Rational expectations and efficiency in futures markets goss barry. Download Rational Expectations and Efficiency in Futures Markets Pdf (By Barry Goss) 2019-01-28

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Rational expectations and efficiency in futures markets (eBook, 1992) [automatictrade.net]

rational expectations and efficiency in futures markets goss barry

We find at the core of these cycles a set of contemporaneous supply and demand surprises that coincided with low inventories and that were magnified by macroeconomic shocks and policy responses. As accounting researchers we are not interested in private information per se, but we have a particular interest in the interactive effect of public reports and private investor information. The evidence is consistent with the notion that option trading has a stabilizing impact on cash markets. It also has the advantage of allowing participants to stack up on open interests on futures subject to their binding constraints. A set of necessary and sufficient conditions is established for the informational efficiency of the futures market, which is taken to mean that the futures price is a sufficient statistic for information about the spot price. In this model the futures price is not in general a sufficient statistic unless there is information available about only one side of the spot market, in which case the sufficient statistic equilibrium is shown to be the only rational expectations equilibrium in which price is a linear function of the information.

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Download Rational Expectations and Efficiency in Futures Markets Pdf (By Barry Goss)

rational expectations and efficiency in futures markets goss barry

Under such conditions, the arbitrary, self-fulfilling expectation of price changes may drive actual price changes independently of market fundamentals; we refer to such a situation as a rational price bubble. As a result, the customers of the front-running manager may be worse off and place smaller orders. We examine daily trading and hedging activities effects by incorporating futures trade volume and open interest, respectively, to represent the two variables. This pattern is documented for total option trading activity, speculative trading activity, and across option trading activities broken down by put and call volume. However, because market participants are likely to respond by increasing inventory holdings and investing in new technologies, we see no reason to expect an increase in the frequency of dramatic commodity booms and busts.

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Download Rational Expectations and Efficiency in Futures Markets Pdf (By Barry Goss)

rational expectations and efficiency in futures markets goss barry

The opposite is true, however, for those investors who are not subject to front-running. In addition, with focus on agricultural markets, futures trading is expected to lower seasonal price ranges due to speculative support at harvest time. This work was advanced by Danthine 1978 and Anderson and Danthine 1983 and has its roots in the concepts of normal backwardization and contango first discussed by Keynes 1930 and Hicks 1946. Goss Founding Director Barry Goss is Founding Director of Futures Markets Research Associates Pty Ltd, Melbourne, Australia. For a special case, sufficient conditions for invertibility are derived. In other models, prices are not fully revealing because insiders have superior information in two dimensions see, e. Our results shed light on the role of inventory effects in daily stock price movements.

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Rational Expectations And Efficiency In Futures Markets

rational expectations and efficiency in futures markets goss barry

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the rapidly growing market shares of futures speculators have destabilized commodity spot prices. This paper studies the imposition of position limits on commodity futures from the perspective of curbing excessive speculation and thus manipulation. This study develops a multiple-period, competitive rational expectations model for examining how competitive informed traders time their informed trading and how information is incorporated into prices. Social implications — The findings of this study may further help the regulators and policy makers to undertake decisions about how to provide an alternative platform for farmers to sell their agricultural produce more efficiently. This paper examines whether the introduction of Chinese stock index futures had an impact on the volatility of the underlying spot market. We find that lack of appropriate information about hedge disclosures also distorts the risk-sharing role of the futures market, thereby resulting in an increase in risk premium embedded in the futures price.

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Rational Expectations and Efficiency in Futures Markets, Barry Goss (Edited )

rational expectations and efficiency in futures markets goss barry

This method is used in conjunction with a measure of price informativeness to test the model's main predictions. In a focal example of a circular world, we explore how correlation affects market efficiency and expected prices. The chapter discusses that as financial market theory grows, it laps over the boundaries of the general equilibrium paradigm to focus on the process of price formation. The need to address asymmetric information, in particular, has led to strategic models of investment behavior. These findings have several important implications for commodity production decision-making, commodity hedging and commodity price forecasting.

