The thesis consists basically of two parts. The first part deals with speculators in commodity markets. In particular, we are interested in the role of speculators in stabilizing or destabilizing market price. The second part takes up hedgers in commodity futures markets. Here, we are concerned with the asymmetries between short and long hedgers. Specifically, we study whether or not the asymmetries discussed in the literature will lead to a backwardation equilibrium in futures markets.
\r\n\r\nThe two approaches differ in the way speculators are treated in the framework as market participants. In the literature dealing with speculators and stabilization, the non-speculators are inactive; their only role is to provide an (exogenous) non-speculative excess demand function based on which speculators choose their transactions to maximize their objective functions. Conversely, in the futures market literature, under rational expectations and common beliefs on the part of all traders, speculators are only the supporting actors while hedgers play the leading roles; speculators act only to reduce the imbalance between short and long hedging. The difference between these two approaches is, however, not as clear-cut as it seems to be. The reason is simply that hedgers often take some speculative positions in their decision-making process. Consequently, it can be argued that both speculators and non-speculators are active participants in the futures markets. This specific characteristic thus generates the ambiguities about the role of speculators in stabilizing or destabilizing market price in the futures market framework.
\r\n\r\nThe main results of the thesis are as follows. From an ex post viewpoint, Chapter 1 indicates that profitable speculation will necessarily stabilize market price if and only if the non-speculative excess demand function is linear, with no lag structure and with the law of demand being satisfied. This conclusion falsifies the famous Friedman conjecture (i.e., profitable speculation necessarily stabilizes market price). We then study the case of linear non-speculative excess demand function using an ex ante approach. At a rational expectations equilibrium, it is shown that Friedman's conjecture holds when speculators' expected utility function can be expressed in terms of mean-variance consideration. Whether or not there are nonlinear non-speculative excess demand functions that verify the Friedman conjecture in ex ante framework is a matter for future research.
\r\n\r\nIn Chapters 3 through S, we deal with two well-known asymmetries between short and long hedging, namely, asymmetric arbitrage opportunities and the so-called Houthakker effect. First, we show that the asymmetric arbitrage argument has no standing in the way of establishing the existence of a backwardation equilibrium in forward markets, whereas some highly restrictive assumptions must be imposed for the asymmetric arbitrage argument to lead to a backwardation equilibrium in a true futures market. Thus the theoretical argument for a link between asymmetric arbitrage opportunities and a backwardation equilibrium is weak. Yet the question remains as to whether or not asymmetric arbitrage opportunities prevail in functioning futures markets. This is studied in Chapter 4 with respect to wheat and corn futures contracts traded on the Chicago Board of Trade (CBOT). The results indicate that asymmetric arbitrage opportunities have impacts upon CBOT wheat futures markets, but not upon CBOT corn futures markets. Consequently, the asymmetric arbitrage argument may apply only to some specific commodities.
\r\n\r\nFinally, in Chapter 5, we apply the same sample to test the existence of the Houthakker effect. Again, the hypothesis is rejected. Therefore, the two well-known asymmetries between short and long hedging do not have impacts upon CBOT wheat and corn futures markets. notwithstanding their roles in the way of a backwardation equilibrium.
\r\n\r\nThe thesis is concerned with developing an understanding of the way in which futures markets function, and the role of speculators and hedgers in the markets. The results presented here indicate that it is only under rather restrictive conditions that definite results concerning these issues can be derived, particularly in the context of the true futures markets, that is, markets in which several delivery options exist under a futures contract.
", "doi": "10.7907/9n64-3x45", "publication_date": "1986", "thesis_type": "phd", "thesis_year": "1986" }, { "id": "thesis:11385", "collection": "thesis", "collection_id": "11385", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:02062019-101425283", "primary_object_url": { "basename": "Fort_RD_1985.pdf", "content": "final", "filesize": 68541619, "license": "other", "mime_type": "application/pdf", "url": "/11385/1/Fort_RD_1985.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Theory and Practice in the Analysis of Commodity Futures Price Distributions", "author": [ { "family_name": "Fort", "given_name": "Rodney Douglas", "orcid": "0000-0003-4610-6663", "clpid": "Fort-Rodney-Douglas" } ], "thesis_advisor": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" } ], "thesis_committee": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" }, { "family_name": "Kiewiet", "given_name": "D. Roderick", "clpid": "Kiewiet-D-R" }, { "family_name": "Dubin", "given_name": "Jeffrey A.", "clpid": "Dubin-J-A" }, { "family_name": "Noll", "given_name": "Roger G.", "clpid": "Noll-R-G" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis is concerned with commodity futures markets. More specifically, it addresses itself to two issues -- the behavior of commodity futures prices and the effect of these price distributions on hedgers in commodity markets. On the former issue, the distribution of futures prices, the aim is to bring heretofore neglected theoretical implications to an empirical investigation into distributional form. Concerning the latter issue, price distributions and hedging activity, the arguments behind possible trends in futures prices due to short hedging dominance (short hedging in excess of offsetting long hedging, across the entire market) are highlighted, formalized, and tested empirically.
