Futures markets,production and diversification of risk

This paper lays out a framework for the analysis of the risk transfer role of speculators on futures markets and the impact of their trading on the production decisions of firms. We show that when speculators diversify their portfolios over a large number of markets, the equilibrium risk premium converges to an asymptotic premium, the behaviour of which is determined by the stochastic dependence between the spot price and an index of average returns on other markets—the idiosyncratic risk arising from the variability of the spot price itself is diversified away. In the independent and negatively dependent cases this diversification of risk leads to a Pareto improving property.     

Modeling carbon spot and futures price returns with GARCH and Markov switching GARCH models

This paper makes use of spot and futures market data to carry out a thorough analysis of the dynamics of carbon price returns in the European Union Emission Trading Scheme for the whole first commitment period from 2008 to 2012. Understanding the properties of carbon price returns is especially crucial for industries which have to comply with an emission trading system and other market participants such as risk managers and speculators. We therefore seek to develop accurate models which capture the behavior of carbon price returns comprehensively. We apply a broad spectrum of GARCH model specifications, using different distributions for model innovations. As both time series, spot and futures price returns, exhibit asymmetric behavior in their variance, we additionally take Markov regime switching models for the variance equation into consideration. Empirical results demonstrate that AGARCH, NARCH and GJR fit the data best. We further show that, in the error term of any model, fat-tailed distributions—in particular the generalized error distribution—significantly improve the fit. Additionally, as futures returns seem to carry informational content concerning subsequent spot returns, we propose a sound, yet parsimonious, spot returns model, well-suited to capturing the dynamics. Finally, the most appropriate models for spot and futures price returns are tested in an out-of-sample environment, and further checked for robustness in data subsets. Subsequently a model for each market is proposed.     

沪深300股指期货价格发现能力研究

利用沪深300指数及其期货当月主力合约的5分钟高频数据,本文采用Granger因果检验、向量自回归模型、Johansen协整检验及向量误差修正模型,系统分析不同价格趋势下沪深300股指期货的价格发现能力。研究表明:第一,在上涨趋势中期货收益率单方面引起现货收益率变化,现货收益率不是引导期货收益变化的原因;但是,在下跌趋势中现货收益率与期货收益率具有相互引导的Granger因果关系。第二,无论在上涨阶段还是下跌阶段,期货市场都在价格发现能力方面处于主导地位。第三,期货价格与现货价格存在长期均衡关系,当二者短期内偏离均衡时,期货价格引导现货价格向均衡方向调整。     

Radner equilibrium in incomplete Lévy models

We construct continuous-time equilibrium models based on a finite number of exponential utility investors. The investors’ income rates as well as the stock’s dividend rate are governed by discontinuous Lévy processes. Our main result provides the equilibrium (i.e., bond and stock price dynamics) in closed-form. As an application, we show that the equilibrium Sharpe ratio can be increased and the equilibrium interest rate can be decreased (simultaneously) when the investors’ income streams cannot be traded.     

股票交叉上市与价格发现——来自中国“A+H”股的经验证据

交叉上市股票由于其对应于同一标的资产但却有着不同的价格表现,因此吸引了大量研究者的关注。本文以内地和香港股市交叉上市的"A+H"股票为研究对象,通过编制各自的综合指数代表两市的价格水平,采用协整检验、误差修正模型以及多元GARCH模型对A股和H股价格发现进行了多层次分析,研究结果显示:内地A股和香港H股价格走势虽然表现各异,但它们之间却存在长期稳定的均衡关系,且显著地受此长期均衡关系的调整;当股价偏离均衡状态时,H股和A股向均衡方向调整速度非常接近,不过,在收益率的引导关系上H股占有优势;在波动溢出关系上,主要表现为H股向A股的溢出效应。这些实证结果说明虽然A股和H股在价格发现功能上都扮演着重要角色,但总体而言,H股较A股具有更强的信息传递效率和价格发现功能。     

