Lower Price Volatility Research Articles

Socioeconomic and technical feasibility of cajuput oil (Melaleuca cajuput Powell) distillation business

Abstract The distillation of cajuput leaves into cajuput oil is a potential business for farmers. However, farmers and distillers still encounter problems that lead to failures in developing the business, such as low yield, price volatility, and technical issues related to agroclimatology suitability, good cultivation, and distillation process. This research was conducted to obtain the socioeconomic and technical feasibility of the cajuput oil business and the information needed to support its sustainability. The research parameters used in the economic aspect include profit level analysis and Net B/C. The financial element used NPV, IRR, Payback Period, sensitivity analysis, and the non-financial aspect, including the employment, suitability of cultivated land, and cajuput oil distillation. The financial analysis results obtained a profit of IDR 2,254,911,000, NPV of IDR 2,478,763,489, Payback Period of 4.6 years, and Net B/C of 8.02. However, the decrease of 40% in yield and increase of 20% in raw material prices did not result in the company’s loss. Socially, the potential for on-farm and off-farm labor absorption reaches 2,500 workers/business unit. The determining factor for the success of the cajuput oil business is land suitability.

Vulnerability assessment of food imports—Conceptual framework and empirical application to the case of Switzerland

The world's food supply is becoming increasingly vulnerable because of rising political and climatic crises. To identify food supply vulnerabilities at an early stage, this paper proposes a multifactorial and standardized import vulnerability index (IVI). The IVI encompasses (i) an exporter vulnerability index (EVI) consisting of four exporter-specific factors and (ii) a product vulnerability index (PVI) consisting of three product-specific factors. We applied a robust principal component analysis to derive weights to combine these individual factors into a standardized IVI. The IVI was applied to food import-dependent Switzerland from 2014 to 2019 as an empirical case study. The results showed that a large share of Swiss food imports mainly originated from neighboring countries, indicating a very low to moderate EVI. Regarding the PVI, only product groups that were imported from a small number of countries (e.g., oilseeds) or that showed a low self-sufficiency ratio (e.g., coffee) or high price volatility (e.g., meat) exhibited a high value. Moreover, the findings demonstrate that the IVI showed neither large fluctuations nor a decreasing or increasing trend. With regular updates, the proposed indicator can become a valuable monitoring tool for food supply security.

Comercialização nas feiras da agricultura familiar: um estudo de caso sobre a estrutura desses canais

Abstract Fairs of family farming on agroecological bases are direct sales channels of great importance for local supply. Thus, it is essential to devise ways to evaluate and monitor their evolution. In the present case study, a methodology was applied to analyze commercialization at the Family Agriculture Fair (FAF) held at the Seropédica Campus of the Federal Rural University of Rio de Janeiro (UFRRJ). The objective of this study was to analyze gross sales and the seasonality of the supply and demand of products in the FAF, relate these factors to agroecological production in the Baixada Fluminense, and both demonstrate and understand the relationships among the supply, prices and sales of products. A literature review was conducted on the short circuit and commercialization forms of family farming, and data from 1,664 marketing reports, self-completed by market traders from 2017 to 2019, were analyzed. The results allow us to conclude that (i) the stallholders farmers at FAF are not mere price takers; (ii) gross sales are influenced by the seasonality of demand and supply; (iii) the effects of seasonality have an impact on supply and sales but are reduced with low price volatility; and (iv) the offers are diversified, and the items have close substitutes within the same product category.

La traslación del aumento de los costes de producción a los precios de venta de las empresas no financieras en 2022

Rationale The surge in energy and other commodity prices in 2021 H2 and a significant part of 2022 has led to firms’ costs increasing considerably. This article analyses how this rise in costs has been passed through to selling prices and what impact it has had on firms’ output, wages, employment and unit labour costs. Takeaways •On average, firms passed through a significant proportion of production cost increases to selling prices in 2022, albeit with a high degree of heterogeneity across sectors. •In sectors that have historically seen more rigid pricing (proxied by lower price volatility), pass-through of rising costs to selling prices has been slower. •Rising input prices directly cause selling prices and unit labour costs to grow. The latter is a consequence of the negative effect on labour productivity, owing to the adverse impact on output and the lack of an impact on personnel costs. •In any case, these direct effects, which are stronger in the sectors most exposed to this shock, do not account for the indirect (general equilibrium) effects that influence all sectors.

