Asymmetric Mispricing and Regime‐dependent Dynamics in Futures and Options Markets

We examine regime‐dependent price dynamics and mispricing adjustments within the KOSPI200 spot, futures and options markets through an analysis of data from January 2000 to December 2014. Investors exploit mispricing between derivatives and spot markets only if mispricing is sufficiently large. The futures traders take long, rather than short, positions to adjust for mispricing. Mispricing between spot and options markets is adjusted by trading options and not by trading spots. We find the bidirectional information flows between spot and futures markets when the futures‐implied index is sufficiently larger than the spot index. In contrast, no significant lead–lag relationship between spot and options markets exists. Significant asymmetric transaction costs exist in the spot market and this asymmetry has decreased over time.     

Financial Market Competition: The Effects of Transparency

European and US financial markets are faced with increased competition for order flow. Fundamental in the competition process is the organization of the trading process, since this directly influences the performance and trading costs of those markets. In this paper we examine the effects of public quote disclosure and the disclosure of transaction information on market liquidity and price efficiency. Our results indicate a clear trade-off between efficiency and liquidity. These findings could explain why a variety of co-existing trading structures can be optimal among competitive financial markets.     

Turnover tax and trading volume: Panel analysis of stocks traded in the Japanese and US markets

Japan eliminated turnover tax on stock trading through the end of the 1990’s to revitalize its ailing stock market by reducing the overall transaction cost for stock trading. This paper empirically examines the effect of this exogenous, institutional change in tax policy on stock trading volume in the Japanese market. To do so, we use panel data of stocks traded in both the Japanese and United States markets and compare changes in their trading volumes at the times of the tax changes. We use a well-established V-shape relationship between turnover and price change, with three different assumptions as regards how the price change relates to turnover across stocks and markets. Although a model allowing for both slope and intercept shifts does not offer any indications one way or the other, a more restricted model allowing only for an intercept shift clearly suggests a statistically significant increase in trading volume in the Japanese market but not in the United States markets for April 1999. However, such a result was not obtained for April 1996. These results indicate that the abolition of turnover tax in 1999, but not the rate reduction in 1996, contributed to the trading volume increase.     

Re-examining foreign direct investment,exports, and economic growth in asian economies using a bootstrap ARDL test for cointegration

This paper examines whether there is a long-run relationship among foreign direct investment (FDI), exports, and gross domestic product (GDP) in selected Asian economies. We use a newly developed cointegration test, the bootstrap autoregressive distributed lag (ARDL), to examine this long-run relationship. The motivation for using the bootstrap methodology is to generate and apply critical values for the ARDL test that are valid and appropriate for the specific data sets used. Further, the bootstrap tests allow for endogeneity and feedback that may exist. Pesaran et al. (2001) highlighted the possibility of degenerate cases, but empirical studies in general ignore these and may conclude that cointegration exists when it does not. Our tests fail to find evidence of cointegration when GDP is the dependent variable. The absence of a long-run forcing relation from FDI and exports to GDP implies that FDI and exports were not the sole sources of economic growth in our selected Asian economies.     

Fragmentation and Market Quality: The Case of European Markets

This paper questions whether the proliferation of alternative trading venues in Western Europe after MiFID implementation in 2007 affected market quality. By means of a difference-in-differences analysis, we evaluate changes in market quality of stocks that initiated trading in Multilateral Trading Facilities (MTF) in relation to matched samples. Our analysis provides evidence that the overall liquidity (measured by transaction costs and price impact) and trading activity increased in the short term with trade initiation in MTF. Notably, we show that fragmentation did not cause lower price precision or informativeness, but some tests suggest that fragmentation correlates positively with volatility. The results of this study are stronger for stocks with greater propensity for MTF trade initiation, i.e. stocks with greater size and liquidity prior to that event. Interestingly, the impact on liquidity and trading activity varied across stock exchanges and timing of MTF trade initiation. As for long run effects, our results suggest an improvement of overall liquidity and a neutral effect on the trading activity of traditional exchanges.     

