Dominant markets,staggered openings,and price discovery

This study examines information incorporation and price discovery in closely related markets that witness staggered openings. A theoretical model is presented. In this framework, one market, termed dominant, is the venue where most of the price discovery occurs, and the other is termed secondary. The model predicts heightened volatility and order flow in each market when it opens first compared with when it opens second. The effects are predicted to be more pronounced in the dominant market, and is linked to the process of information incorporation. Tests conducted using futures on crude oil (dominant) and gasoline (secondary), two related markets that witness staggered openings, reveal findings consistent with the model's predictions. © 2010 Wiley Periodicals, Inc. Jrl Fut Mark     

Budget deficits and stock prices: International evidence

The purpose of this research is to provide empirical evidence regarding deficits and their effects on stock prices. We investigate whether changes in deficits cause changes in stock prices and if so, in what direction. We use Granger causality tests and impulse response analysis of vector autoregressive models to assess the relationship between budget deficits and stock prices in several industrialized nations. The evidence from impulse response analysis and Granger causality tests shows that only in the U.S. deficit reductions have an inverse effect on equity returns.     

Designing a Model for Competitiveness Measurement of Selected Tourism Destinations of Iran (The Model and Rankings)

Destination competitiveness is the ability to sustain or improve market position and market share of a destination over a period of time. Different markets have different expectations which increase the importance of features a destination should provide in order to achieve competitive advantage. The results of this study show that the domestic model of Iran’s destinations competitiveness comprises 9 major indices. These indices are made of 64 variables which have been derived from literature reviews and qualitative surveys. The results of running the model for all selected destinations are consistent with the destinations’ tourist statistics except for one destination (Qom).     

Margin requirements and futures activity: Evidence from the soybean and corn markets

This article investigates the impact of margin requirements on the trading activity and volatility in futures markets. We extend Hartzmark's (1986) model for futures demand to allow for the costs imposed by margins to change across the maturity of the contract. The model is tested employing data from the soybean and corn markets. We find that trading activity becomes more sensitive to margin changes as one gets closer to contract maturity, inconsistent with the notion that margins impose important opportunity costs on futures traders. Margins are found to have a negative impact on the trading activities of all types of traders, though there is some evidence that margin alterations bring about changes in the makeup of the market. The data also indicate that margins are likely to be hiked during periods of increased volatility, and reduced during periods of relative stability, thus suggesting that margin alterations serve primarily as insurance to futures exchanges. © 1999 John Wiley & Sons, Inc. Jrl Fut Mark 19: 433–455, 1999     

Inflation,output and stock prices: evidence from Latin America

Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rate in markets of industrialized economies. The present study investigates this relationship for the developing markets of Peru and Chile. Fama's model of linkages between inflation and real economic activity constitutes the theoretical framework of this paper. The study tests whether the negative relationship between equity returns and inflation is a result of a ‘proxy effect’, namely, a negative relationship between inflation and real economic activity. The evidence for Peru and Chile does not provide strong support for Fama's hypothesis. It is shown that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity. The long‐run equilibrium between stock prices and general price levels is weak, as indicated by the findings of the Johansen and Juselius co‐integration tests. However, in both economies, stock prices and general price levels seem to show a strong long‐run equilibrium with the real economic activity. These findings suggest that in the long‐run, Fama's propositions A and B are supported for Peru and Chile. The disparity between traditional regression and co‐integration test results suggest that it may be prudent to re‐examine the proxy effect in the framework of a long‐run relationship before denying its validity. Copyright © 1999 John Wiley & Sons, Ltd.     

Inflation, output, and stock prices: Evidence from two major emerging markets

Research in economics and finance documents a puzzling negative relationship between stock returns and inflation rates in markets of industrialized economies. The present study investigates this relationship for Korea and Mexico. We show that the negative relationship between the real stock returns and unexpected inflation persists after purging inflation of the effects of the real economic activity. Johansen and Juselius cointegration tests verify that the long-run equilibrium between stock prices and general price levels is weak. However, in both economies, stock prices and general price levels seem to show a strong long-run equilibrium with the real economic activity. This paper benefited from the constructive suggestions of an anonymous referee. The remaining errors are the authors’ responsibility. Financial support from the Dr. Robert B. Pamplin, Jr., School of Business Administration, University of Portland, is greatly appreciated.     

Do Commodity Traders Herd?

We test for herding using data on aggregate trader positions for four commodities over 20 years. We show that while the positions of commodity traders are highly related, the relatedness falls short of herding. The cross‐commodity relatedness in trader positions is almost entirely explained by common demand and supply factors.