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Price Dynamics (price + dynamics)

Distribution by Scientific Domains

Business, Economics, Finance and Accounting	86%
Humanities and Social Sciences	9%

Distribution within Business, Economics, Finance and Accounting

General & Introductory Finance & Investments	46%
General & Introductory Economics	20%

Kinds of Price Dynamics

asset price dynamics

stock price dynamics

Selected Abstracts

Non-Linear Oil Price Dynamics: A Tale of Heterogeneous Speculators?

GERMAN ECONOMIC REVIEW, Issue 3 2009
Stefan Reitz
Oil price dynamics; endogenous bubbles; STR-GARCH model Abstract. While some of the recent surges in oil prices can be attributed to a robust global demand at a time of tight production capacities, commentators occasionally also blame the impact of speculators for part of the price pressure. We propose an empirical oil market model with heterogeneous speculators. Whereas trend-extrapolating chartists may tend to destabilize the market, fundamentalists exercise a stabilizing effect on the price dynamics. Using monthly data for West Texas Intermediate oil prices, our STR-GARCH estimates indicate that oil price cycles may indeed emerge due to the non-linear interplay between different trader types. [source]

Price Dynamics in the International Wheat Market: Modeling with Error Correction and Directed Acyclic Graphs

JOURNAL OF REGIONAL SCIENCE, Issue 1 2003
David A Bessler
In this paper we examine dynamic relationships among wheat prices from five countries for the years 1981,1999. Error correction models and directed acyclic graphs are employed with observational data to sort,out the dynamic causal relationships among prices from major wheat producing regions: Canada, the European Union, Argentina, Australia, and the United States. An ambiguity related to the cyclic or acyclic flow of information between Canada and Australia is uncovered. We condition our analysis on the assumption that information flow is acyclic. The empirical results show that Canada and the U.S. are leaders in the pricing of wheat in these markets. The U.S. has a significant effect on three markets excluding Canada. [source]

Land Leverage: Decomposing Home Price Dynamics

REAL ESTATE ECONOMICS, Issue 2 2007
Raphael W. Bostic
This article demonstrates the importance of separating the bundled good of housing into land and improvements, arguing that changes in a property's overall value will depend critically on how much of its total value is contained in the land, a proportion we call land leverage. The importance of this deconstruction is demonstrated by highlighting how land leverage helps to explain variation in house price appreciation in Wichita, Kansas. Noting that land leverage should be relevant for many real estate issues and policies, we highlight four specific areas where consideration of land leverage could significantly improve our understanding of real estate markets. Land is the only thing in the world that amounts to anything , for ,tis the only thing in this world that lasts, and don't you be forgetting it!,Tis the only thing worth working for, worth fighting for,worth dying for. Gerald O'Hara in Gone with the Wind1 [source]

Presidential Address: Asset Price Dynamics with Slow-Moving Capital

THE JOURNAL OF FINANCE, Issue 4 2010
DARRELL DUFFIE
ABSTRACT I describe asset price dynamics caused by the slow movement of investment capital to trading opportunities. The pattern of price responses to supply or demand shocks typically involves a sharp reaction to the shock and a subsequent and more extended reversal. The amplitude of the immediate price impact and the pattern of the subsequent recovery can reflect institutional impediments to immediate trade, such as search costs for trading counterparties or time to raise capital by intermediaries. I discuss special impediments to capital formation during the recent financial crisis that caused asset price distortions, which subsided afterward. After presenting examples of price reactions to supply shocks in normal market settings, I offer a simple illustrative model of price dynamics associated with slow-moving capital due to the presence of inattentive investors. [source]

Corporate Investment and Asset Price Dynamics: Implications for SEO Event Studies and Long-Run Performance

THE JOURNAL OF FINANCE, Issue 3 2006
MURRAY CARLSON
ABSTRACT We present a rational theory of SEOs that explains a pre-issuance price run-up, a negative announcement effect, and long-run post-issuance underperformance. When SEOs finance investment in a real options framework, expected returns decrease endogenously because growth options are converted into assets in place. Regardless of their risk, the new assets are less risky than the options they replace. Although both size and book-to-market effects are present, standard matching procedures fail to fully capture the dynamics of risk and expected return. We calibrate the model and show that it closely matches the primary features of SEO return dynamics. [source]

Price dynamics in the Bangladesh rice market: implications for public intervention

AGRICULTURAL ECONOMICS, Issue 1 2003
Donna Brennan
Commodity price stabilisation; Food policy Abstract In this paper, the price dynamics of a rice market are examined using dynamic programming techniques. The model is parameterised to the case of Bangladesh and thus represents the situation of a very poor country which has characteristically high price elasticity (due to income effects) and high storage and interest costs. The incentives for private sector storage and its impact on price stability are examined. Various options for public intervention in the storage sector are also explored, including price ceiling schemes and subsidisation of storage costs. Results show that interventions that remove private disincentives (such as storage subsidies) are much cheaper than direct intervention by government, but the impact on the probability distribution of prices is quite different. The effect of trade on the probability distribution of prices is also examined. [source]