Economic calculation and transaction costs: The case of the airline oversales auction system

According to Nobel Laureate Edmund Phelps (2013, p. 123), Mises's critique of economic calculation under socialism renders him the originator of the economic analysis of property rights. This paper also suggests that implicit to Mises's impossibility theorem was also the origins of the theory of transaction costs. This raises the following question: what is the relationship, if any, between the process of economic calculation and the concept of transaction costs? Filtered through a Misesian lens, we argue that transaction costs are the costs of engaging in economic calculation. We illustrate our theoretical point utilizing the case of airline oversales auction system first proposed by Julian Simon (1968). In doing so, we reframe the problem of airline oversales from a transaction-cost approach, one in which property rights in airline seats are initially poorly defined. By doing so, we illustrate that resources expended to discover the valuable attributes of a good (in this case airline seats), the terms of exchange between potential trading partners, as well as enforcing the terms of an exchange, all of which are transaction costs, are also, by definition, the costs of calculating the exchange value of goods. Thus, the airlines oversales auction system is illustrative of an institutional solution to the problem of economic calculation via a reduction of transaction costs.     

Evaluating the performance of futures hedging using multivariate realized volatility

This paper investigates the performance of a conditional hedging model using the realized covariance measure (RCM) with noisy high-frequency data. We employ a bivariate realized exponential GARCH (BREG) model with some RCMs to estimate conditional optimal hedge ratios in the Japanese stock and futures markets. The bivariate Student’s t-distribution as well as the bivariate normal distribution are used for the return distribution. The out-of-sample results show that the BREG model outperforms the DCC-EGARCH model and the OLS approach using daily returns for a short hedge in the period without unpredictably large fluctuations in returns such as the Lehman aftermath and the economic impact of the Great East Japan Earthquake. The BREG model with a Student’s t-distribution is likely to be superior to that with a normal distribution. The use of RCMs with methods reducing bias induced by microstructure noise and non-synchronous trading improves the performance. We also find that the joint model of returns and RCM such as the BREG model yields better performance for a short hedge than a model in which RCM is included as an exogenous variable.     

Earnings Management to Minimize Superfund Clean‐up and Transaction Costs*

We investigate whether firms identified as potentially responsible parties (PRPs) under the Comprehensive Environmental Response, Compensation, and Liability Act (more commonly known as Superfund) appear to manipulate earnings to minimize their exposure to Superfund clean‐up and transaction costs. We analyze the discretionary accrual behavior of 612 PRPs from 1981 to 1995 and increase the power of our tests by identifying those PRPs with the most incentive to manage earnings during PRP identification years. The results provide robust evidence consistent with the hypothesis that these PRPs use income‐reducing discretionary accruals during PRP identification years in an attempt to minimize Superfund clean‐up and transaction costs. We also consider whether PRPs' incentives to manage earnings change in response to a change in the EPA regulatory regime and find modest evidence consistent with our conjecture.     

PPP: <Emphasis Type="Italic">Delusion</Emphasis> or <Emphasis Type="Italic">Reality</Emphasis>? Evidence from a Nonlinear Analysis

In this paper we analyze the validity of the purchasing power parity (PPP) in a nonlinear framework using data for 18 bilateral US dollar exchange rates. Following Enders and Ludlow (2002), we use unit root and cointegration tests that do not assume a specific nonlinear adjustment. We find evidence of non-linear mean reversion in deviations from the PPP equilibrium in 11 out of 18 currencies. Additionally, to disentangle the respective contribution of exchange rate and prices to the adjustment toward the long run equilibrium, we estimate a Vector Error Correction Model. According to our empirical analysis, there exists a nonlinear mechanism to correct for deviation from the PPP equilibrium that comes mainly from the exchange rates. This is consistent with theoretical arguments on international goods markets under transaction costs as well as with an emerging strand of empirical literature. These results highlight the importance of neglecting the possibility of nonlinearity in the debate about the PPP and provide empirical evidence that supports the scenario of the PPP hypothesis as a reality.     