Pricing and advertisement in a manufacturer–retailer supply chain

We use a game theoretical approach to study pricing and advertisement decisions in a manufacturer–retailer supply chain when price discounts are offered by both the manufacturer and retailer. When the manufacturer is the leader of the game, we obtained Stackelberg equilibrium with manufacturer’s local allowance, national brand name investment, manufacturer’s preferred price discount, retailer’s price discount, and local advertising expense. For the special case of two-stage equilibrium when the manufacturer’s price discount is exogenous, we found that the retailer is willing to increase local advertising expense if the manufacturer increases local advertising allowance and provides deeper price discount, or if the manufacturer decreases its brand name investment. When both the manufacturer and retailer have power, Nash equilibrium in a competition game is obtained. The comparison between the Nash equilibrium and Stackelberg equilibrium shows that the manufacturer always prefers Stackelberg equilibrium, but there is no definitive conclusion for the retailer. The bargaining power can be used to determine the profit sharing between the manufacturer and the retailer. Once the profit sharing is determined, we suggest a simple contract to help the manufacturer and retailer obtain their desired profit sharing.     

Open versus closed loop capacity equilibria in electricity markets under perfect and oligopolistic competition

We consider two game-theoretic models of the generation capacity expansion problem in liberalized electricity markets. The first is an open loop equilibrium model, where generation companies simultaneously choose capacities and quantities to maximize their individual profit. The second is a closed loop model, in which companies first choose capacities maximizing their profit anticipating the market equilibrium outcomes in the second stage. The latter problem is an equilibrium problem with equilibrium constraints. In both models, the intensity of competition among producers in the energy market is frequently represented using conjectural variations. Considering one load period, we show that for any choice of conjectural variations ranging from perfect competition to Cournot, the closed loop equilibrium coincides with the Cournot open loop equilibrium, thereby obtaining a ‘Kreps and Scheinkman’-like result and extending it to arbitrary strategic behavior. When expanding the model framework to multiple load periods, the closed loop equilibria for different conjectural variations can diverge from each other and from open loop equilibria. We also present and analyze alternative conjectured price response models with switching conjectures. Surprisingly, the rank ordering of the closed loop equilibria in terms of consumer surplus and market efficiency (as measured by total social welfare) is ambiguous. Thus, regulatory approaches that force marginal cost-based bidding in spot markets may diminish market efficiency and consumer welfare by dampening incentives for investment. We also show that the closed loop capacity yielded by a conjectured price response second stage competition can be less or equal to the closed loop Cournot capacity, and that the former capacity cannot exceed the latter when there are symmetric agents and two load periods.     

On price competition in location-price models with spatially separated markets

In this paper we study price competition for two types of location-price models in which facility locations are set up and price decisions have to be made in order to maximise profit. We discuss the existence and determination of equilibrium prices in a general location space when facilities have different production costs. It is assumed that each price is bounded from below and demand for a single homogeneous product is price-inelastic. When facilities set mill prices, a price equilibrium rarely exists and necessary conditions for existence are obtained. In particular, when the location space is a tree network, we give a characterisation of the locations for which a unique equilibrium exists for two competitors. With spatial price discrimination, though equilibrium prices might not exist, it is shown that ε-equilibrium prices always exist for any locations of the facilities. A characterisation of ε-equilibrium is also given. Then the location-price problem is reduced to a location problem. A comparison of results with the two types of price determination is also presented. This work has been supported by the Ministry of Science and Technology of Spain under the research project BEC2002-01026, in part financed by the European Regional Development Fund (ERDF).     

Pricing with markups in industries with increasing marginal costs

We study a game that models a market in which heterogeneous producers of perfect substitutes make pricing decisions in a first stage, followed by consumers that select a producer that sells at lowest price. As opposed to Cournot or Bertrand competition, producers select prices using a supply function that maps prices to production levels. Solutions of this type of models are normally referred to as supply function equilibria. We consider a market where producers’ convex costs functions are proportional to each other, depending on the efficiency of each particular producer. We provide necessary and sufficient conditions for the existence of an equilibrium that uses simple supply functions that replicate the cost structure. We then specialize the model to monomial cost functions with exponent \(q>0\) , which allows us to reinterpret the simple supply functions as a markup applied to the production cost. We prove that an equilibrium for the markups exists if and only if the number of producers in the market is strictly larger than \(1+q\) , and if an equilibrium exists, it is unique. The main result for monomials is that the equilibrium nearly minimizes the total production cost when the market is competitive. The result holds because when there is enough competition, markups are bounded, thus preventing prices to be significantly distorted from costs. Focusing on the case of linear unit-cost functions on the production quantities, we characterize the equilibrium accurately and refine the previous result to establish an almost tight bound on the worst-case inefficiency of equilibria. Finally, we derive explicitly the producers’ best response for series-parallel networks with linear unit-cost functions, extending our previous result to more general topologies. We prove that a unique equilibrium exists if and only if the network that captures the market structure is 3-edge-connected. For non-series-parallel markets, we provide an example that does not admit an equilibrium on markups.     

