Impact of Liquidity on the Futures–Cash Basis: Evidence from the Indian Market

The law of one price relies on enforcement by arbitragers who are expected to eliminate price differentials quickly. Arbitragers’ activities are constrained by liquidity of markets. However, large price differentials attract arbitrage activity enhancing the liquidity of markets. Using daily data on the NYSE index and related futures contracts, Roll, Schwartz, and Subrahmanyam (2007) document two-way Granger causality between the futures-cash basis and bid-ask spreads for stocks. We examine the issue using intra-day data on Indian single stock futures (SSF) contracts on Indian stocks and also consider the spread on the futures contracts. While the spreads in both the futures and cash markets affect futures-cash basis, we find that the futures-cash basis Granger-causes only the bid-ask spreads for SSFs but not the stocks.Futures-cash basis; Single stock futures; Indian stocks.

India's Patterns of Development: What Happened, What Follows

India seems to have followed an idiosyncratic pattern of development, certainly compared to other fast-growing Asian economies. While the emphasis on services rather than manufacturing has been widely noted, within manufacturing India has emphasized skill-intensive rather than labor-intensive manufacturing, and industries with typically higher average scale. We show that some of these distinctive patterns existed even prior to the beginning of economic reforms in the 1980s, and argue they stem from the idiosyncratic policies adopted soon after India's independence. We then look to the future, using the growth of fast-moving Indian states as a guide. Despite recent reforms that have removed some of the policy impediments that might have sent India down its distinctive path, it appears unlikely that India will revert to the pattern followed by other countries.

What Determines Firm Size?

Motivated by theories of the firm, which we classify as technological' or organizational,' we analyze the determinants of firm size across industries and across countries in a sample of 15 European countries. We find that, on average, firms facing larger markets are larger. At the industry level, we find firms in the utility sector are large, perhaps because they enjoy a natural, or officially sanctioned, monopoly. Capital intensive industries, high wage industries, and industries that do a lot of R&D have larger firms, as do industries that require little external financing. At the country level, the most salient findings are that countries with efficient judicial systems have larger firms, and, correcting for institutional development, there is little evidence that richer countries have larger firms. Interestingly, institutional development, such as greater judicial efficiency, seems to be correlated with lower dispersion in firm size within an industry. The effects of interactions (between an industry's characteristics and a country's environment) on size are perhaps the most novel results in the paper, and are best able to discriminate between theories. As the judicial system improves, the difference in size between firms in capital intensive industries and firms in industries that use little physical capital diminishes, a finding consistent with size of firms in industries dependent on external finance is larger in countries with better financial markets, suggesting that financial constraints limit average firm size.

Thermomagnetic convection in stratified ferrofluids permeated with dusty particles through a porous medium

In the present note, the stability problem of an incompressible dusty stratified ferromagnetic fluid is investigated through a porous medium when the fluid layer is subjected to vertical magnetic field intensity. The governing nonlinear equations are linearized using perturbation technique and the cases of exponentially varying stratifications for various physical parameters are discussed. The system is found to be stable for stable stratification in both the absence and presence of magnetic field. For unstable stratification, the system has both stabilizing and destabilizing effects in the presence of magnetic field under certain conditions, whereas in the absence of magnetic field, the system has only destabilizing effect. The variations in the growth rate with respect to kinematic viscosity, medium porosity, medium permeability, square of Alfvén velocity and suspended particle parameter are also shown analytically