Geographic Spread of Currency Trading: The Renminbi and Other Emerging Market Currencies

This paper studies the ongoing diffusion of renminbi (RMB) trading across the globe, the first of such research of an international currency. It analyses the distribution in offshore RMB trading in 2013 and 2016 using comprehensive data from the Triennial Central Bank Survey of foreign exchange markets. In 2013, Asian centers favored by the policy of RMB internationalization had disproportionate shares in global RMB trading. Over the following three years, RMB trading seemed to converge to the spatial pattern of all currencies, with a half‐life of seven to eight years. The previously most traded emerging market currency, the Mexican peso, shows a similar pattern, although it is converging to the global norm more slowly. Three other emerging market currencies show a qualitatively similar evolution in the geography of their offshore trading. Overall, the RMB's internationalization is tracing an arc from the influence of administrative measures to the working of market forces.     

中国对外双边贸易成本的测度研究——以亚洲贸易伙伴为例

基于Novy(2006)提出的具备微观基础的引力模型,本文综合测度了中国与亚洲主要贸易伙伴的双边贸易成本。结果表明,中国与这些国家(地区)的贸易成本自上世纪80年代以来出现了不同程度的下降趋势。与此同时,我们还考察了贸易成本的下降对中国与亚洲国家(地区)双边贸易的增长效应,对我们样本中的大多数国家(地区)而言,贸易成本下降对双边贸易增长的贡献率相对要大于经济增长的贡献率。通过实证研究我们进一步探讨了双边贸易成本的决定因素和条件趋同性,最后揭示了本文研究的政策性涵义。     

Transaction costs and crop marketing in the communal areas of Impendle and Swayimana,KwaZulu-Natal

High transaction costs are detrimental to the efficient operation or existence of markets for inputs and outputs. The cost of information and the costs associated with the search for trade partners, the distance to formal markets and contract enforcement are likely to influence the marketing of food crops. This study hypothesises that the level of income generated from food-crop sales by small-scale farmers in the Impendle and Swayimana districts of KwaZuluNatal is influenced by transaction costs and certain household and farm characteristics. Regression analysis shows that the depth of marketing methods is significantly influenced by transaction cost proxies, such as cooperation with large commercial farmers and ownership of means of transport. Results from a block-recursive regression analysis show that the level of crop income generated is determined by the depth of marketing methods, the size of allocated arable land and off-farm income. Households with lower transaction costs, sizeable allocated land and off-farm income can be expected to generate higher income from food crops. Investment in public goods such as roads, telecommunications and an efficient legal system (to uphold commercial contracts), as well as farmer support services (input supply, extension, marketing information and research), would probably raise farm and non-farm income by reducing transaction costs. This would increase the effective demand for locally produced goods and services, thus contributing to rural employment and livelihoods within rural communal areas.     

股指期货抑制股市正反馈交易的效果及作用机制分析——对全球主要市场的实证检验

普遍存在的正反馈交易行为,加剧股市波动,必须加以有效治理。本文以正反馈模型为基础,对包括新兴市场在内的全球10个代表性指数进行实证检验。结果表明,上市股指期货能够有效抑制股市正反馈交易,这补充和完善了Antoniou et al．（2005）的工作。本文进而分析了股指期货发挥作用的五条渠道,并认为上市股指期货能够进一步完善内在稳定机制。     

交易效率及其提升的主要途径分析

文章对交易效率的形成和发展进行了阐述,对交易效率的内涵作了分析,认为交易效率表现为交易效益与交易成本的比率,交易效率与交易效益成正比,与交易成本成反比。接着,分析了影响交易效率的主要因素,包括满足交易需要的物质条件、交易技术和交易制度。最后,提出加快物流、信息流、资金流和劳动流的速度是提升交易效率的主要途径。     

Determinants of Smallholder Farmers' Marketing Channel Choice: Evidence from the Vietnamese Rice Sector

