There is something about pairs trading

The process of pairs trading involves exhaustively matching and ranking pairwise stocks based on some prespecified measure of closeness; e.g., correlation, cointegration, sum-of-squared price difference. Pairs trading is popular for various reasons. It is simple to follow and execute. The pairwise portfolio can be nearly market-neutral, such that it does not require the comprehensive analysis of macroeconomic news. Since it is based on relative valuation, the actual worth of individual firms is not a pertinent consideration. The strategy is sufficiently flexible to accommodate various investment styles. Lastly, it does not evoke frequent intraday rebalancing, such that pairs trading can be automated to a certain extent and be cost-feasibly profitable. Despite its long history on Wall Street, pairs trading remains elusive in nature. The academic attention it attracts is modest compared to contrarian and momentum trading.

Economic linkages across commodity futures : hedging and trading implications

We investigate cross-market trading dynamics in futures contracts written on seemingly unrelated commodities that are consumed by a common industry. On the Tokyo Commodity Exchange, we find such evidence in natural rubber (NR), palladium (PA) and gasoline (GA) futures markets. The automobile industry is responsible for more than 50% of global demand for each of these commodities. VAR estimation reveals short-run cross-market interaction between NR and GA, and from NR to PA. Cross-market influence exerted by PA is felt in longer dynamics, with PA volatility (volume) affecting NR (GA) volume (volatility). Our findings are robust to lag-specification, volatility measure, and consistent with full BEKK-GARCH estimation results. Further analysis, which benchmarks against silver futures market, TOCOM index and TOPIX transportation index, confirms that our results are driven by a common industry exposure, and not a commodity market factor. A simple trading rule that incorporates short-run GA and long-run PA dynamics to predict NR return yields positive economic profit. Our study offers new insights into how commodity and equity markets relate at an industry level, and implications for multi-commodity hedging.

Firms as adaptive organizations : the case of Australian trading banks

The conventional accounting notion of ‘going concern’ — that a firm will continue its business operations in the same manner indefinitely — has underpinned accounting practice for over one hundred years. This idea has provided a rationale for spreading costs over accounting periods and for deferring costs as assets in balance sheets. An alternative idea that is widely regarded as reliable in the literatures of economics and deliberate action is that firms continually adapt to changes in market and economic conditions. That is economic behaviour. The implications of that view of a firm for accounting have been systematically explored by Chambers (1966). While not examining those particular implications, many other accounting theorists have been critical of the conventional accounting idea of 'going concern' and of its impact on accounting practice. The two notions of ‘going concern’ - as static or adaptive enterprises - are examined by referring to the business operations of the four major Australian trading banks over the period 1983-1991. Banks were selected because they are commonly thought to be particularly ‘conservative’ organizations. The period 1983—1991 was chosen because it covers the era of deregulation of the Australian financial system. The evidence adduced by this study indicates that the Australian trading banks have continually adapted their organizational structures and business operations in the light of changes in technology, markets for financial services, government policies and domestic and global economic conditions. Illustrations of adaptive behaviour by banks ate drawn from their normal operating procedures such as the provision of products and services, loan services, acquisitions, sale of property, non-core banking operations and international banking. It is argued on analytical grounds that the cost basis of accounting does not yield financial statements that provide factual and up-to-date information about the financial capacity of firms to pay their debts and to continue trading generally; that is, to be going concerns. At any time, those financial capacities are determined by the amount of money commanded by a firm, including the money's worth of its assets, and by its level of debt. It is concluded on empirical grounds that the Australian trading banks, at least, are adaptive entities.

Introduction of electronic trading in index futures : volatility and volume effects

There is continuing debate in the US over full introduction of electronic trading in those index futures contracts that are still traded at the CME via open outcry. Since the late 1990s major international exchanges trading index futures contracts have converted to full electronic trading. Recent empirical studies have focused on effects on bid/ask spreads and related price volatility following these changes. We take a different approach and investigate and test for structural change in conditional volatility and volume effects following the shift to electronic trading in the Australian Share Price Index futures contract. Multiple Switching point GARCH models are employed with the data sampled at 5, 15 and 30-minute intervals from transaction records supplied by the Sydney Futures Exchange. There is significant evidence of structural changes in both the persistence of volatility shocks and simultaneous volume effects following the change to screen trading in this futures market.

Are adolescents from a forest community well-informed about forest management?

The indigenous community of San Juan Nuevo Parangaricutiro in Mexico has been engaged in a successful Community Forest Enterprise employing sustainable management practices since 1981. These environmental practices do not seem to be reflected in the educational programmes developed at school. In this study, the environmental knowledge and interest of 102 students at high-school (15 to 18 years old) towards forestry management were analysed. The association between their knowledge and interests in environmental issues was also estimated. These analyses examine their interest in forest management as potential employment and the effect of the educational system on environmental learning. A combination of quantitative and qualitative methods was used. Results showed that environmental concepts were poorly understood despite their inclusion in the curriculum. Adolescents did not envisage working in the forest in the future because they showed no interest in forest activities. Educational implications and strategies to encourage adolescents to become involved in community forest management are crucial for conservation.

An examination of Australia's insider trading laws

Considers that the effective regulation of insider trading is desirable in order to maintain investor confidence in Australia's share markets. Although the current laws and the use of continuous disclosure provide a workable foundation, the thesis further considers the ways in which insider trading may be more effectively regulated and prosecuted in Australia.

Selection of priority groups for obesity prevention current approaches and development of an evidence-informed framework

Resources for obesity prevention interventions are inevitably limited, necessitating the selection of priority groups to ensure effective and equitable use of funds. This paper aims to review published approaches to selection of priority groups ('target populations') for obesity prevention, and to present the development of a new systematic framework for organizing and assessing evidence for selecting priority groups. A review was conducted of the process and justification described for selecting priority groups in a sample of obesity prevention publications. Using the results of this review and adaptation of theory and frameworks in both the obesity prevention and health promotion priority-setting literature, a framework was developed for assessment of potential priority groups for obesity prevention. The published literature lacks discussion of and explicit processes for selection of priority groups for obesity prevention intervention. The new framework describes specific types of evidence that should be considered in the assessment of a potential priority group for obesity prevention and has applications for funding and implementing community-based or settings-level obesity prevention interventions and research. Application of this framework has the potential to enhance the effective use of limited obesity prevention resources and to identify areas in need of additional research evidence.