Parameter estimation of structural commodity price models

Commodity price modeling is normally approached in terms of structural time-series models, in which the different components (states) have a financial interpretation. The parameters of these models can be estimated using maximum likelihood. This approach results in a non-linear parameter estimation problem and thus a key issue is how to obtain reliable initial estimates. In this paper, we focus on the initial parameter estimation problem for the Schwartz-Smith two-factor model commonly used in asset valuation. We propose the use of a two-step method. The first step considers a univariate model based only on the spot price and uses a transfer function model to obtain initial estimates of the fundamental parameters. The second step uses the estimates obtained in the first step to initialize a re-parameterized state-space-innovations based estimator, which includes information related to future prices. The second step refines the estimates obtained in the first step and also gives estimates of the remaining parameters in the model. This paper is part tutorial in nature and gives an introduction to aspects of commodity price modeling and the associated parameter estimation problem.

Pairs trading profits in commodity futures markets

This study employs a pairs trading investment strategy on daily commodity futures returns. The study reveals that pairs trading in similarly related commodity futures earns statistically significant excess returns with commensurate volatility. The excess returns from pairs trading in commodity futures are unrelated to conventional market risk factors and they are not associated with classic contrarian investing. The evidence of pairs trading reflect compensation to arbitrageurs for enforcing the law of one price in similarly related market efficiency.

Distribution of benefits of irrigation induced technological changes and commodity markets : new evidence

A plethora of literature exists on irrigation development. However, only a few studies analyse the distributional issues associated with irrigation induced technological changes (IITC) in the context of commodity markets. Furthermore, these studies deal with only the theoretical arguments and to date no proper investigation has been conducted to examine the long-term benefits of adopting modern irrigation technology. This study investigates the long-term benefit changes of irrigation induced technological changes using data from Sri Lanka with reference to rice farming. The results show that (1) adopting modern technology on irrigation increases the overall social welfare through consumption of a larger quantity at a lower cost (2) the magnitude, sensitivity and distributional gains depend on the price elasticity of demand and supply as well as the size of the marketable surplus (3) non-farm sector gains are larger than farm sector gains (4) the distribution of the benefits among different types of producers depend on the magnitude of the expansion of the irrigated areas as well as the competition faced by traditional farmers (5) selective technological adoption and subsidies have a detrimental effect on the welfare of other producers who do not enjoy the same benefits (6) the short-term distributional effects are more severe than the long-term effects among different groups of farmers.

Chile is hot travel spot

A brief travel article about Chile

Simple classification of walking activities using commodity smart phones

People interact with mobile computing devices everywhere, while sitting, walking, running or even driving. Adapting the interface to suit these contexts is important, thus this paper proposes a simple human activity classification system. Our approach uses a vector magnitude recognition technique to detect and classify when a person is stationary (or not walking), casually walking, or jogging, without any prior training. The user study has confirmed the accuracy.

‘Spotty Dick’ : a research experiment to test design suitability for the use of jewelled spot matrix patterns for UV aware men’s swimwear

The great male Aussie cossie is growing spots. The ‘dick’ tog, as it is colloquially referred to, is linked to Australia’s national identify with overtly masculine bronzed Aussie bodies clothed in this iconic apparel. Yet the reality is our hunger for worshiping the sun and the addiction to a beach lifestyle is tempered by the pragmatic need for neck-to-knee, or more apt head-to-toe, swimwear. Spotty Dick is an irreverent play on male swimwear – it experiments with alternate modes to sheath the body with Lyrca in order to protect it from searing UV’s and at the same time light-heartedly fools around with texture and pattern; to be specific, black Scharovsky crystals, jewelled in spot patterns - jewelled clothing is not characteristically aligned to menswear and even less so to the great Aussie cossie. The crystals form a matrix of spots that attempt to provoke a sense of mischievousness aligned to the Aussie beach larrikin. Ironically, spot patterns are in itself a form of a parody, as prolonged sun exposure ages the skin and sun spots can occur if appropriate sun protection is not used. ‘Spotty Dick’ – a research experiment to test design suitability for the use of jewelled spot matrix patterns for UV aware men’s swimwear. The creative work was paraded at 56 shows, over a 2 week period, and an estimated 50,000 people viewed the work.

Please take out your phones : on the spot solicitation of student feedback in class

The use of mobile devices such as smart phones and tablets in classrooms has been met with mixed sentiments. Some instructors and teachers see them as a distraction and regularly ban their usage. Others who see their potential to enhance learning have started to explore ways to integrate them into their teaching in an attempt to improve student engagement. In this paper we report on a pilot study that forms part of a university-wide project reconceptualising its approach to the student evaluation of learning and teaching. In a progressive decision to embrace mobile technology, the university decided to trial a smart phone app designed for students to check-in to class and leave feedback on the spot. Our preliminary findings from trialling the app indicate that the application establishes a more immediate feedback loop between students and teachers. However, the app’s impact depends on how feedback is shared with students and how the teaching team responds.