Cash crops such as specialty rice and other high‐value varieties produced for domestic and international markets are considered an increasing source of income for smallholder farmers in many Asian countries. The present study focuses on the factors affecting Vietnamese specialty rice farmers' choice of marketing channel and how their choice influences farm performance. The analysis has been conducted using multinomial logit and linear regression models on quantitative data collected from 280 specialty rice farmers in the Red River Delta, one of the main rice production regions in Vietnam. Results reveal that even though local collectors and wholesalers are still the most common recipients of farmers' goods in rural areas, reduction in transaction costs with regard to uncertainty influences farmers to choose modern marketing channels through collective action (via specialty rice farmer associations). This collective marketing channel helps farmers increase average prices received by US$0.028 per kg of paddy. Based on the results, manifold political implications are derived.     

An examination of minimum tick sizes on the Tokyo Stock Exchange

In setting a minimum tick size, exchanges balance the competing objectives of lowering transaction costs and encouraging liquidity provision by minimizing stepping-ahead risk. We examine the trade-off between these two types of costs by examining the proportion of time that the quoted spread equals the minimum tick size (PTIMEMIN). We undertake this analysis on the Tokyo Stock Exchange, a market that sets nine different tick sizes based on stock price. PTIMEMIN varies markedly across stocks, ranging from almost 0 to almost 100 percent. We find that trade size, the number of trades, and price are the most important determinants of whether the minimum tick size is a binding constraint. In fact, trade size and number of trades are more significant determinants of tick size constraint than price. Consequently, we argue that tick size should be set based on trading activity and price, rather than price alone.     

Are “new” and “old” EU members becoming more financially integrated? A threshold cointegration analysis

We assess the degree of financial integration for a selected number of “new” EU member states with Germany. The analysis is performed using a threshold vector error-correction (TVECM) model with fixed rolling window. By employing this methodology we are able to evaluate the degree and dynamics of transaction costs resulting from various market imperfections. TVECM model is applied on interest rate data from different segments of financial markets covering the 1994–2006 period. The hypothesis we test is to what extent European integration tendencies resulted in a more efficient and integrated financial markets. Our findings support the gradual integration hypothesis.     

从亚洲外汇市场演变看人民币国际化进展

在2001—2004期间,亚洲货币的外汇交易量增长比全球市场更加迅速,其中人民币外汇交易增长特别强劲。对人民币未来预期因素似乎正在加入到美元日元即期汇率形成机制中并对亚洲外汇市场施加着重要影响。总体看来,具有更加弹性汇率的亚洲货币将以有效汇率为导向进行交易,美元的影     

从软件企业外包业务分析网络关系对国际化的影响

软件行业是高科技行业国际化中的重要组成,也是网络关系理论构建中和分析“天生国际企业”时被考察最多的行业。中国软件企业在国际竞争中虽然是典型的后来者,但其在涉足国际业务时所表现出来的特征却能给我们很长远的启示。本文试图从中国小型软件企业的外包业务入手,探讨网络关系对企业国际化的影响。研究结果表明,小型软件企业在国际化的过程中,主动寻求网络关系并且能够从这种资源中获益,减少市场成本。该结果支持了两大主流理论,交易成本和资源基础理论的融合。     

The relative importance of liquidity and other constraints inhibiting the growth of small‐scale farming in KwaZulu‐Natal

A logit model is used to examine the extent of liquidity constraints relative to other constraints inhibiting small‐scale farming in KwaZulu‐Natal. These other constraints include poor access to land, labour and information, and high transaction costs. Data for the analysis were sourced from two rural districts in the former KwaZulu. The results suggest that liquidity is important, while imperfect land markets, information costs and high transaction costs are also significant inhibiting factors. Investments in literacy and language skills, vocational training, and business and financial management skills may improve income opportunities for rural people and hence enhance their ability to invest, save and borrow. Better roads, telecommunications and legal institutions are also required to realise the full benefit of investment in extension and credit services.