North-South interdependence: An economic-physical interpretation

Summary The article gives a physical-economic interpretation to a number of economic North-South interdependent relations. Basic research evidence at the man-machine level was an inspiration; the output could only be expressed in physical specification terms. The corresponding generalizations are in product complexity, speciality terms also. This terminology is conducive to far-ranging extrapolations and generalizations. It eliminates the problem of pricing at the product level for all aggregation levels; therefore the fundamental economic relations are better expressed. The article concludes with a mega extrapolation in graphical terms, which relates the product and implied technological capability in the world, expressed in physical terms, for country groups ordered by three development levels. Correspondingly the comparative advantage and inter-industry trade areas at the world product level are shown.The author acknowledges valid comments of two anonymous referees and financial support by DGIS to the Technology Scientific Foundation for the research of which this paper reports certain aspects only. This paper came out as a working paper TSF 84-1. An earlier version was presented at the International Economic Association Meeting in Madrid, Sept. 1983. Clearly, only the author bears responsibility for the ideas and interpretations presented in the following text.     

The Role Of Maternal Literacy in Reducing the Risk of Child Malnutrition in India

This study uses unit-record data on over 50,000 rural children, from the sixteen major states of India, to analyse the determinants of the risks of severe stunting and of being severely underweight. The importance of this study derives from the fact that the prevalence of under-nourishment in India is, even relative to other poor countries, shockingly high. The study focuses on the role of maternal literacy in reducing the risk of child malnourishment. It concludes that when the mother is literate, real benefits flow to children in terms of reduced risk; the same benefits, however, do not flow when the father, but not the mother, is literate. Literate mothers make more effective use of health-care institutions, like anganwadis and hospitals. Consequently, the benefits to children from expanding the supply of such institutions are greater when these institutions interact with mothers who are literate.

     

The impact of time duration between trades on the price of treasury note futures contracts

Recent research in finance has indicated that the institutional structure in which financial asset prices are determined can have a nontrivial impact on pricing. This report examines transaction level data for Treasury Note futures contracts traded at the Chicago Board of Trade (CBOT) to identify institutional, or market microstructure, impacts on the pricing of these contracts. Relatively few articles have conducted empirical research on the microstructure of U.S. futures trading due to the limited availability of comprehensive transaction level data from the futures exchanges. This report uses the CBOT's Computerized Trade Reconstruction database, a comprehensive transaction level dataset, to identify the price impact of the time duration between trades in a manner analogous to that of A. Dufour and R. F. Engle (2000). Unique differences from prior research include the application to futures contracts with their relative higher frequency of trading, as well as the investigation of the price impact of the number of active traders present on the trading floor and the trading volume. Subsequent price and sign of trade significantly relate to the time duration between trades, the number of floor brokers, and the trading volume. © 2004 Wiley Periodicals, Inc. Jrl. Fut Mark 24:965–980, 2004     

The contribution of a satellite market to price discovery: Evidence from the Singapore exchange

The Singapore Exchange (SGX), a small satellite market, successfully competes with a large home market, the Osaka Securities Exchange (OSE), in trading the Nikkei 225 futures index. In this paper, we investigate the contribution of the SGX to price discovery and shed light on the reasons for its continued success. Evidence is provided from information revelation and price discovery of three competing but informationally linked markets of the Nikkei 225 index—domestic spot (Tokyo Stock Exchange), domestic futures (OSE), and foreign futures (SGX), which represents the satellite market. Overall, the futures market contributes 77% to price discovery, with the satellite market contributing 42% of the futures and 33% of the total price discovery. These figures, surprisingly, far exceed the satellite market's share of trading volume. Support is provided for the extended trading hours on the SGX for three of the four non‐overlapping trading sub‐periods. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:981–1004, 2004     

Contract modifications and the basis behavior of live cattle futures

The purpose of this study was to assess the basis behavior of the Live Cattle Futures contract at the Chicago Mercantile Exchange (CME) before and after the 1995 contract changes. Additionally, an alternative method of basis calculation utilizing weighted mean futures prices versus settlement futures prices was compared to determine which method provides a better representation of the basis level. Within a regression model with heteroskedascity error framework, we found that the level of nearby basis in the period after June 1995 has shifted lower and the average monthly open interest of net commercial long positions has substantially increased after the contract modifications. These empirical results are consistent with the notion that more long activity entered the market in response to the contract modifications. Additionally, an alternative (new) measure of basis calculation (cash price minus weighted mean futures price) produced similar results to two other commonly used measures. In conclusion, the 1995 contract changes have neither increased nor decreased the volatility of live cattle basis. © 2004 Wiley Periodicals, Inc. Jrl Fut Mark 24:557–590, 2004     

BUILDING CARS TO CUSTOMER ORDER — WHAT DOES IT MEAN FOR INBOUND LOGISTICS OPERATIONS?

