. Order imbalance impedes error correction particularly when the market impact of order imbalance works against the error correction force of the cash index, explaining why real potential arbitrage opportunities may persist over time. Incorporating order imbalance in the framework significantly improves its explanatory power. The findings indicate that a stock market microstructure that allows a quick resolution of order imbalance promotes dynamic arbitrage efficiency between futures and underlying stocks. The results also suggest that the unloading of cash stocks by portfolio managers in a falling market situation aggravates the price decline and increases the real cost of hedging with futures. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:1129,1157, 2007 [source] The stock closing calland futures price behavior: Evidence from the Taiwan futures marketTHE JOURNAL OF FUTURES MARKETS, Issue 10 2007Hsiu-Chuan Lee This study examines the behavior of futures prices around stock market close before and after changes to the batching period of the stock closing call. On July 1, 2002, the Taiwan Stock Exchange expanded the length of the batching period roughly 10-fold, from an average of 30 seconds to 5 minutes. This change presents an opportunity to analyze how a stock closing method affects the behavior of index futures prices. Empirical results indicate that an increase in the length of the batching period affects the return volatility and trading volume of index futures contracts around stock market close. Furthermore, preclose stock returns have a great impact on extended futures returns when the batching period of the stock closing call is long. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:1003,1019, 2007 [source] The pricing of electricity futures: Evidence from the European energy exchangeTHE JOURNAL OF FUTURES MARKETS, Issue 4 2007Sascha Wilkens This study investigates the pricing of electricity futures at the European Energy Exchange (EEX) over the period 2002 through 2004. To calculate theoretical contract values, the reduced-form models of J. J. Lucia and E. S. Schwartz (2002) are used, and a thorough empirical analysis by means of an out-of-sample test is conducted for both one- and two-factor models, incorporating a constant non-zero price of risk. Although the models are proven to capture all basic spot market characteristics and provide an accurate in-the-sample fit to observed futures prices, the forecasting performance is subject to biases. For instance, it was found that the relative mispricing depends on both the spot price level and the remaining time-to-maturity of the futures contracts. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:387,410, 2007 [source] Intraday price-reversal patterns in the currency futures market: The impact of the introduction of GLOBEX and the euroTHE JOURNAL OF FUTURES MARKETS, Issue 11 2006Joel Rentzler This article assesses the intraday price-reversal patterns of seven major currency futures contracts traded on the Chicago Mercantile Exchange over 1988,2003 after 1-day returns and opening gaps. Significant intraday price-reversal patterns are observed in five of the seven currency futures contracts, following large price changes. Additional tests are conducted in three subperiods (1988,1992, 1993,1998, and 1999,2003) to examine the impact of the introduction of electronic trading on GLOBEX in 1992 (to assess how a near 24-hour trading session might impact the next-day opening and closing futures prices) and the introduction of the euro in 1999 (to assess its impact on price predictability in other futures markets). It is found that the introduction of the GLOBEX in 1992 significantly reduced pricing errors in currency futures in the second subperiod, making the currency futures markets fairly efficient. However, the introduction of the new currency, the euro, and the disappearance of several European currencies in 1999, resulted in significant price patterns (mostly reversals and some persistence) in most of the currency futures, indicating inefficiencies in the third subperiod. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:1089,1130, 2006 [source] Jumping hedges: An examination of movements in copper spot and futures marketsTHE JOURNAL OF FUTURES MARKETS, Issue 2 2006Wing H. Chan Price risk is an important factor for both copper purchasers, who use the commodity as a major input in their production process, and copper refiners, who must deal with cash-flow volatility. Information from NYMEX cash and futures prices is used to examine optimal hedging behavior for agents in copper markets. A bivariate GARCH-jump model with autoregressive jump intensity is proposed to capture the features of the joint distribution of cash and futures returns over two subperiods with different dominant pricing regimes. It is found that during the earlier producerpricing regime this specification is not needed, whereas for the later exchange pricing era jump dynamics stemming from a common jump across cash and futures series are significant in explaining the dynamics in both daily and weekly data sets. Results from the model are used to under-take both within-sample and out-of-sample hedging exercises. These results indicate that there are important gains to be made from a time-varying optimal hedging strategy that incorporates the information from the common jump dynamics. © 2006 Wiley Periodicals, Inc. Jrl Fut Mark 26:169,188, 2006 [source] | ||||||||||||||||||||||||||||