Higher Market Efficiency Research Articles

The Feasibility of Introducing an Alternative Dual Market for Tradeable Pollution Permits to Improve its Economic Efficiency in Addressing Global Warming

Under growing public awareness of global warming, economists proposed a system that marketises the cost of pollution to firms in the form of tradable permits, aiming to discourage carbon emissions. In this system, pollution cost is determined by a free market force, making it more efficient than the government directly taxing producers. Nevertheless, the system’s efficiency still can be improved, and the urgent situation of climate change calls for policyholders to take a more effective and comprehensive approach, one of which is a regulated, online, dual market with the involvement of both producers and individuals around the world. The thesis, thereby, aims to examine whether this self-proposed system, with a higher market efficiency, can trigger more joint efforts to carbon reduction. The analysis will include a description of the new system and a comparison between the current and new system. The paper will then use mathematical modelling to determine key figures for the new scheme. The primary objective set for the model, which determines the market's feasibility, is achieving the Paris Agreement's 2-degree goal and restoring the atmosphere's carbon emissions to the pre-industrial level.

Time-Varying and Scale-Dependent Informational Efficiency of the European CO2 Emissions Market: An Analysis Based on Singular Value Decomposition Entropy

This work examined the informational efficiency of the European CO2 emission trading market for the different implementation phases in the period 2008–2022:Q3. The approach is based on a bootstrap singular value decomposition (SVD) approach and the analysis was conducted for a rolling window to assess the time-varying efficiency and over different time scales. The impact of the COVID-19 lockdown and the Russia–Ukraine conflict was evaluated. The results showed that the informational efficiency changes over time and scales, which is in line with adaptive market hypothesis (AMH) notions. High market efficiency was exhibited in Phase II (2008–2012), but large deviations from efficiency, especially for quarterly scale, were exhibited in Phase III. However, Phase IV has shown a behavior consistent with informational efficiency. The COVID-19 outbreak negatively impacted informational efficiency. On the other hand, it seems that the Russia–Ukraine conflict has improved informational efficiency due to the European decisions to move to energy independence policies. The findings in this study suggest that the European carbon market is gradually attaining a state of financial maturity.

What limits the innovation efficiency in China's ICT industry? A two-stage dynamic network slacks-based measure approach

ABSTRACT Based on the innovation value chain theory, the innovation process of the information and communication technology (ICT) firms is not only decomposed into R&D and commercialisation activities, but also its dynamic characteristics should be included in the evaluation system. To seek the underlying reasons for the inefficiency, a two-stage dynamic network DEA model within the SBM structure has been applied to assess the innovation efficiency along with the R&D capability and commercialisation performance. The results show that the innovation efficiency of the Chinese ICT industry shows a continuous decline due to the constraints of firms’ R&D capabilities. Similarly, the heterogeneity exists within the ICT industry; The four sub-industries has its own strengths, but they also exhibit high market efficiency and low R&D efficiency. Private companies show a higher level of R&D and commercialisation than SOEs in both stages.

Distributed Reputation-Distance iterative auction system for Peer-To-Peer power trading

Peer-to-peer energy trading is a promising approach for decentralized electricity markets to achieve the decarbonization of power. In the trading process, the misbehavior of contracted users and power loss in network delivery can lead to transaction failure and higher delivery costs. This paper presents a distributed reputation-distance-driven iterative auction mechanism to promote energy trading among users who commit contracts well and among electrically closer peers. A reputation-distance index is built based on the historical trading performance and the electricity distance between users. The index is introduced into the auction matching process. Then, a self-adaption algorithm based on game theory is used to model the iterative auction to arrive at a Nash equilibrium. This paper also extends the combined factors framework to improve the flexibility and extensibility of the mechanism. A case study validates that the proposed decentralized mechanism can reduce network loss and peak loads, ensure power reliability, achieve high market efficiency, social welfare. Specifically, compared with the traditional model without considering reputation and distance, the proposed decentralized mechanism can reduce network loss by 50%, increase 7.1% the market share of users with good reputations, improve market efficiency by 10%, and increase social welfare by 7.69%.

Fixing feedback revision rules in online markets

AbstractFeedback withdrawal mechanisms in online markets aim to facilitate the resolution of conflicts during transactions. Yet, frequently used online feedback withdrawal rules are flawed and may backfire by inviting strategic transaction and feedback behavior. Our laboratory experiment shows how a small change in the design of feedback withdrawal rules, allowing unilateral rather than mutual withdrawal, can both reduce incentives for strategic gaming and improve coordination of expectations. This leads to less trading risk, more cooperation, and higher market efficiency.

