Pricing VIX derivatives with free stochastic volatility model

Review of Derivatives Research - This paper aims to develop a new free stochastic volatility model, joint with jumps. By freeing the power parameter of instantaneous variance, this paper takes...     

The information content of stock split announcements: Do options matter?

We provide a new test of the informational efficiency of trading in stock options in the context of stock split announcements. These announcements tend to be associated with positive abnormal returns. Our traditional event study results show abnormal returns that are significantly lower for optioned than non-optioned stocks, whether traded on the NYSE, Amex, or Nasdaq. After controlling for market returns, capitalization, book-to-market ratio, and trading volume, we find that the abnormal returns are significantly lower for NYSE/Amex optioned than non-optioned stocks. Although the results for Nasdaq stocks are not as clear, the overall effects tend to be lower after optioning. These findings are consistent with the hypothesis that the prices of optioned stocks embody more information, diminishing the impact of the stock split announcement. They provide new evidence of the beneficial effects of options on their underlying stocks.     

Household food consumption in Turkey: a reply

We reply to the Comment by Drichoutis et al. regarding somemethodological and estimation issues arising from our paper.In particular, we compare the elasticities reported in the originalpaper with those obtained using estimation procedures suggestedby Drichoutis et al. We find that the differences are very small.     

Sovereign Ratings and Oil‐Exporting Countries: The Effect of High Oil Prices on Ratings

We investigate how high and rising oil prices in the 2003–2008 period affected the sovereign ratings of oil‐exporting countries, after controlling for fundamentals. Based on a large dataset of countries from Standard and Poor's and Moody's, we find strong statistical evidence of a large ratings premium – nearly two notches – for those oil‐exporting countries with a large share of net oil revenue to gross domestic product, relative to countries with similar economic fundamentals. We have some limited forecast information from the rating agencies and the effect increases when we include this information, providing further evidence that this ratings premium is not driven by expected improvements in fundamentals. This finding has implications for asset prices in oil‐exporting countries and highlights the risk that in the event of a sharp unanticipated drop in oil prices, sovereign rating downgrades of oil‐exporting countries could be sharper than the deterioration in their economic fundamentals.     

Impact and implications of price policy and land degradation on agricultural growth in developing countries

In many developing countries, a high proportion of the population resides and works in rural areas. Agriculture is the dominant sector in rural areas and has the greatest concentration of poverty: landless workers, small tenant farmers, and small farm owners. Thus, any development strategy that is directed towards increasing employment and alleviating a country's hunger must concentrate on sustainable agricultural growth. Historically, economic development in most countries has been based on exploitation of natural resources, particularly land resources. Soil erosion and land degradation have been serious worldwide. Due to reasons such as high population pressure on land and limited fossil energy supplies, land degradation is generally more serious in the developing world. Empirical studies show that soil erosion and degradation of agricultural land not only decrease the land productivity but they can also result in major downstream or off-site damage which may be several times that of on-site damage. In promoting industrialization, governments of many developing countries adopt a package of price and other policies that reduce agricultural production incentives and encourage a flow of resources out of agriculture. Increasing evidence shows that these policies cause a substantial efficiency or social welfare loss, and a great loss in foreign exchange earnings. In addition, a World Bank study on the effect of price distortions on economic growth rates concluded that neither rich resource endowments, nor a high stage of economic development, nor privatization are able to make up the adverse effects caused by high price distortions. This analysis is primarily concerned with identifying the factors that determine the agricultural production growth rate and in testing the effects these factors have on agricultural growth in developing countries. Specifically, this study involves statistical estimation of an aggregate agricultural growth function based on cross-country data for 28 developing countries. Special attention is devoted to land degradation and agricultural pricing policy, and to the policy implications resulting from the effects these variables have on agricultural and food production growth. The overall results of this study show that price distortions in the economy and land degradation had statistically significant negative impacts while the change in arable and permanent land was positively related to the growth of agricultural production and food production in 28 developing countries from 1971 to 1980. These results emphasize the importance of ‘getting prices right’ and implementation of sustainable land and water management practices if future growth in food and agricultural output is to be realized and sustained in developing countries.     

