Commodity Futures Contract Viability: A Multidisciplinary Approach

We propose a development process of commodity futures contracts in which the decisions and wishes of potential customers are investigated simultaneously with the necessary technical properties that need to be met for trading to take place. Within this framework the relationship between trading volume and hedging effectiveness is examined taking both basis risk and market depth risk into account, and the relationship between owner-manager's characteristics and the probability of using futures is examined, taking latent variables and the heterogeneity of owner-managers into account. The relationships are tested on a set of data gathered in a stratified sample of 440 owner-managers by means of computer-assisted personal interviews and on transaction-specific futures data. Structural equation models and multiple regression models are used to validate the relationships. The hedging effectiveness and the variables that play a role in the owner-manager's use of futures are related to the tools of the exchange.Futures Contracts Design; Multidisciplinarity; Hedging Effectiveness; Choice Behavior; Measurement Error; Segments; Futures Exchange Toolbox

Futures Exchange Innovations: Reinforcement versus Cannibalism

Futures exchanges are in constant search of futures contracts that will generate a profitable level of trading volume. In this context, it would be interesting to determine what effect the introduction of new futures contracts have on the trading volume of the contracts already listed. The introduction of new futures contracts may lead to a volume increase for those contracts already listed and hence, contribute to the success of a futures exchange. On the other hand, the introduction of new futures contracts could lead to a volume decrease for the contracts already listed, thereby undermining the success of the futures exchange accordingly. Using a multi-product hedging model in which the perspective has been shifted from portfolio to exchange management, we study these effects. Using data from two exchanges that are different regarding market liquidity (Amsterdam Exchanges versus Chicago Board of Trade) we show the usefulness of the proposed tool. Our findings have several important implications for a futures exchange's innovation policy.

Portfolio Diversification with Commodity Futures: Properties of Levered Futures

This study extends previous work on the impact of commodity futures on portfolio performance by explicitly incorporating levered futures into the portfolio optimization problem. Using data on nine individual commodity futures and one aggregate index from 1994-2003, we find that collateralized and levered futures strategies perform similarly in an ex-post context. Significant differences between the approaches emerge however when constraints on investment behavior exist. Further, levered futures do not result in a prohibitive number of margin calls. The investment performances of the collateralized and the levered strategies vary little across different rebalancing intervals, and frequent portfolio rebalancing does not necessarily result in superior performance.Marketing,

What You See Is not What You Get: Product Architecture and Corporate Strategy

Weaving insights from the study of technology, operations, and organizational theory, we examine factors that underlie decisions about product product architecture. The general principles that determine the composition and interdependency between the components that make a product have largely been relegated to the engineering literature. However, our preliminary results from a Wharton-SMU study of product architecture in the imagining industry suggest several overlooked factors that play an important role in determining product architecture and consequently – firm performance. We suggest that product architecture decisions are far from being the exclusive domain of engineers. Using a sample of firms and products from the imaging sector, we distinguish between the engineering product architecture and perceived product architecture and note that they can be decoupled. Second, we seek to determine how firm choices regarding the design architecture can be mapped explained using variables such as firm prestige and customer sophistication

Innovation and Strategic Renewal in Mature Markets: A Study of the Tennis Racket Industry

This paper presents a study of successive new product introductions in the mature tennis racket industry. The inquiry examines novel design\u27s important role in strategic renewal, under the assumption that innovation includes not only the development, production, and launch of new products, but also communication between firms and market. We explore this industry\u27s transformation through the strategic actions of innovative firms and subsequent competitive contagion. A tennis racket innovation triggers competitors\u27 imitative reactions and sways the market toward a new de facto standard when the new product launch includes marketing such as product endorsement by high-profile professional players and advertising. Our results indicate that innovators should actively manage various industry participants as an integral part of their strategic renewal efforts, especially when facing rivalry with “me-too” peers. We suggest the interface between firms and consumers as a next focus for research on strategic renewal

Top Management Pay: Impact of Overt and Covert Power

This paper examines variations in executive pay as a function of CEO power. We assume that CEOs optimize their pay conditional upon their ability to shape decisions that favour their interests. Power is inferred from overt manifestations such as share holdings, but also from covert sources such as a CEOs\u27 social capital. Two components of compensation are considered: base pay and bonus. While financial performance, firm size, and other factors are held constant, the results show overt power as measured by CEO, and CEO-family equity holdings, to have a curvilinear relationship with executive compensation. Proxies of covert power include tenure, being (one of) the founder(s), and firm diversification. These variables magnify or moderate the effect of equity holdings on compensation. The power effects are most pronounced for the size of CEO bonus

Facilitation May Buffer Competitive Effects: Indirect and Diffuse Interactions Among Salt Marsh Plants

Direct interactions among plant species may be highly modified by indirect or diffuse effects within a multispecies community. We investigated the direct and diffuse effects of two salt marsh perennials, Monanthechloe littoralis and Arthrocnemum subterminale, on winter annuals and the perennial herb Limonium californicum in a salt marsh in central California. In permanent plots, Monanthechloe had expanded substantially in the upper marsh over the past 13 yr, while Arthrocnemum and all annual species had decreased. These dynamics suggest that Monanthechloe may directly outcompete most other species in the upper marsh. In contrast, Arthrocnemum is known to facilitate some annual species. In our field experiments, Monanthechloe strongly suppressed Arthrocnemum, all four common annual species, and Limonium in direct interactions. In contrast, Arthrocnemum directly facilitated the winter annuals Parapholis incurva and Lasthenia glabrata, competed with Spergularia marina, and did not have a significant effect on Limonium. However, when the combined effects of Monanthechloe and Arthrocnemum were tested, Arthrocnemum ameliorated the negative effect of Monanthechloe on all four species. Although isolated Arthrocnemum competed with Spergularia and had no direct effects on Limonium, Arthrocnemum in the presence of Monanthechloe facilitated both species. We hypothesize that Arthrocnemum buffered the strong competitive effects of Monanthechloe on Lasthenia and Parapholis via direct positive effects and benefited Spergularia and Limonium through its competitive effect on Monanthechloe. These findings add to the growing body of literature emphasizing the importance of diversity and interdependence in the functioning of plant communities

The Advantages of Clonal Integration Under Different Ecological Conditions: a Community-Wide Test

The connectedness of clonal plants has been shown to promote survival and growth in a variety of single-species, single-factor studies, but experiments comparing the relative advantages of clonality across multiple habitats and species are rare, raising the concern that generalizations about the benefits of clonality might be biased by the particular species or habitat studied. We studied the importance of clonal integration in southeastern USA salt marsh plants, using all six of the common clonal species in the community, by following the success of intact and severed clonal fragments invading three habitat treatments. Clonal integration was most important for growth of clonal fragments invading hypersaline salt pans, likely because parent clones supplied salt-stressed fragments with water; of moderate importance for fragments invading the neighbors-clipped treatment, likely because parent clones supplied fragments with resources enabling rapid exploitation of unused patches; and least important when neighbors were present, consistent with suggestions that size-based asymmetrical competition is relatively unimportant in clonal plants. Our results indicate that the importance of clonal integration can differ between habitats and species within a community. We encourage explicit consideration of these potential sources of variability to best understand the importance of clonal integration in the field