Effect of Chinese pilots carbon emission trading scheme on enterprises' total factor productivity: The moderating role of government participation and carbon trading market efficiency

Based on the tightening regulation of carbon emissions, China has launched the pilot carbon emission trading scheme (CETS) since 2013. There is growing empirical evidence of the actual effect of CETS to promote enterprises' productivity which is characterized by total factor productivity (TFP). However, most studies ignored the further analysis of influence mechanisms. This paper aims to explore the impact of CETS on the TFP of enterprises and discuss the mediating role of government participation and carbon trading market efficiency. Using data from A-share listed enterprises from CETS-covered enterprises, this paper employed a combination of the propensity score matching (PSM) and difference-in-differences (DID) strategies and found that the CETS has a statistically significant positive impact on the TFP of enterprises, and the positive effect has been maintained for six years since its inception. The moderation analysis indicated that: (1) two dimensions of government participation in terms of the market incentive and government supervision significantly moderate the positive impact of CETS on TFP of enterprises; (2) two dimensions of carbon trading market efficiency in terms of the market scale and liquidity significantly moderates the positive impact of CETS on TFP of enterprises. In light of Chinese pilots CETS policy, the study highlights the important moderating roles of government participation and high carbon trading market efficiency on enterprise's TFP.

MULTIFRACTAL ANALYSIS OF COVID-19’S IMPACT ON CHINA’S STOCK MARKET

To examine the overall properties of the China’s stock market affected by the COVID-19 pandemic, we provide a comprehensive study of the multifractal properties across stock market sectors applying multifractal detrended fluctuation analysis (MF-DFA). We focus on intra-day 5[Formula: see text]min transaction data of 10 sectors in the Shanghai Stock Exchange, and the time-depended MF-DFA was also used to explore the dynamical evolution of the multifractal characterize for the overall period. We found that all sectors exhibit stronger multifractality and the weak market efficiency during the period of COVID-19, MHII performed best with the lower multifractal properties and higher market efficiency, three worse performers were ITII, TBII, and EII. While ITII, TBII, MCII, and UII were the four fastest recovering sectors from the gloom of the epidemic, with the plummeted multifractal intensity and the significantly increased market efficiency for the post-phase of the pandemic. The results based on the time-varying MF-DFA confirmed that the Chinese stock market is not only affected by the COVID-19 epidemic domestic but the impact of the US stock market crash in March was also transmitted to it, causing those industries sensitive to the market to fluctuate subsequently.

Choice of Rural Collective Construction Land Sales and Rental Markets at the Theoretical Framework of Williamson’s Transaction Costs: Evidence from Nanhai District, Guangdong Province, China

The rural collective construction land (RCCL) market imperfections, as well as informal regulations, may have contributed to high transaction costs. Well-functioning land markets play an essential role in land-use revenue, land-use efficiency, and land allocation efficiency for the rural collective economic organization (RCEO). Therefore, specific land-use patterns and detailed transaction rules for the land rental market and land sales market, respectively, make a contribution to a suitable market model with lower transaction costs and higher market efficiency. Through an empirical investigation in Nanhai District, Gungdong Province, this article builds on the theoretical framework of Williamson’s transaction costs, where the asset specificity, uncertainty, and transaction frequency have a significant influence on the RCCL market model choice. Probit model results show that (1) the RCEO prefers to choose the land sales market when the RCCL market has higher asset specificity so that the land sales market can counteract transaction costs by creating land revenue for long-term investments. Thus, the land sales market is a more appropriate choice when the trading land is a large area in a great location. (2) The rental market choice is more suitable for the RCCL market with higher transaction uncertainty. Therefore, the RCEO can detail transaction rules for the land sales and rental markets, respectively. We propose that local governments need to announce regulations for the longest contract period and the land development planning (floor area ratio, building density, floor height, etc.) of different land-use types (industrial land and commercial land) for the land sales market and the land rental market.