", "doi": "10.7907/ae1b-0k61", "publication_date": "1985", "thesis_type": "phd", "thesis_year": "1985" }, { "id": "thesis:18391", "collection": "thesis", "collection_id": "18391", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:02252026-214015049", "primary_object_url": { "basename": "Binger_BR_1979.pdf", "content": "final", "filesize": 30699344, "license": "other", "mime_type": "application/pdf", "url": "/18391/1/Binger_BR_1979.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Essays in Forward Markets and the Uranium Industry", "author": [ { "family_name": "Binger", "given_name": "Brian Robert", "clpid": "Binger-Brian-Robert" } ], "thesis_advisor": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" } ], "thesis_committee": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" }, { "family_name": "Nelson", "given_name": "Forrest D.", "clpid": "Nelson-Forrest-D" }, { "family_name": "Noll", "given_name": "Roger G.", "clpid": "Noll-R-G" }, { "family_name": "Wilde", "given_name": "Louis L.", "clpid": "Wilde-L-L" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis brings together two papers, one of which is \r\nprimarily empirical and one of which is theoretical. The first\r\nestimates long run costs of uranium production. The second\r\nanalyzes theoretically the impact of fixed price contracting on the\r\ndecisions of a firm facing price uncertainty.", "doi": "10.7907/desr-8p44", "publication_date": "1979", "thesis_type": "phd", "thesis_year": "1979" }, { "id": "thesis:8525", "collection": "thesis", "collection_id": "8525", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:06262014-103044842", "primary_object_url": { "basename": "Hoffman_e_1979.pdf", "content": "final", "filesize": 18691278, "license": "other", "mime_type": "application/pdf", "url": "/8525/1/Hoffman_e_1979.pdf", "version": "v4.0.0" }, "type": "thesis", "title": "Essays in Optimal Resource Allocation under Uncertainty with Capacity Constraints", "author": [ { "family_name": "Hoffman", "given_name": "Elizabeth", "clpid": "Hoffman-Elizabeth" } ], "thesis_advisor": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" } ], "thesis_committee": [ { "family_name": "Unknown", "given_name": "Unknown" } ], "local_group": [ { "literal": "div_hss" } ], "abstract": "This thesis brings together four papers on optimal resource allocation under uncertainty with capacity constraints. \r\nThe first is an extension of the Arrow-Debreu contingent claim model to a good subject to supply uncertainty for which delivery capacity has to be chosen before the uncertainty is resolved. The second compares an ex-ante contingent claims market to a dynamic market in which capacity is chosen ex-ante and output and consumption decisions are made ex-post. The third extends the analysis to a storable good subject to random supply. Finally, the fourth examines optimal allocation of water under an appropriative rights system.", "doi": "10.7907/qw1g-4b75", "publication_date": "1979", "thesis_type": "phd", "thesis_year": "1979" }, { "id": "thesis:18383", "collection": "thesis", "collection_id": "18383", "cite_using_url": "https://resolver.caltech.edu/CaltechTHESIS:02202026-224210777", "primary_object_url": { "basename": "McKay_DJ_1978.pdf", "content": "final", "filesize": 37818640, "license": "other", "mime_type": "application/pdf", "url": "/18383/1/McKay_DJ_1978.pdf", "version": "v2.0.0" }, "type": "thesis", "title": "Two Essays on the Economics of Electricity Supply: 1. Has the Averch-Johnson Effect been Empirically Verified? 2. Electricity Pricing", "author": [ { "family_name": "McKay", "given_name": "Derek John", "clpid": "McKay-Derek-John" } ], "thesis_advisor": [ { "family_name": "Quirk", "given_name": "James P.", "clpid": "Quirk-J-P" }, { "family_name": "Noll", "given_name": "Roger G.", "clpid": "Noll-R-G" } ], "thesis_committee": [ { "family_name": "Unknown", "given_name": "Unknown" } ], "local_group": [ { "literal": "div_eng" } ], "abstract": "This thesis reports on investigations in two areas of the\r\neconomics of electricity supply. The first chapter examines\r\nempirical evidence to determine whether rate of return regulation\r\nhas produced detectable overcapitalisation in this industry.\r\nThe second chapter studies the determination of optimal pricing\r\nmechanisms for electricity, particularly in the presence of\r\nuncertainty.
\r\n\r\nChapter 1:
\r\n\r\nThree studies which claim to confirm, and one which claims\r\nto reject, the existence of the Averch-Johnson effect in the\r\nelectric power industry, have recently been published. This\r\npaper examines the general problem of what the nature of the\r\nA-J effect might be and what sort of data would be required in\r\norder to confirm its presence. The other studies are then\r\ncritically examined on the basis of this discussion. A modification\r\nof the method used in one previous study is then used\r\nto test a suitably restricted form of the A-J hypothesis, and\r\nno evidence of capital bias is found. The principal conclusion\r\nof this study is that if the A-J effect is significant in distorting\r\ninput choices in the electric utility industry, very\r\ndifferent sorts of data than those that have been used thus far\r\nare going to be required in order to verify its presence. Mechanical\r\nusage of gross input and output numbers, without understanding\r\nof the technological processes involved, leads only to\r\nerroneous conclusions.
\r\n\r\nChapter 2:
\r\n\r\nIn this chapter we examine the issues involved in setting\r\nelectricity prices. The existing literature on peak load\r\npricing and pricing under uncertainty is reviewed. Recent\r\ntechnological developments applicable to metering and load\r\nmanagement of electricity are examined. The pricing problem is\r\nthen reformulated so that its solution may take advantage of\r\nthese innovations. New technologies such as wind power promise\r\nto be economically attractive within this new framework. This\r\nformulation of the problem suggests a method of investment\r\nplanning which would better distribute risk. In addition it\r\nprovides a way in which the generation sector of the industry\r\ncan be made competitive, thus reducing the need for regulation.
", "doi": "10.7907/1092-8k23", "publication_date": "1978", "thesis_type": "phd", "thesis_year": "1978" } ]