Feedforward networks in financial predictions: the future that modifies the present

EXPERT SYSTEMS, Issue 3 2000
Massimo Budcema
The main goal of this paper is to show how relatively minor modifications of well-known algorithms (in particular, back propagation) can dramatically increase the performance of an artificial neural network (ANN) for time series prediction. We denote our proposed sets of modifications as the 'self-momentum', 'Freud' and 'Jung' rules. In our opinion, they provide an example of an alternative approach to the design of learning strategies for ANNs, one that focuses on basic mathematical conceptualization rather than on formalism and demonstration. The complexity of actual prediction problems makes it necessary to experiment with modelling possibilities whose inherent mathematical properties are often not well understood yet. The problem of time series prediction in stock markets is a case in point. It is well known that asset price dynamics in financial markets are difficult to trace, let alone to predict with an operationally interesting degree of accuracy. We therefore take financial prediction as a meaningful test bed for the validation of our techniques. We discuss in some detail both the theoretical underpinnings of the technique and our case study about financial prediction, finding encouraging evidence that supports the theoretical and operational viability of our new ANN specifications. Ours is clearly only a preliminary step. Further developments of ANN architectures with more and more sophisticated 'learning to learn' characteristics are now under study and test. [source]

Non-Linear Oil Price Dynamics: A Tale of Heterogeneous Speculators?

The Contributions of Professors Fischer Black, Robert Merton and Myron Scholes to the Financial Services Industry

INTERNATIONAL REVIEW OF FINANCE, Issue 4 2000
Terry Marsh
This paper is written as a tribute to Professors Robert Merton and Myron Scholes, winners of the 1997 Nobel Prize in economics, as well as to their collaborator, the late Professor Fischer Black. We first provide a brief and very selective review of their seminal work in contingent claims pricing. We then provide an overview of some of the recent research on stock price dynamics as it relates to contingent claim pricing. The continuing intensity of this research, some 25 years after the publication of the original Black,Scholes paper, must surely be regarded as the ultimate tribute to their work. We discuss jump-diffusion and stochastic volatility models, subordinated models, fractal models and generalized binomial tree models for stock price dynamics and option pricing. We also address questions as to whether derivatives trading poses a systemic risk in the context of models in which stock price movements are endogenized, and give our views on the ,LTCM crisis' and liquidity risk. [source]

Continuous-time models, realized volatilities, and testable distributional implications for daily stock returns

JOURNAL OF APPLIED ECONOMETRICS, Issue 2 2010
Torben G. Andersen
We provide an empirical framework for assessing the distributional properties of daily speculative returns within the context of the continuous-time jump diffusion models traditionally used in asset pricing finance. Our approach builds directly on recently developed realized variation measures and non-parametric jump detection statistics constructed from high-frequency intra-day data. A sequence of simple-to-implement moment-based tests involving various transformations of the daily returns speak directly to the importance of different distributional features, and may serve as useful diagnostic tools in the specification of empirically more realistic continuous-time asset pricing models. On applying the tests to the 30 individual stocks in the Dow Jones Industrial Average index, we find that it is important to allow for both time-varying diffusive volatility, jumps, and leverage effects to satisfactorily describe the daily stock price dynamics. Copyright © 2009 John Wiley & Sons, Ltd. [source]

Consumer Stockpiling and Price Competition in Differentiated Markets

JOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2007
Liang Guo
In many storable-goods markets, firms are often aware that consumers may strategically adjust purchase timing in response to expected price dynamics. For example, in periods when prices are low, consumers stockpile for future consumption. This paper investigates the dynamic impact of consumer stockpiling on competing firms' strategic pricing decisions in differentiated markets. The necessity of equilibrium consumer storage for storable products is re-examined. It is shown that preference heterogeneity generates differential consumer stockpiling propensity, thereby intensifying future price competition. As a result, consumer storage may not necessarily arise as an equilibrium outcome. Economic forces are also investigated that may mitigate the competition-intensifying effect of consumer inventories and that, hence, may lead to equilibrium consumer storage. [source]

Price dynamics in the Bangladesh rice market: implications for public intervention

Optimising the policy cost of market stabilisation: Which commodity matters most in Ethiopia?

JOURNAL OF INTERNATIONAL DEVELOPMENT, Issue 3 2009
Kindie Getnet
Abstract Unprecedented food crop price spikes in recent years prompted the Ethiopian government to impose grain export ban and to distribute grain stocks as price stabilization strategies. Successful price stabilization and size of public spending for such programs depend, to a large extent, on the choice and targeting of stabilization strategies. In a situation where a single commodity plays a leadership role in the price dynamics of other crops, targeting intervention at such a commodity would provide a useful mechanism to reduce policy cost of price stabilization while achieving commodity-wide stabilization objectives. Using multiple cointegration analysis techniques to generate knowledge useful in targeting price stabilization intervention, this study investigates whether there is a single food crop in Ethiopia, among the three major ones (teff, wheat, and maize), with an exclusive price leadership role in the price formation process of the rest. The results show that maize price plays a leadership role in the dynamics of teff and wheat prices at all markets studied, except that of Addis Ababa teff market. Given the major evidence of a price leadership role of maize, it might be possible to achieve commodity-wide price stabilization objectives through targeting intervention on maize. Such targeted intervention may also prove efficiency in terms of reducing policy cost and public spending. Copyright © 2008 John Wiley & Sons, Ltd. [source]

