Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a time-varying portfolio framework. Foreign exchange futures are found to be by far the most important derivative instrument to be employed in order to reduce uncertainty for traders. Our...

Directed Acyclic Graphs (DAG's) and Error Correction Models (ECM's) are employed to analyze questions of price discovery between spatially separated commodity markets and the transportation market linking them together. Results from our analysis suggest these markets are highly interconnected...

This research compares partial equilibrium and statistical time-series approaches to hedging. The finance literature stresses the former approach, while the applied economics literature has focused on the latter. We compare the out-of-sample hedging effectiveness of the two approaches when...

Issues of recent interest and controversy regarding bid-ask spreads in commodity futures markets are investigated. First we apply competing spread estimators to open outcry transactions data and compare resulting estimates to observed spreads. This enables market microstructure researchers,...

Many goods and services are subject to random changes in quality during the time between sale and delivery, resulting in markets characterized by lemons-market equilibria. We examine two forms of costly verification, ex post inspection and ex ante certification. In equilibrium, ex post...

Two behavioral concepts, loss aversion and mental accounting, have recently been combined to provide a theoretical explanation of the equity premium puzzle. Recent experimental evidence suggests that undergraduate students' behavior is consistent with this "myopic loss aversion" conjecture. Our...

This research investigates various unresolved issues regarding futures markets, using formal methods appropriate for inferring causal relationships from observational data when some relevant quantities are hidden. We find no evidence supporting the generalized version of Keynes's theory of...

This paper presents an effective way of combining two popular, yet distinct approaches used in the hedging literature dynamic programming (DP) and time-series (GARCH) econometrics. Theoretically consistent yet realistic and tractable models are developed for traders interested in hedging a...