Investor preferences for oil spot and futures based on mean-variance and stochastic dominance

This paper examines investor preferences for oil spot and futures based on mean-variance (MV) and stochastic dominance (SD). The mean-variance criterion cannot distinct the preferences of spot and market whereas SD tests leads to the conclusion that spot dominates futures in the downside risk while futures dominate spot in the upside profit. It is also found that risk-averse investors prefer investing in the spot index, whereas risk seekers are attracted to the futures index to maximize their expected utilities. In addition, the SD results suggest that there is no arbitrage opportunity between these two markets. Market efficiency and market rationality are likely to hold in the oil spot and futures markets.stochastic dominance;futures market;risk averter;risk seeker;spot market;G15;C14;G12

Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach

This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets.stochastic dominance;futures market;risk averter;risk seeker;spot market

Investor preferences for oil spot and futures based on mean-variance and stochastic dominance

This paper examines investor preferences for oil spot and futures based on mean-variance (MV) and stochastic dominance (SD). The mean-variance criterion cannot distinct the preferences of spot and market whereas SD tests leads to the conclusion that spot dominates futures in the downside risk while futures dominate spot in the upside profit. It is also found that risk-averse investors prefer investing in the spot index, whereas risk seekers are attracted to the futures index to maximize their expected utilities. In addition, the SD results suggest that there is no arbitrage opportunity between these two markets. Market efficiency and market rationality are likely to hold in the oil spot and futures markets

Market Efficiency of Oil Spot and Futures: A Stochastic Dominance Approach

This paper examines the market efficiency of oil spot and futures prices by using a stochastic dominance (SD) approach. As there is no evidence of an SD relationship between oil spot and futures, we conclude that there is no arbitrage opportunity between these two markets, and that both market efficiency and market rationality are not rejected in the oil spot and futures markets

Why did Warrant Markets Close in China but not Taiwan?

The paper bridges a gap in the literature by using moment analysis, CAPM statistics, stochastic dominance (SD) test, and volume analysis to examine investor preferences for warrants between China and Taiwan, and investigating why the market for warrants in China has to close while the market for Taiwan warrants is successful. Using moment analysis, it is shown that that buying China warrants has a higher likelihood of losses than its Taiwan counterpart. Using CAPM analysis, in general, both the Sharpe ratio and Jensen index for warrants from the Taiwan market are more reasonable, while that from the China market is too negative. On the other hand, the Treynor index for China warrants shows that China warrants are highly volatile. This could make investors avoid investing in China warrants which, in turn, could lead to its closure. Using SD analysis, though there is no arbitrage opportunity between the China and Taiwan warrant markets, it is shown that the markets for China and Taiwan warrants are not efficient, and second- and third-order risk averters prefer to invest in China warrants to warrants in Taiwan. This implies that the warrant issuers prefer to issue Taiwan warrants than China warrants. Using volume analysis, the China warrant market is much more active than the Taiwan warrant market. This could imply that there are more speculative activities in China than in Taiwan which, in turn, could lead to China’s decision to close its warrant market. The findings in the paper are useful for investors for investment decisions regarding Taiwan and China warrants, for academic analysis for modelling Taiwan and China warrants, and policy makers for policy making related to Taiwan and China warrants. In the future, China may rethink reopening warrant markets and learning from mature-covered warrant markets such as Taiwan how to inhibit excess speculation and educate warrant investors

Stochastic dominance and behavior towards risk: The market for Internet stocks

10.1016/j.jebo.2008.03.013Journal of Economic Behavior and Organization681194-208JEBO

International momentum strategies: A stochastic dominance approach

10.1016/j.finmar.2004.08.001Journal of Financial Markets8189-10

Energy subsidy and oil price fluctuation, and price behavior in Malaysia:A time series analysis

Balancing between favorable energy subsidy and the financial burden of government is crucial for policymakers. This article intends to advance this thinking by informing policymakers about how price reacts to changes in the international oil price and energy subsidy program. Hence, it is essential to investigate the empirical evidence concerning the relationship between the international oil price and energy subsidy, and price behavior. This study used time series data covering the period 1981–2015 to explore the price behavior on energy subsidy rationalization and oil price fluctuation in Malaysia. To prepare concrete empirical evidence, we employed the autoregressive distribution lag (ARDL) approach to capture the long-run dynamic behavior. Our findings indicated that both factors, oil price and energy subsidy, are significant in influencing the pattern of price behavior. The PPI (Producer Price Index) was more sensitive to changes in the oil price than the CPI (Consumer Price Index). The PPI was found to be affected more while the CPI was less affected. We call on policymakers to provide the Malaysian economic system with a productive social safety net to offset the negative impact caused by energy subsidy reform