Illiquidity and Pricing Biases in the Real Estate Market

REAL ESTATE ECONOMICS, Issue 3 2007
Zhenguo Lin
This article addresses the micro-analytic foundations of illiquidity and price dynamics in the real estate market by integrating modern portfolio theory with models describing the real estate transaction process. Based on the notion that real estate is a heterogeneous good that is traded in decentralized markets and that transactions in these markets are often characterized by costly searches, we argue that the most important aspects defining real estate illiquidity in both residential and commercial markets are the time required for sale and the uncertainty of the marketing period. These aspects provide two sources of bias in the commonly adopted methods of real estate valuation, which are based solely on the prices of sold properties and implicitly assume immediate execution. We demonstrate that estimated returns must be biased upward and risks downward. These biases can be significant, especially when the marketing period is highly uncertain relative to the holding period. We also find that real estate risk is closely related to investors' time horizons, specifically that real estate risk decreases when the holding period increases. These results are consistent with the conventional wisdom that real estate is more favorable to long-term investors than to short-term investors. They also provide a theoretical foundation for the recent econometric literature, which finds evidence of smoothing of real estate returns. Our findings help explain the apparent risk-premium puzzle in real estate,that is, that ex post returns appear too high, given their apparent low volatility,and can lead to the formal derivation of adjustments that can define real estate's proper role in the mixed-asset portfolio. [source]

Presidential Address: Asset Price Dynamics with Slow-Moving Capital

Do Stock Prices and Volatility Jump?

THE JOURNAL OF FINANCE, Issue 3 2004
Option Prices, Reconciling Evidence from Spot
This paper examines the empirical performance of jump diffusion models of stock price dynamics from joint options and stock markets data. The paper introduces a model with discontinuous correlated jumps in stock prices and stock price volatility, and with state-dependent arrival intensity. We discuss how to perform likelihood-based inference based upon joint options/returns data and present estimates of risk premiums for jump and volatility risks. The paper finds that while complex jump specifications add little explanatory power in fitting options data, these models fare better in fitting options and returns data simultaneously. [source]

Contagion as a Wealth Effect

THE JOURNAL OF FINANCE, Issue 4 2001
Albert S. Kyle
Financial contagion is described as a wealth effect in a continuous-time model with two risky assets and three types of traders. Noise traders trade randomly in one market. Long-term investors provide liquidity using a linear rule based on fundamentals. Convergence traders with logarithmic utility trade optimally in both markets. Asset price dynamics are endogenously determined (numerically) as functions of endogenous wealth and exogenous noise. When convergence traders lose money, they liquidate positions in both markets. This creates contagion, in that returns become more volatile and more correlated. Contagion reduces benefits from portfolio diversification and raises issues for risk management. [source]

Equity swaps in a LIBOR market model

THE JOURNAL OF FUTURES MARKETS, Issue 9 2007
Ting-Pin Wu
This study extends the BGM (A. Brace, D. Gatarek, & M. Musiela, 1997) interest rate model (the London Interbank Offered Rate [LIBOR] market model) by incorporating the stock price dynamics under the martingale measure. As compared with traditional interest rate models, the extended BGM model is both appropriate for pricing equity swaps and easy to calibrate. The general framework for pricing equity swaps is proposed and applied to the pricing of floating-for-equity swaps with either constant or variable notional principals. The calibration procedure and the practical implementation are also discussed. © 2007 Wiley Periodicals, Inc. Jrl Fut Mark 27:893,920, 2007 [source]

Volatility and commodity price dynamics

THE JOURNAL OF FUTURES MARKETS, Issue 11 2004
Robert S. Pindyck
Commodity prices are volatile, and volatility itself varies over time. Changes in volatility can affect market variables by directly affecting the marginal value of storage, and by affecting a component of the total marginal cost of production, the opportunity cost of producing the commodity now rather than waiting for more price information. I examine the role of volatility in short-run commodity market dynamics and the determinants of volatility itself. I develop a structural model of inventories, spot, and futures prices that explicitly accounts for volatility, and estimate it using daily and weekly data for the petroleum complex: crude oil, heating oil, and gasoline. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:1029,1047, 2004 [source]

FUNDING EXTERNALITIES, ASSET PRICES AND INVESTORS' ,SEARCH FOR YIELD'

BULLETIN OF ECONOMIC RESEARCH, Issue 1 2009
Prasanna Gai
G15; E44; E58 ABSTRACT This note presents a simple model that nests the ,excess liquidity' and ,savings glut' hypotheses of the debate on the recent asset price boom. It clarifies the notion of investors' ,search for yield' and shows how financial frictions influence asset price dynamics. [source]