Crude oil, heating oil, and unleaded gasoline futures contracts are simultaneously analysed for their effectiveness in reducing price volatility for an energy trader. A conceptual model is developed for a trader hedging the 'crack spread'. Various hedge ratio estimation techniques are compared...

In many studies the assumption is made that traders only encounter one type of price risk. In reality, however, traders are exposed to multiple price risks, and often have several relevant derivative instruments available with which to hedge price uncertainty. In this study, commodity, foreign...

Foreign exchange hedging ratios are simultaneously estimated alongside freight and commodity ratios in a time‐varying portfolio framework. Foreign exchange futures are by far the most important derivative instrument used to reduce uncertainty for traders. Our results lend support to the...

Two behavioral concepts, loss aversion and mental accounting, have been combined to provide a theoretical explanation of the equity premium puzzle. Recent experimental evidence supports the theory, as students-behavior has been found to be consistent with myopic loss aversion (MLA). Yet, much...

We compare behavior across students and professional traders from the Chicago Board of Trade in a classic Allais paradox experiment. Our experiment tests whether independence, a necessary condition in expected utility theory, is systematically violated. We find that both students and...

Issues of recent interest and controversy regarding bid-ask spreads in commodity futures markets are investigated. First, competing spread estimators are applied to open outcry transactions data and resulting estimates are compared to observed spreads. This enables market microstructure...

This study examines the effect of the recent radical agricultural liberalization policy, i.e. the 1996 FAIR Act, on agricultural commodity price volatility using Generalized Autoregressive Conditional Heteroscedasticity (GARCH) models. Results of the study indicate that the agricultural...

Previous empirical studies of information cascades use either naturally occurring data or laboratory experiments with student subjects. We combine attractive elements from each of these lines of research by observing market professionals from the Chicago Board of Trade (CBOT) in a controlled...

We compare behavior across students and professional traders from the Chicago Board of Trade in a classic Allais paradox experiment. Our experiment tests whether independence, a necessary condition in expected utility theory, is systematically violated. We find that both students and...