Forecasting the value effect of seasoned equity offering announcements

Seasoned Equity Offers (SEOs) by publicly listed firms generally result in unexpected negative share price returns, being often perceived as a signal of overvalued share prices and information asymmetries. Hence, forecasting the value effect of such announcements is of crucial importance for issuers, who wish to avoid share price dilution, but also for professional fund managers and individual investors alike. This study adopts the OR forecasting paradigm, where the latest part of the data is used as a holdout, on which a competition is performed unveiling the most effective forecasting techniques for the matter in question. We employ data from a European Market raising in total €8 billion through 149 SEOs. We compare economic and econometric models to forecasting techniques mostly applied in the OR literature such as Nearest Neighbour approaches, Artificial Neural Networks as well as human Judgment. Evaluation in terms of statistical accuracy metrics indicates the superiority of the econometric models, while economic evaluation based on trading strategies and simulated profits attests expert judgement and nearest-neighbour approaches as top performers.     

考虑投资人过度自信偏好的占线股票投资策略研究

当股票价格及收益的统计信息不足或无法构建精确概率分布时,股票占线投资问题获得广泛关注,即投资人能够运用在线算法和竞争分析设计出更好的占线投资策略以应对股价的不确定性。本文将投资人过度自信偏好这种认知偏差,引入到股票占线投资问题中,构建了离线对手与股票占线投资人的博弈模型,分别给出一般情形和存在动量效应情形下的最优混合策略和混合策略纳什均衡。结果发现,两种情形下的最优混合策略不仅克服了传统股票投资策略对股价或股票收益概率分布假设的过度依赖,并且更好地抽象了股票占线投资人过度自信、追涨杀跌等特征,对现有行为金融与金融占线交易问题的研究提供了有益补充。     

On the uniqueness of Bertrand equilibrium

We introduce product differentiation in the model of price competition with strictly convex costs in which firms have to supply all of the forthcoming demand. We find that although a continuum of equilibria exists in a homogeneous product market, the competitive price equilibrium is the only robust one. Specifically, as long as the equilibrium correspondence is nonempty, the equilibrium price converges to the competitive price when the degree of product differentiation shrinks to zero.     

Oil Price Shocks and Long Run Price and Import Demand Behavior

The effect which the oil price time series has on the long run properties of Vector AutoRegressive (VAR) models for price levels and import demand is investigated. As the oil price variable is assumed to be weakly exogenous for the long run parameters, a cointegration testing procedure allowing for weakly exogenous variables is developed using a LU decomposition of the long run multiplier matrix. The likelihood based cointegration test statistics, Wald, Likelihood Ratio and Lagrange Multiplier, are constructed and their limiting distributions derived. Using these tests, we find that incorporating the oil price in a model for the domestic or import price level of seven industrialized countries decreases the long run memory of the inflation rate. Second, we find that the results for import demand can be classified with respect to the oil importing or exporting status of the specific country. The result for Japan is typical as its import price is not influenced by GNP in the long run, which is the case for all other countries.     

具有一般效用函数与允许卖空的资本市场中均衡价格向量的存在性与唯一性

对有有限多个其效用函数为一般凹函数的投资者参与的资本市场，在假设风险资产收益的联合分布为椭圆分布之下，通过考虑期望效用最大化问题，我们导出了使市场出清的均衡价格向量存在唯一的条件及其计算公式，并简要讨论了所给条件的经济意义，所得结果推广了有关资产市场均衡分析的某些结果。     

Representative Agent Pricing of Financial Assets Based on L��vy Processes with Normal Inverse Gaussian Marginals

The aim of the paper is to test the assumption of normal inverse Gaussian returns from speculative investments. We construct an asset pricing model where price processes are pure jump processes having associated returns with marginal distributions of this particular type. The resulting model is not complete, and we employ a partial equilibrium framework with a representative agent. The model is confronted with some stylized facts, like the equity premium puzzle, and the results seem promising.     

