Three essays on commodity markets

The three essays that constitute this dissertation aim to understand the role of agribusiness organizational structures in competition, the risk management practices of grain producers, and the characteristics of the U.S. corn harvest futures price. The cooperative (co-op) model is held up as a novel solution to many kinds of market failures. It integrates the business successes and members’ utilities and provides a countervailing force to the market power of investor-owned firms (IOFs). A traditional cooperative business is characterized as being owned and controlled by its member-users, to whom benefits are intended to primarily accrue. The user-benefit principle has given rise to diverse assumptions regarding the objectives of co-ops in the existing literature. And the theoretical literature has yet to reconcile the extent to which operating objectives of a cooperative business deviate from profit maximization. Chapter 2 adds to the literature by developing a model of duopsony competition from which the strategic interactions of a cooperative firm and an investor owned firm (IOF) under output price uncertainty are interpreted. I analyze the way in which the market equilibrium varies as the co-op takes on different objectives. Crop producers’ risk management practices have long been understood using either survey based data or aggregate trading data. These studies suggest there is limited relevance of Expected Utility (EU) optimal hedging theory as farmers may deviate from rationality. There are two impediments to this line of research. First, hedging theories that rely on alternative utility paradigms may be too complicated to test with data. Second, there is a lack of data on the actual hedging activities of producers. Chapter 3 provides a solution that partially overcomes these two problems. I investigate the role of reference-dependence, a central feature of most utility paradigms other than EU in the optimal hedging theory under the EU framework. The theoretical predictions facilitate a direct comparison of optimal hedge ratios with and without a reference price. I then test the model’s results with a unique database of forward contracting transactions of Iowa corn producers over a five-year period. The corn producers’ hedging pattern indeed appears to be reference-dependent: more hedges are placed when futures prices rise above the recent price trend. This finding has important implications for future research on grain producers’ marketing practices because if the futures markets are efficient, price-based triggers as a motivation for hedging may not be beneficial to farm income. A well-known phenomenon in the corn futures market, weather premium, suggests that producers may enhance their marketing strategies by forward contracting early in the season. This is because the commodity futures market for grain over-predicts the actual harvest price more often than not. Chapter 4 formally defines the weather premium, and recovers the potential weather premium in the corn futures market. I show theoretically that the size of weather premium depends on the expected supply at harvest, which consists of the carryout from last year and the expected new harvest. These two covariates partially explain the variation of the forecast error of the December futures contract price from 1968 to 2015. However, the existence of weather premium does not imply the biasness in the futures, i.e. risk premium. The Sharpe ratio of the passive strategy of routinely shorting the corn December futures in spring is too small to justify such an approach

Noise Dimension of GAN: An Image Compression Perspective

Generative adversial network (GAN) is a type of generative model that maps a high-dimensional noise to samples in target distribution. However, the dimension of noise required in GAN is not well understood. Previous approaches view GAN as a mapping from a continuous distribution to another continous distribution. In this paper, we propose to view GAN as a discrete sampler instead. From this perspective, we build a connection between the minimum noise required and the bits to losslessly compress the images. Furthermore, to understand the behaviour of GAN when noise dimension is limited, we propose divergence-entropy trade-off. This trade-off depicts the best divergence we can achieve when noise is limited. And as rate distortion trade-off, it can be numerically solved when source distribution is known. Finally, we verifies our theory with experiments on image generation.Comment: ICME2

The cooperative capital constraint revisited

Purpose – There is little reason a priori to expect that a cooperative firm’s capital needs are different from a non-cooperative firm’s needs if the two firms are otherwise similar in function and size and operate within similar market economies. However, the notion that cooperatives face capital constraints that investor-owned firms (IOFs) do not is a persistent theme in the literature. The paper aims to discuss these issues. Design/methodology/approach – The authors revisit this hypothesis with an empirical examination of capital constraints in a panel data set of US agricultural supply and grain cooperatives and IOFs. Findings – The findings are mixed. While the authors find little to suggest that cooperatives face financial constraints on borrowing in the short run, relative to IOFs, the authors do find some evidence that for long-term investments, a capital constraint may exist. Originality/value – These short and long run differences have implications for the survival and growth of agricultural cooperatives. While in the short run, access to debt financing allows these firms to operative profitably, ultimately long-term large investments in technology and fixed assets will be required to maintain competitiveness in this industry

