This paper examines the weak form market efficiency using transactions data. Previous studies have mainly used daily data to investigate whether trading rules can result in abnormal profits with mixed results. This study on the other hand uses trade-by-trade data to apply trading rules such as moving average and filter. Two different futures contracts the Australian All Ordinaries Index traded ...

This paper considers two issues. Firstly it examines the efficacy of a mechanical trading model freely available from the ‘Turtletrader’ web page on the Internet. The results are tested against the Efficient Market Hypothesis (EMH) Weak-Form as proposed by Fama (1970). The findings show that EMH Weak-Form fails to describe the profits generated by the model when examining CBOT Corn and T-Bond f...

Hedgers located far from organized commodity exchanges suffer a mismatch between their local prices and exchange prices. Futures and options traded on the exchange may still be valuable to distant hedgers, but only to the extent that basis risk is small. Forward contracting allows hedgers to manage risk using a local delivery price, but the Commodity Futures Trading Commission has long banned t...

This paper examines volatility models of currency futures contracts for three developed markets and two emerging markets. For each contract, standard models of the Unbiased Expectations Hypothesis (UEH) and Cost-of-Carry hypothesis (COC) are extended to derive volatility models corresponding to each of the two standard approaches. Each volatility model is formulated as a system of individual eq...

This paper develops a generalization of the formulas proposed by Kuttner (2001) and others for purposes of measuring the effects of a change in the federal funds target on Treasury yields of different maturities. The generalization avoids the need to condition on the date of the target change and allows for deviations of the effective fed funds rate from the target as well as gradual learning b...

Financial data mining models is considered to be “the hardest way to make easy money.” Data miners are certainly motivated by the prospect of discovering a financial “Holy Grail.” However, designing and implementing a successful model poses many intellectual challenges. These include securing and cleaning data; acquiring a sufficient amount of financial domain knowledge; bounding the complexity...

Using market prices for crude-oil futures options and the prices of their underlying futures contracts, we estimate the volatility skew in two ways. As a benchmark for our theoretical model, on each date we first estimate a crosssectional polynomial structure for each maturity to demonstrate the strength and weaknesses of a purely-mechanical model. We then apply to the empirical data a Merton-s...

We analyze the effect various delivery options embedded in commodity futures contracts have on the futures price. The two embedded options considered are the timing and location options. We show that early delivery is always optimal when only a timing option is present, but not so with joint options. The estimates of the combined options are much smaller than the comparable estimates for the ti...

We examine how consumers and financial markets in the United States reacted to two health warnings about mad cow disease: the first discovery of an infected cow in December 2003 and an Oprah Winfrey show that aired seven years earlier on the potentially harmful effects of mad cow disease. We find a pronounced and significant reduction in beef sales following the first discovery of an infected c...