Energy price volatility affects decisions to purchase energy using capital: Motor vehicles

I investigate how energy price volatility affects consumer decisions to purchase durable, energy using capital, motor vehicles. A cointegrating vector autoregression (CVAR) model indicates that; (1) high price volatility reduces the negative effect of motor gasoline prices on monthly purchases of motor vehicles, (2) consumers consider passenger cars to be an inferior good and this drives the substitution of light trucks for passenger cars, (3) the own price elasticity of demand for vehicles is about −0.3, which is consistent with estimates used to justify The Safer Affordable Fuel-Efficient (SAFE) Vehicles Rule for Models Years 2021–2026 Passenger Cars and Light Trucks. Simulating the CVAR model indicates that implementing an energy tax rapidly or during a period of low price volatility has a greater effect on motor vehicle sales than implementing the same tax slowly or during a period of high price volatility. Together these results suggest that more research should focus on how energy price volatility affects consumer decisions to purchase energy using capital.

Behavior and Consequences of COVID-19-related Voluntary Disclosure: Evidence from Pharmaceutical Companies

With the explosion of COVID-19, a number of publicly traded companies in the pharmaceutical industry have thrown themselves into the development of novel coronavirus vaccines and therapeutics, and have voluntarily disclosed information about the development process. In this paper, six companies with different quality ratings of information disclosure in the pharmaceutical industry (refer to the results of the 2019 Shenzhen Stock Exchange quality assessment of information disclosure) were selected to explore the behavior and consequences of voluntary disclosure of information by listed companies in the pharmaceutical industry in China. The results show that voluntary disclosure of positive news will have a positive impact on the company’s share price. Companies with high disclosure quality ratings have lower price volatility before and after disclosure. Low-rated companies have volatile stock prices before and after disclosure, and the price gains are unsustainable for long periods of time, even falling back to lower levels than they were before disclosure. It is not the case that companies’ share prices do not fluctuate due to poor disclosure appraisal results, but rather they may cause a larger market reaction for the purpose of misleading investors. To some extent, this paper enriches the research on voluntary information disclosure of listed companies and will make listed companies understand the consequences of voluntary information disclosure on COVID-19-related issues, provide evidence for relevant supervisory authorities to regulate voluntary information disclosure further, and create a better voluntary information disclosure environment for China’s stock market.

The economic cost of hydropower environmental constraints under decreasing price volatility

AbstractHydropower operation optimization in river systems involves market prices, technological constraints affecting the efficiency of turbines, and flow constraints set by an environmental regulator. Comprehensive environmental flow regulation includes the ecological state of a river system and the impact on hydropower value. This article studies the impacts of environmental constraints on hydropower value under varying electricity price volatility scenarios. The effects of maximum flow, minimum flow, and flow ramping constraints are studied analytically and quantitatively. We frame the lost hydropower value as the economic cost of these constraints. We show that the economic costs of the environmental constraints decrease with lower price volatility. We use a marginal cost and marginal benefit framework to illustrate that the optimal flow constraint should be tightened if the price volatility decreases in the electricity market. Our approach illustrates how electricity price volatility influences the analysis of optimal environmental constraints in regulated river systems. Finally, we analyse the effect of different environmental flow release options in fishways on the economic cost of a fishway. If the hydropower operator can optimize the fishway flow allocation, then the loss in hydropower value is lower than under a constant fishway flow.

Asset pricing with a financial sector

AbstractIn this paper, we study the quantitative asset pricing implications of a financial intermediary that faces a leverage constraint. We use a recursive method to construct the global solution that accounts for occasionally binding constraints. Quantitatively, our model generates a high and countercyclical equity premium, a low and smooth risk‐free interest rate, and a procyclical and persistent price–dividend ratio, despite an independently and identically distributed consumption growth process and a moderate risk aversion of 10. As a distinct prediction from our model, we find that when the intermediary is financially constrained, the interest rate spread between interbank and household loans spikes. This pattern is consistent with the empirical evidence that high TED spread coincides with low stock price and high stock market volatility.

Price Volatility of Ornamental Plants in Batu Municipality

The imbalance between supply and demand of ornamental plants in the market cause fluctuations that lead to price volatility. This study aimed to analyze the price volatility of ornamental plants with high economic value, such as orchids, adenium, aglaonema, anthurium, and palm. This study also analyzed the long-term and short-term relationship between the production and prices of these ornamental plants. The data used were the productions and prices of orchid, adenium, aglaonema, anthurium, and palm at the producer level from 2012 to 2020 obtained from the Agriculture Office of Batu Municipality. Volatility analysis was carried out using the ARCH/GARCH method, the long-term relationship was analyzed using the Johansen cointegration test, and the short-term relationship was carried out using the Error Correction model. The results of volatility analysis showed that all the ornamental plants studied had low price volatility. In addition, the productions and prices of the ornamental plants were cointegrated in the long run, but only the orchid had a short-term relationship with an adjustment period of 2.6 months.