Randomized double auctions: gains from trade, trader roles, and price discovery

Experimental double-auction commodity markets are known to exhibit robust convergence to competitive equilibria under stable or cyclical supply and demand conditions, but little is known about their performance in truly random environments. We provide a comprehensive study of double auctions in a stochastic setting where the equilibrium prices, trading volumes and gains from trade are highly variable across periods, and with commodity traders who may buy or sell their goods depending on market conditions and their individual outcomes. We find that performance in this stochastic environment is sensitive to underlying market conditions. Efficiency is higher and convergence to the competitive equilibrium stronger when the potential gains from trade are high and when the equilibrium spans a wide range of quantities, implying a large number of marginal trades. Speculative re-trading is prevalent, especially among those who have little to gain under equilibrium pricing. Those with the largest expected gains typically earn far less than predicted, while those with little or no predicted earnings gain modestly from speculation, leading to some redistribution of gains from high to low expected earners. Excessive trading volumes are associated with negative efficiencies in markets with low gains from trade, but not in the high-gains markets, where zero-sum trading and re-trading appear to enforce efficiency and near-equilibrium pricing. Buyers earn more relative to their competitive equilibrium benchmark than sellers do. Introducing trader specialization leads to fewer trading errors and higher market efficiency, but it does not eliminate zero-sum trading and re-trading.

Electrical-distance driven peer-to-peer energy trading in a low-voltage network

Given the increasing penetration of distributed energy resources (DER) in low-voltage networks, peer-to-peer (P2P) energy trading has been proposed to facilitate DER integration into power systems. In this paper, we investigate P2P energy trading driven by the electrical distance between agents in a low-voltage network. Our market design considers the role of a distributed system operator (DSO) who determines the shortest path between agents, encoded in preference lists. The DSO submits the preference lists to the agents but does not intervene in the P2P matching process. Specifically, we propose two decentralised P2P market mechanisms that are induced by the relations in the preference lists. First, we introduce a stable-matching (SM) algorithm for matching agents and guaranteeing that no agents want to mutually deviate from the matching. Second, a mechanism based on a continuous double auction (CDA) is adopted for continually matching peers. The proposed mechanisms are tested on a UK low-voltage network. Simulation results show that the outcome of the proposed SM mechanism faces a trade-off between the stability of the matching and market efficiency, whereas the proposed CDA-based mechanism deviates from the stable outcome but can still capture the high market efficiency of the CDA. We show that a P2P market driven by electrical distance leads to reduced losses and line congestion in both mechanisms.

Supply chain efficiency of Tomato in Kathmandu valley

Past studies kept attention on the supply side or value chain aspects of tomato but not kept attention to the supply chain efficiency. To measure supply-side efficiencies in tomato sub-sector, this survey research organized an interview schedule with the randomly selected eighty households in Kirtipur, Chandragiri, Changunarayan, and Godawori municipalities of Kathmandu valley during April to June 2018 with semi structured questionnaire. Study estimated NRs 8,26,144/ha as net profit of tomato grown under tunnel was nearly 44% higher compared to open field condition. Further five types of marketing channels prevailed for tomato market were; channel first (producer-retailer-consumer), channel second (producer-wholesaler-retailer-consumer), channel third (produce-cooperative-retailer-consumer), channel fourth (producer-collector-wholesaler-retailer-consumer) and channel fifth (producer-wholesaler-processor-wholesaler-retailer-consumer) but most dominant was the fourth one since 45% of the fresh tomato supplied through it especially to save time and avoid all possible drudgery in the market. The marketing margin per kilogram of tomato was the lowest (NRs.16.55) in the third channel and the highest (NRs. 39.2) in the fifth channel while the highest market efficiency was 1.27 for the third channel. The producer’s share was highest for the third channel (66.33%) and lowest for fifth channel (39.88%). followed by 1st channel (63.72%) and lowest in 5th channel (39.88%). In order to promote a coordinated and most efficient supply chain, the study suggested the most dominant, low marketing margin and highly efficient supply channel for tomato so that tomato producers would get a high share. Rather than a private one, either group marketing or cooperatives are suggested to involve in fresh tomato marketing.

The application of the improved option parity arbitrage model in SSE 50ETF option

The SSE 50ETF option is China's first stock index option product launched in 2015. For a number of reasons, the options market can sometimes create arbitrage opportunities. Based on the theory of option parity arbitrage and taking into account the transaction costs, this paper explores effective options arbitrage strategies and practices them. Based on the theory of option parity arbitrage and taking into account the transaction costs, this paper establishes an effective option arbitrage strategy model and puts it into practice. The results show that there are indeed arbitrage opportunities in the market that exceed the risk-free rate of return, but there are not many such opportunities, and there is not much arbitrage space under many opportunities. This is not only the embodiment of high market efficiency, but also the result of taking various transaction costs into full consideration in this paper to ensure the effectiveness of arbitrage.