Household food consumption in Turkey

This paper analyses Turkish household food consumption, usingdata from the 2003 Turkish Household Expenditure Survey. A completedemand system is estimated taking into account demographic differencesand zero consumption. The highest expenditure elasticity isfound for the meat and meat products group, suggesting thatits demand will grow faster than the demand for other productsas the economy develops and income increases. Demand is moreprice-responsive for fats and oils and non-alcoholic beveragesthan all other food products. Regional and seasonal differencesand socio-demographic factors are as important as the conventionaleconomic variables in explaining observed differences in thehousehold's food consumption patterns in Turkey.     

Property-Value Impacts of an Environmental Disamenity: The Case of Landfills

The purpose of this article is to quantify the property-value impacts of a change in environmental quality by using the hedonic price model. In particular, we focus on the impact of the presence of landfills on nearby residential real estate prices. We combine elements of an urban location choice and hedonic pricing model to estimate the effects of the presence of multiple environmental disamenities on residential real estate prices. We explicitly account for temporal effects by including housing transactions in areas with both open and closed landfills and control for information effects. In addition, we treat property taxes and prices as being simultaneously determined. Our analysis suggests that closing landfills will not necessarily mitigate property-value impacts.     

Benefit evaluation of the country of origin labeling in Taiwan: Results from an auction experiment

This research is aimed at investigating the consumer’s preference for food produced in Taiwan and the economic benefits for the country of origin labeling (COOL). The study used Vickrey second-price sealed-bid auction to elicit the consumer’s willingness to pay (WTP) for products under COOL. The study compared the bid functions estimated with Tobit model and the premium functions estimated with ordinary least squares (OLS). Due to price affiliation, it is more reliable to use the estimated premium functions. The estimated premiums are 67.5%, 84.7% and 99% for Taiwan products over their alternatives of China olives, China oolong tea, and Vietnam oolong tea, respectively. The study concludes that enacting and rigorously enforcing a COOL law would increase economic benefits to consumers in Taiwan, and at the same time, placing the imported products in the leveled playing field.     

Foodservice hygiene factors—The consumer perspective

Food safety is important to today's food industry operators as consumers have become increasingly concerned about risks related to food. Unlike foodservice operators or health inspectors, consumers can only rely on the visible cues, particularly those associated with food hygiene to judge the level of food safety in eating establishments. While previous research highlighted the influence of foodservice hygiene perception on consumer dining out decision, study examining the constructs of food safety cues that consumers employed is scant. This research aims to bridge the gap by exploring the topic from the consumer perspective. Results indicate that foodservice hygiene is one of the top three considerations when consumers select a dining place. Results of confirmatory factor analysis reveal a four-factor model encompasses staff and handling, food and location, premise and practices, and scent aspects. Further substantiation in different settings is needed for generalization purpose.     

Difference in time influencing creativity performance between design and management majors

This study is aimed to obtain a better understanding of difference in time of day as a factor influencing creativity performance between design and management programs students. Two hundred and ninety-seven college students, consisting of 154 design majors and 143 management majors at a university, participated in this study. Two idea generation tasks adapted from the Torrance Tests of Creative Thinking verbal tests were used to collect data on their creativity performance across school time intervals. The results show that the distributions of creativity performance across school time intervals reveal statistically significant differences in the fluency and originality measures between the two disciplines. Further, for the design majors, statistically significant differences are found in the fluency, originality, and elaboration measures of creativity; for the management majors, no difference is found for any of the creativity measures. That is, time of school day is a concern in creativity performance for the design students but not a significant factor for their counterparts. It is suggested that the timing issue should be taken into account when we try to assess the instructional and learning performance of creativity-related courses. An open mind and awareness of program differences are expected. More alternatives to improve time-constrains in traditional in-class learning and instruction are also suggested at the end, to create a more individualized and flexible learning environment for creativity.