The automotive industry is undergoing a strategic transition. Cost pressure from rising stock levels in the market and increasing incentives needed to sell these vehicles are forcing vehicle manufacturers to rethink their prevalent “stock‐push” approach, building vehicles against a forecast and selling from stock, in favor of a stock‐less “build‐to‐order” order fulfillment strategy. More responsive order fulfillment at the vehicle manufacturer level however will not only require flexible and responsive component supply, but will also have wide ramifications for the logistics operations. Based on three case studies of major inbound logistics operations, this exploratory study assesses their ability to support such a build‐to‐order approach, as well as the potential implications of such transition. The paper concludes with a set of general strategies for how these implications could be mitigated.     

Information from successive changes in gold and silver prices during phases of the business cycles

This paper concerns the behavior of gold and silver prices on a daily, weekly and monthly time span during January 1970 to December 1989. The methodology consists of extracting the predictive power of time series of changes in past prices for obtaining optimal forecasts for next-period changes in prices. Optimizations are made in the context of information theory via minimizing the degree of diversity between the actual and predicted changes in prices. This methodology has merit in that it does not rest on, generally speaking, unacceptable assumptions regarding the shape of the distribution, stationarity of variance or its existence. The behavior of gold and silver prices are studied during peak to trough and trough to peak of the business cycles over 1970–1989. It is generally shown that information contained in past prices of gold and silver does not allow one to predict next-period changes in prices in the short run. However, longer-term predictions are possible. This study further reveals that as the length of the time interval expands, gold prices exhibit a higher degree of dependency on past prices than silver.     

A Study of Arbitrage Efficiency Between the FTSE‐100 Index Futures and Options Contracts

Despite the importance of the London markets and the significance of the relationship for market makers, little published research is available on arbitrage between the FTSE‐100 Index futures and the FTSE‐100 European index options contracts. This study uses the put–call–futures parity condition to throw light on the relationship between options and futures written against the FTSE Index. The arbitrage methodology adopted in this study avoids many of the problems that have affected prior research on the relationship between options or futures prices and the underlying index. The problems that arise from nonsynchroneity between options and futures prices are reduced by the matching of options and futures prices within narrow time intervals with time‐stamped transaction data. This study allows for realistic trading and market‐impact costs. The feasibility of strategies such as execute‐and‐hold and early unwinding is examined with both ex‐post and ex‐ante simulation tests that take into consideration possible execution time lags for the arbitrage trade. This study reveals that the occurrence of matched put–call–futures trios exhibits a U‐shaped intraday pattern with a concentration at both open and close, although the magnitude of observed mispricings has no discernible intraday pattern. Ex‐post arbitrage profits for traders facing transaction costs are concentrated in at‐the‐money options. As in other major markets, despite important microstructure differences, opportunities are generally rapidly extinguished in less than 3 min. The results suggest that arbitrage opportunities for traders facing transaction costs are small in number and confirm the efficiency of trading on the London International Financial Futures and Options Exchange. © 2002 John Wiley & Sons, Inc. Jrl Fut Mark 22:31–58, 2002     

Are Fundamentals Priced in the Bond Market?*

To date, the discussion of the Lev and Thiagarajan 1993 fundamentals in the prior literature has been exclusively in the context of the stock market. Our study is the first to examine the value‐relevance of these fundamentals for default risk. By focusing on the market for new bond issues, we examine the value‐relevance of the fundamental score using expected rather than realized returns. Also, by focusing on the bond market we provide a different perspective than that brought by prior studies relying solely on stock prices. We find the fundamentals to be priced in the market for new bond issues as indicators of expected future earnings and to be value‐relevant in enabling the market to discern differences in bond credit quality over and above the published bond ratings.