The relative capital structure of agricultural grain and supply cooperatives and investor owned firms [The cooperative capital constraint revisited]

A recent set of articles in Choices identified some of the major issues facing agricultural cooperatives. Among these are the challenges related to identifying the financing activities and equity capital management strategies that will lead to growth and longevity of cooperatives (Barton, et al 2011). Like their investor-owned counterparts, cooperatives must be profitable and competitive in the markets they face. However, cooperatives face unique challenges in managing equity capital. Because they are limited in their access to outside investments and have nontradable stock, cooperatives rely on member-provided equity through voting shares and equity accumulation through the allocation of profits as retained patronage as the primary sources of equity. Thus, a number of theoretical and empirical investigations identify that cooperatives are constrained in their ability to access capital and, therefore, are limited and perhaps inefficient in their investment activities. This paper seeks to examine the issue of capital constraints on U.S. agricultural supply and grain cooperatives and investor-owned firms (IOFs). A variant of the DuPont model – a technique that breaks down a firm’s rate of return to equity into measures that relate to profitability, efficiency in asset use, and leverage – permits an empirical comparison between IOFs and cooperatives on their activities, debt structure, equity, and liquidity factors. Using firm-level panel data of financial information for cooperativeand IOF agricultural grain and supply firms in Iowa, the two ownership types are compared to identify whether significant differences exists in their investment activities and financial efficiency. Whether capital structure is impacted by firm type and the financial determinants which may contribute to such differences is highlighted

Amplitude-Duration-Persistence Trade-off Relationship for Long Term Bear Stock Markets

We study the mechanism that controls the shape of the bear market through an information diffusion perspective, and establish a frontier of market decline, in terms of a trade-off between amplitude, duration and the rate of information diffusion. Empirical analysis using data from 15 stock markets confirms the existence of this trade-off relationship. An algorithm for generating the frontier using real data is proposed and applied in several market scenarios. The results suggest that the behaviour of international stock markets during the current US credit crunch is similar to that in previous bear markets in terms of the trivariate trade-off

Real-world Deep Local Motion Deblurring

Most existing deblurring methods focus on removing global blur caused by camera shake, while they cannot well handle local blur caused by object movements. To fill the vacancy of local deblurring in real scenes, we establish the first real local motion blur dataset (ReLoBlur), which is captured by a synchronized beam-splitting photographing system and corrected by a post-progressing pipeline. Based on ReLoBlur, we propose a Local Blur-Aware Gated network (LBAG) and several local blur-aware techniques to bridge the gap between global and local deblurring: 1) a blur detection approach based on background subtraction to localize blurred regions; 2) a gate mechanism to guide our network to focus on blurred regions; and 3) a blur-aware patch cropping strategy to address data imbalance problem. Extensive experiments prove the reliability of ReLoBlur dataset, and demonstrate that LBAG achieves better performance than state-of-the-art global deblurring methods without our proposed local blur-aware techniques

Amplitude-Duration-Persistence Trade-off Relationship for Long Term Bear Stock Markets

We study the mechanism that controls the shape of the bear market through an information diffusion perspective, and establish a frontier of market decline, in terms of a trade-off between amplitude, duration and the rate of information diffusion. Empirical analysis using data from 15 stock markets confirms the existence of this trade-off relationship. An algorithm for generating the frontier using real data is proposed and applied in several market scenarios. The results suggest that the behaviour of international stock markets during the current US credit crunch is similar to that in previous bear markets in terms of the trivariate trade-off