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0415023432

rational expectations and efficiency in futures markets goss barry

Our analysis illustrates the weakness common in empirical studies on commodity markets of assuming that different types of shocks are publicly observable to market participants. Unlike most previous studies, significant serial dependence in the conditional mean of deviations between crude oil futures price and fu-ture spot price is found as evidence against the joint hypothesis. Our main findings are as follows: First, we find that the competitive equilibrium price is equal to the rational expectations equilibrium price. While some economists have been unable to draw any meaningful distinction between the two approaches, most have agreed that they should be considered separately. It therefore has a particular bearing on the study of futures markets. With the markets serving as a selection process of information, it can be shown that the proportion of time that the futures price equal to the spot price converges to one with probability one.

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automatictrade.net: Rational Expectations and Efficiency in Futures Markets eBook: Barry Goss: Kindle Store

rational expectations and efficiency in futures markets goss barry

Hedgers speculate as well on futures contracts. Jrl Fut Mark 21:79—108, 2001 Turbulent economic events in the past have often triggered substantial changes in ruling economic paradigms. Since agents forming rational expectations do not make systematic prediction errors, the positive relationship between price and its expected rate of change implies a similar relationship between price and its actual rate of change. From United Kingdom to U. Hedgers are active on both markets and speculators trade only on the futures market. A subset of investors might have better information or modes of analysis and get above average gains in the random-walk model; and the model's underlying probabilities could be shaped by fundamentalists' economic forces.

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Futures Markets Research Associates

rational expectations and efficiency in futures markets goss barry

Our model shows that an inefficient futures price causes significant externalities by distorting the production choices of an entire industry. The Announcement Effect of Economic Variables Ting-Yean Tan, National University of Singapore Futures markets frequently hinge upon the expectations of traders and the ability of people operating within them to make maximum use of all available information. Our main purpose is to explore the relationship among information precision, the observational frequency of information and the stock market equilibrium. Our model highlights important feedback effects of informational noise originating from supply shocks and futures market trading on commodity demand and spot prices. The present contribution shows that such observable patterns can be deduced rigorously from a model which hypothesizes that a stock's present price is set at the expected discounted value of its future dividends, where the future dividends are supposed to be random variables generated according to any general but known stochastic process. Gestützt auf neuere Resultate verschiedener Autoren wird gezeigt, wie die moderne Theorie zur Klärung einer Reihe von Fragen dienen kann, z. In the presence of hedge disclosures, the futures price appropriately informs production decisions in the whole industry.

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Futures Trading, Rational Expectations, and the Efficient Markets Hypothesis

rational expectations and efficiency in futures markets goss barry

A mean-variance Noisy Rational Expectations Equilibrium model is extended to an economy in which traders have asymmetric opportunities for information acquisition. It is found that informed traders may choose either to trade early or late on their information, depending on the parameter values of the proposed model. The rationality of both expectations and behavior often does not imply that the price of an asset be equal to its fundamental value. This fundamental theorem follows by an easy superposition applied to the 1965 Samuelson theorem that properly anticipated futures prices fluctuate randomly -- i. Combined with a result about pooling of linear signals, this observation implies that the linear rational expectations equilibrium is unique.

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Rational Expectations and Efficiency in Futures Markets: Goss, Barry A.: Hardcover: 9780415023436: Powell's Books

rational expectations and efficiency in futures markets goss barry

In this situation, everyone loses because of a decreasing payoff coming from speculation. Finally, further research could investigate how accurate the market equilibrium price is as a sufficient statistic for all the market information. A wide range of financial and commodity markets, including currencies, interest rates, livestock, grains and wool, are analyzed in an attempt to discover whether traders in futures markets use all relevant information and whether this is reflected in prices. Conditions are specified under which equilibrium prices reflect or transmit all available information to market observers. Therefore, information of past deviations should be utilized to improve the spot price forecasting inherent in futures price. The model predicts that in mar- kets with substantial and mean reverting convenience yield shocks e.

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