The Relation Between Default‐Free Interest Rates and Expected Economic Growth Is Stronger Than You Think
Published: 9/1997, Volume: 52, Issue: 4 | DOI: 10.1111/j.1540-6261.1997.tb01126.x | Cited by: 17
AVRAHAM KAMARA
The relation between default‐free interest rates and expected economic growth is substantially stronger than suggested by extant literature. Futures‐implied Treasury bill yield spreads are more highly correlated with future real consumption, investment, and GNP growth than spot spreads. This stronger relation arises because using futures removes a component of the spot term structure that covaries negatively with real economic growth. Treasury forward rates from spot bills contain a premium for the risk that short‐sellers will default. This risk premium is negatively related to expected economic growth.
Optimal Hedging in Futures Markets with Multiple Delivery Specifications
Published: 9/1987, Volume: 42, Issue: 4 | DOI: 10.1111/j.1540-6261.1987.tb03924.x | Cited by: 50
AVRAHAM KAMARA, ANDREW F. SIEGEL
Nearly all futures contracts allow delivery of any of several qualities of the underlying asset. Consequently, the price of the futures contract is associated more with the price of the expected cheapest deliverable variety than with the price of the par‐delivery variety. The delivery specifications introduce a delivery risk for every hedger in the market. We derive the optimal hedging strategies in these markets. Their hedging effectiveness is evaluated for wheat futures contracts in Chicago. Hedging optimally would have significantly reduced the variance of the rates of return on hedges while yielding similar mean returns.
ON SYSTEMATIC AND UNSYSTEMATIC COMPONENTS OF FINANCIAL RISK
Published: 3/1972, Volume: 27, Issue: 1 | DOI: 10.1111/j.1540-6261.1972.tb00617.x | Cited by: 28
Avraham Beja
DYNAMIC MARKET PROCESSES AND THE REWARDS TO UP‐TO‐DATE INFORMATION
Published: 5/1977, Volume: 32, Issue: 2 | DOI: 10.1111/j.1540-6261.1977.tb03269.x | Cited by: 17
Avraham Beja, Nils H. Hakansson
Market Prices vs. Equilibrium Prices: Returns' Variance, Serial Correlation, and the Role of the Specialist
Published: 6/1979, Volume: 34, Issue: 3 | DOI: 10.1111/j.1540-6261.1979.tb02127.x | Cited by: 33
M. BARRY GOLDMAN, AVRAHAM BEJA
On The Dynamic Behavior of Prices in Disequilibrium
Published: 5/1980, Volume: 35, Issue: 2 | DOI: 10.1111/j.1540-6261.1980.tb02151.x | Cited by: 251
AVRAHAM BEJA, M. BARRY GOLDMAN
On the Feasibility of Automated Market Making by a Programmed Specialist
Published: 3/1985, Volume: 40, Issue: 1 | DOI: 10.1111/j.1540-6261.1985.tb04934.x | Cited by: 17
NILS H. HAKANSSON, AVRAHAM BEJA, JIVENDRA KALE
Securities trading is accomplished through the execution of orders. Admissible orders (e.g., market orders, limit orders) give rise to discontinuous aggregate demand functions, composed of many “steps.” Demand smoothing, or the balancing of excesses due to such discontinuities via intervention, is one of the most basic functions that could be assigned to a “specialist.” When the specialist's “affirmative obligation” is fully specified, his or her activity can in principle be automated. This paper is an attempt to assess, via simulation, some of the ramifications of using a “programmed specialist,” whose automated market making is limited to demand smoothing. A number of alternative rules of operation are simulated. Several of the rules performed well, especially the extremely simple rule that calls for the (computerized) specialist to minimize new absolute share holdings in each security at each trading point via “total” (as opposed to “local”) demand smoothing. Our results indicate that the underlying costs of demand smoothing are on the order of a fraction of a penny per share traded even in relatively thin markets.