Spot the differences in traditional and social entrepreneurial intention : highlighting the role of human and social capital

There is general agreement in the scientific community that entrepreneurship plays a central role in the growth and development of an economy in rapidly changing environments (Acs & Virgill 2010). In particular, when business activities are regarded as a vehicle for sustainable growth at large, that goes beyond mere economic returns of singular entities, encompassing also social problems and heavily relying on collaborative actions, then we more precisely fall into the domain of ‘social entrepreneurship’(Robinson et al. 2009). In the entrepreneurship literature, prior studies demonstrated the role of intentionality as the best predictor of planned behavior (Ajzen 1991), and assumed that the intention to start a business derives from the perception of desirability and feasibility and from a propensity to act upon an opportunity (Fishbein & Ajzen 1975). Recognizing that starting a business is an intentional act (Krueger et al. 2000) and entrepreneurship is a planned behaviour (Katz & Gartner 1988), models of entrepreneurial intentions have substantial implications for intentionality research in entrepreneurship. The purpose of this paper is to explore the emerging practice of social entrepreneurship by comparing the determinants of entrepreneurial intention in general versus those leading to startups with a social mission. Social entrepreneurial intentions clearly merit to be investigated given that the opportunity identification process is an intentional process not only typical of for profit start-ups, and yet there is a lack of research examining opportunity recognition in social entrepreneurship (Haugh 2005). The key argument is that intentionality in both traditional and social entrepreneurs during the decision-making process of new venture creation is influenced by an individual's perceptions toward opportunities (Fishbein & Ajzen 1975). Besides opportunity recognition, at least two other aspects can substantially influence intentionality: human and social capital (Davidsson, 2003). This paper is set to establish if and to what extent the social intentions of potential entrepreneurs, at the cognitive level, are influenced by opportunities recognition, human capital, and social capital. By applying established theoretical constructs, the paper draws comparisons between ‘for-profit’ and ‘social’ intentionality using two samples of students enrolled in Economy and Business Administration at the University G. d’Annunzio in Pescara, Italy. A questionnaire was submitted to 310 potential entrepreneurs to test the robustness of the model. The collected data were used to measure the theoretical constructs of the paper. Reliability of the multi-item scale for each dimension was measured using Cronbach alpha, and for all the dimensions measures of reliability are above 0.70. We empirically tested the model using structural equation modeling with AMOS. The results allow us to empirically contribute to the argument regarding the influence of human and social cognitive capital on social and non-social entrepreneurial intentions. Moreover, we highlight the importance for further researchers to look deeper into the determinants of traditional and social entrepreneurial intention so that governments can one day define better polices and regulations that promote sustainable businesses with a social imprint, rather than inhibit their formation and growth.

Financialization, crisis and commodity correlation dynamics

Stronger investor interest in commodities may create closer integration with conventional asset markets. We estimate sudden and gradual changes in correlation between stocks, bonds and commodity futures returns driven by observable financial variables and time, using double smooth transition conditional correlation (DSTCC–GARCH) models. Most correlations begin the 1990s near zero but closer integration emerges around the early 2000s and reaches peaks during the recent crisis. Diversification benefits to investors across equity, bond and stock markets were significantly reduced. Increases in VIX and financial traders’ short open interest raise futures returns volatility for many commodities. Higher VIX also increases commodity returns correlation with equity returns for about half the pairs, indicating closer integration.

What drives the commodity price beta of oil industry stocks

We test theoretical drivers of the oil price beta of oil industry stocks. The strongest statistical and economic support comes for market conditions-type variables as the prime drivers: namely, oil price (+), bond rate (+), volatility of oil returns (−) and cost of carry (+). Though statistically significant, exogenous firm characteristics and oil firms' financing decisions have less compelling economic significance. There is weaker support for the prediction that financial risk management reduces the exposure of oil stocks to crude oil price variation. Finally, extended modelling shows that mean reversion in oil prices also helps explain cross-sectional variation in the oil beta.

Resources for improving journalists' understanding of the economic and financial parameters of Australia's agricultural and commodity producers

The research addresses how an understanding of the fundamentals of economics will better inform general journalists who report on issues or events affecting rural and regional Australia. The research draws on practice-based experience of the author, formal economics studies, interviews with news editors from Australian television news organisations, and interviews from leading economists. A guidebook has also been written to help journalists apply economic theories to their reporting. The guidebook enables reporters to think strategically and consider the 'big picture' when they inform society about policies, commodity trade, the environment, or any issues involving rural and regional Australia.

Knowledge, attitudes and practices to reduce exposure among residents living near Danang dioxin hot spot : 2.5 years after a preventative intervention

Da Nang Airbase in Viet Nam served as a bulk storage and supply facility for Agent Orange and other herbicides during Operation Ranch Hand 1961-1971[1]. Studies have shown that environmental and biological samples taken around the airbase site have elevated levels of dioxin [1-3]. Residents living in the vicinity of the airbase are at risk of exposure to dioxin in soil, water and mud and particularly through the consumption of local contaminated food. In 2009, a pre-intervention cross sectional survey was undertaken. This survey examined the knowledge, attitudes and practices (KAP) of householders living near Da Nang Airbase, relevent to reducing dioxin exposure through contaminated food. The results showed that despite living near a severe dioxin hot spot, the residents had very limited knowledge of both exposure risk and measures to reduce exposure to dioxin[4]. In response, the Vietnam Public Health Association (VPHA) and Da Nang Public Health Association implemented a risk reduction program at four residential wards in the vicinities of the Da Nang Airbase in 2010. A post intervention KAP survey was under taken in 2011, and the results showed that knowledge of the existence of dioxin in food, dioxin exposure pathways, potential high risk foods, and preventive measures was significantly enhanced. This new study monitored KAP 2.5 years after the intervention through a 2013 survey of food handlers from 400 households that were randomly selected from the four intervention wards. The results show that most of the positive outcomes remained stable or had increased; some KAP indicators decreased compared to those in the post-intervention survey, but were still significantly higher than the pre-intervention levels. In 2014, these findings will be incorporated with qualitative assessments and the results of laboratory analysis of dioxin concentrations in foods in Da Nang and Bien Hoa dioxin hot spots to comprehensively assess the sustained effects of the intervention.