Strategic upfront marketing channel integration as an entry barrier

This paper investigates an organizational design problem concerning whether duopolistic firms competing in a product market should vertically integrate or separate their marketing channels in a dynamic noncooperative game setting. Previous operational research models have shown that the separation of the marketing channel with the adoption of a two-part tariff contract is the dominant strategy compared with integration for each firm if the two firms face retail price competition, and thereby constitutes the subgame perfect Nash equilibrium (SPNE). Contrary to this previous insight, this paper demonstrates that if exogenous parameters that characterize fixed costs, product substitutability, and a demand function fall into a specific region, marketing channel integration dominates the separation strategy when one of the two firms is the incumbent firm while the other is a potential entrant. In other words, the well-known result in the price-setting game can be reversed when we take entry threats into consideration. Specifically, we show that upfront vertical integration of the marketing channel enables the incumbent to deter the entry of the potential competitor and to monopolize the market in the SPNE. This result has operational implications for a firm confronting the threat of potential rivals entering the market, in that the firm can use this apparently inferior strategy as a commitment device, which creates a virtual entry barrier.     

零售商主导型供应链渠道管理与悖论机制分析

普遍认为零售企业压榨供应商、但实际上供应商利润率远高于零售商是业界关注的一个热点商业悖论问题。通过构建无退货、一般退货、全额退货、线性回扣等体现零售商不同强势地位的供应链渠道管理模型,研究并比较了退货和回扣等强势契约机制以及销售努力对零售供应链管理绩效的影响。分析表明供应商通过批发价定价可以有效转移强势契约带来的风险和成本支付,零售商不能通过强势契约显著提升零售供应链效益。零售商应该利用渠道优势首先强化对批发价定价权的影响,在此基础上合理采用强势契约机制。本文研究很好地解释了零供双方渠道地位与利润水平矛盾的商业悖论问题。     

基于不确定性期望效用模型的投资优化

针对资产的收益的分布不确切知道,并且所获得的矩信息也不是准确值的问题,提出了最大化最坏情形期望效用的鲁棒性方法.引入了凹凸类效用函数来度量模型不确定情形下投资者的效用,用一个不确定性结构来刻画资产收益的所有可能的分布和收益的矩信息,通过把具有不确定性结构的鲁棒性模型转化成参数二次规划问题,得到了最优投资策略、有效前沿和均衡价格的解析表示.方法为采用保守策略并且厌恶不确定性的投资者提供了一种有效的投资决策方案.     

Retroactive price regulation and the fair rate of return

Excess profits taxes sometimes are used to prevent accumulation of monopolistic rent. We show that current operation of such taxes for property liability insurance does not. except by coincidence. result in an ex ante fair return on equity. Derivation of the tax threshold required to deliver a fair return is illustrated using capital asset pricing models. Implicit solutions are derived for non-insurance and insurance firms and a possible closed form solution also is presented. This tax creates incentives for avoidance by reducing the variance of the tax flows. This is a classic moral hazard problem. However adverse incentives may be reversed in a multiperiod context. We suggest that use of EPT and direct price regulation results in a system of ‘double taxation’, which likely will cause deficient returns to constituent firms.     

On the existence and computation of an equilibrium in an economy with constant returns to scale production

In this paper we consider the problem of finding an equilibrium in an economy with non-linear constant returns to scale production activities. To find an equilibrium we propose an adjustment process in which the prices of the commodities and the activity levels of production adjust simultaneously. The process starts at a price vector at which each production activity has non-positive profit. We show that the process follows a path which connects the starting point with an equilibrium of the economy. From this it follows that the existence of a price vector at which each production activity has non-positive profit implies the existence of an equilibrium. The equilibrium can be computed by using a simplicial algorithm or by solving a sequence of Linear Variational Inequality Problems.This research is part of the VF-program Competition and Cooperation. The authors are very grateful to Dolf Talman and two unknown referees for their valuable comments and suggestions.