Market Efficiency under the Arrangement of Transaction Rules of the RCCL Market from the Supply-Side Perspective

This paper analyzes market efficiency under the formal transaction rules of the rural collective construction land (RCCL) market in Nanhai District. These transaction rules are not perfect, market uncertainty is strong, and transaction costs remain high. Transaction rules are an important means by which the government can intervene in the market, protect farmers’ land-use and income rights, and make the market more open, equitable, and just. Using a field survey (260 questionnaires) in Nanhai District, Guangdong Province, China, we estimated the impact of the openness, equity, and justice of transaction rules on the transaction costs of the RCCL market. Tobit models were constructed, and the results showed the following: (1) The overall level of market efficiency of the RCCL in Nanhai District is low. In different regions, the highest market efficiency is in Guicheng Street and the lowest is in Xiqiao Town. However, after excluding the influence of environmental and random factors, the overall level of market efficiency decreased, while the market efficiency of Lishui and Xiqiao Town increased. (2) The influencing factors of RCCL market efficiency under the arrangement of transaction rules are mainly related to the disclosure of information in the openness dimension, income distribution and supervision in the fairness dimension, and land-price formation in the fairness dimension. Therefore, we suggest that the lower the transaction cost of an RCCL market, the more active the market will be. It is very important to improve the transaction rules of the RCCL market, reduce the transaction cost, and improve the market efficiency. The transaction rules of the RCCL market should be further improved in the three dimensions of openness, equity, and justice. Our work provides insight into the improvement of market efficiency, which contributes to the development of the RCCL markets in other areas of China and worldwide.

Nonlinearity and efficiency dynamics of foreign exchange markets: evidence from multifractality and volatility of major exchange rates

This study investigates the efficiencies of the exchange markets for four major currencies—the euro (EUR), the pound (GBP), the Canadian dollar (CAD) and the Japanese yen (JPY)—from 2005 to 2019 by using multifractal detrended fluctuation analysis (MF-DFA). This study also investigates the causes of these efficiencies. Significant multifractal properties are demonstrated by the four markets, and long-range correlation and fat-tail distribution properties are the main causes. We calculate and compare the multifractal degrees in three subsamples, which are classified based on their temporal relation to two economic events: the 2008 financial crisis and the announcement by the Federal Reserve of its withdrawal from the quantitative easing policy in 2014. Empirical results suggest that multifractal properties exist at different levels in the subsamples, thus showing that these events affect foreign exchange market efficiencies in terms of statistics and the fractal market. The JPY exchange market has the fewest multifractal properties, thus indicating that this exchange market has the highest market efficiency among these four exchange markets. The empirical results have implications for the nonlinear mechanism and efficiency in foreign exchange markets, which may help investors effectively manage market risks and benefit a stable global economy.

Does the “ice-breaking” of South and North Korea affect the South Korean financial market?

Abstract In this paper, we use the multifractal detrended fluctuation analysis (MF-DFA) to study the difference in financial market of South Korea before and after South and North Korean leaders’ meeting on April 27, 2018. Hurst exponent, quality index, and multifractal spectrum are used to analyze the characteristics and stability of South Korean financial markets before and after the South and North Korean leaders’ meeting. We investigate the foreign exchange and stock markets in South Korea. The results show that multifractality is existed in all time intervals for both the markets, and the multifractal characteristics after the meeting are stronger, which indicates that both the markets before the meeting have a higher market efficiency, and decreased after the meeting. The meeting of South and North Korean leaders since April 27, 2018 is a possible interpretation for changes of efficiency in South Korean financial markets. To document the major source of multifractality, we shuffle and phase-randomize both the original series of two markets. The results show that both the long-range correlation and fat-tailed distribution contribute to multifractality for the time series before the meeting, and only fat-tailed distribution contributes to the multifractality of both times series after the meeting.

The Financial Impact of High-Performance Work Practices

High-performance work practices (HPWP) have been found to increase financial performance. Institutional theory suggests that this effect may be moderated by labor market institutions, such as labor market flexibility and labor market efficiency. We explore this relationship using a combined data set comprised of data on HPWP from ASSET4, financial and other company-level data from the Worldscope Database, and national institutional context data from the World Economic Forum’s Global Competitiveness Report. With an international sample of roughly 20,000 archival firm-year observations across a seven-year period, we use pooled OLS regression models with robust standard errors, clustered at the firm level. We find support for all predicted relationships except for a direct relationship between labor market flexibility and performance: Strong formal institutional pressure (low labor market flexibility) increases the positive financial impact of HPWP. Strong informal institutional pressure (high labor market efficiency) affects the financial performance of businesses directly and positively, and also indirectly by increasing the positive effect of HPWP on financial performance. We conclude that companies seeking the most financially-rewarding approach to human resource management (HRM) should engage in HPWP, encourage the local population to expect and value such practices (e.g., by promoting women’s rights), and, counterintuitively, encourage more government regulation of business around HRM practices.

High frequency trading, price discovery and market efficiency in the FTSE100

This study examines the role of high frequency trading in price discovery and efficiency in the FTSE100 index tick changes. We find that there is no random walk when investors extract information at a millisecond to a second.

Analysis and comparison of the multifractality and efficiency of Chinese stock market: Evidence from dynamics of major indexes in different boards

This paper examines the daily return series of five main indexes, including Shanghai Stock Exchange Composite Index(SSE), Shenzhen Stock Exchange Component Index(SZSE), Shanghai Shenzhen 300 Index(SHSE-SZSE300), Small and Medium Enterprise Board Index(SME), and ChiNext Index(ChiNext), in different boards of Chinese stock market from 2000 to 2018 by multifractal detrended fluctuation analysis (MF-DFA). The return series exhibit significant multifractal properties on the whole time scale and ChiNext has the lowest multifractal properties among the five indexes, indicating the highest market efficiency. The multifractal properties of the five indexes are due to both long-range correlation and fat-tail characteristics of non-Gaussian probability density function, and these two factors have different effects on the multifractality of five indexes. The crosscorrelations among different boards of Chinese stock market reflect the internal linkages between different boards. This paper also aims to compare the multifractality degrees of Main-Board, Small and Medium Enterprise Board(SME Board), and Growth Enterprises Market Board(GEM Board) in three sub-samples divided by the 2015 stock market crash and to study its effects on efficiency and risk of these boards in China’s stock market in each sub-sample, from the statistical and fractal perspectives, which has theoretical and practical significance in the application of Effective Market Hypothesis (EMH) in China’s stock market. The findings of the study may also provide important implications for further study on the dynamic mechanism and efficiency in stock market and help regulators and policymakers effectively control the market risk and achieve more effective resource allocation.

Complexity analysis of Brazilian agriculture and energy market

We investigate regularity and asynchrony in Brazilian energy (ethanol) and agriculture (sugar) market with focus on 2008 global economic crisis, using multiscale entropy method. We applied this method on sugar and ethanol return series for different temporal scales and in sliding windows to analyze temporal evolution of regularity of price dynamics. The results show that for both ethanol and sugar return series the entropy values increase after 2008 and 2012, indicating the increase of market efficiency in post-crisis periods. During the crisis periods sugar and ethanol return series present some deviations from the expected decreasing behavior for higher timescales, which is more evident for the ethanol. Overall, higher entropy values are found for ethanol series indicating less regularity and higher market efficiency in energy market.

Factors affecting the cost performance of transport infrastructure projects

The research objective of this paper is to identify the key factors that affect the cost performance of all types of transport infrastructure projects. The method used is the fuzzy set QUALITATIVE COMPARATIVE ANALYSIS (fs QCA), which allows identifying combinations of factors that affect the cost performance. Results show that 30% of the projects, which are on cost, are explained by a good institutional context, a high ability to save costs, high revenue robustness, high transport market efficiency and acceptability and a mostly public financing scheme as core conditions, combined with good governance as peripheral condition. Also, 29% of the projects, which are over cost, are explained by an unfavourable financial-economic context and mostly a private financing scheme as core conditions, combined with inadequate governance as a peripheral condition. In the on-cost analysis, financing scheme and governance appear to be ‘positive’, while in the over-cost analysis, they appear to be ‘negative’, thus acting consistently and showing their importance, since they contribute respectively to the achievement or not of the cost target. These results can provide useful lessons to academics, practitioners, policy makers and all other stakeholders involved in transport infrastructure projects.