Oil price volatility and corporate cash holding

Since it is believed that oil price movements highly influence economic growth in oil-rich countries, this study examines the influence of oil price volatility on corporate cash holdings and adjustment speed and tests whether firms in the petrochemical industry are affected differently from firms in other industries. This study addresses these research questions using static and dynamic system GMM models on a sample of non-financial firms listed in Gulf Cooperation Council (GCC) countries between 2005 and 2019. The results of this study assert that oil price volatility has a significant impact on cash-holding decisions. Specifically, the study displays a positive and significant relationship between oil price volatility and firms' cash holdings. Again, the study discovers that firms adjust towards their target cash-holding level faster during high oil price volatility than during periods of low oil price volatility. Consistent with the trade-off theory, the study unveils that precautionary motive is a crucial factor motivating firms to retain large amounts of cash. The results also showed that firms in the petrochemical industry have a higher cash-holding ratio than firms in other industries. These results support the view that oil price volatility exposes oil-related industries to a higher uncertainty than other industries. Moreover, the findings are robust to an alternative measure of oil price volatility and model specifications.

Corruption risk and stock market effects: Evidence from the defence industry

Motivated by the finding that corruption is rampant in the defence sector globally, we examine the stock market effects of firm-level corruption risk disclosure in the defence industry. We find that the disclosure of corruption risk scores have information content. Our multivariate tests show that the market reacts negatively to firms that have low corruption risk. Our study supports the ‘greasing the wheels’ hypothesis which suggests that corruption is a cost of doing business. Further, companies with low corruption risk experience lower stock price volatility after the disclosure of corruption risk scores. Finally, we also find that the disclosure of lower corruption risk is associated with an increase in firm-level market liquidity.

Scharding on Non-Centrally Regulated Currencies and Price Volatility

Tobey Scharding claims that Bitcoin’s lack of a central regulator makes it open to price fluctuations. I argue that a currency not having a central regulator does not necessitate it being more volatile than centrally regulated currencies. First, I argue that Scharding’s reason for suggesting that Bitcoin is open to price fluctuations – its potential to face legal restrictions – is also faced by centrally regulated currencies. Second, I use silver in London as an example of a non-centrally regulated currency with relatively low price volatility when compared to other centrally regulated currencies showing that non-centrally regulated currencies are not necessarily more volatile.

GICS and the Real Estate Reclassification Revolution

Morgan Stanley Capital International and Standard & Poor’s Dow Jones established the GICS (Global Industry Classification System) in 1999 as the first international stock classification system. On November 10, 2014, they announced that real estate would be the first new sector added to the classification system. In this study, we analyze the impacts of the GICS reclassification on price, liquidity, and volatility for firms in the real estate sector, using a large sample for the first time. Using various methods, we find higher price, more active trading, and lower price volatility in the new sector, when it was launched on September 16, 2016.

Cryptocurrency price volatility and investor attention

This study examines the relationship between the price volatility of cryptocurrencies and investor attention. Using a large dataset of approximately 25 million tweets about 23 of the largest cryptocurrencies, I show that investor attention, as proxied by the number of tweets, retweets, and favorites, corresponds to greater cryptocurrency price volatility. I use a Vector Autoregression (VAR) framework to show that investor attention predicts future price volatility. Additionally, days on which investors are “distracted” because of attention-grabbing events correspond to lower price volatility in cryptocurrency markets. The results suggest that increased investor attention to cryptocurrencies has the undesirable effect of increasing price volatility.

How the fiscal and monetary policy uncertainty of China respond to global oil price volatility: A multi-regime-on-scale approach

In the beginning of 2020, significant economic recession and financial shocks directly caused by the oil price war and the outbreak of COVID-19 epidemic appear, making the connection between oil price and policy uncertainty a significant topic, especially for China, the largest emerging market and second largest oil consumer. With the monthly data of WTI oil price, China's fiscal policy uncertainty (FPU) index and monetary policy uncertainty (MPU) index from January 2000 to August 2020, this paper detailedly investigates how China's FPU and MPU respond to global oil price volatility in different oil price volatility regimes and time scales. The empirical results expose that: (1) China's FPU and MPU volatility would positively respond to WTI volatility in the low oil price volatility regime, while in the high oil price volatility regime, the FPU response is insignificant and MPU response is only significant and negative in the scale 3–4 (8–16 and 16–32 months); (2) Only in the middle-long term of low oil price volatility regime will the WTI volatility significantly respond to China's FPU and MPU volatility; and (3) The FPU and MPU volatility responses are more violent in high oil price volatility regime. Our diversified findings can be important reference for diversified market participants including policy uncertainty researchers, government policy-makers and global investors interested in the Chinese market.

The Public‐Sector Cost of Capital: An Empirical Test of Peltzman’s Conjecture*

AbstractI test whether public‐sector ownership reduces conventional measures of market risk by using an event exogenous to the air transportation sector. I find that government‐sponsored enterprises show lower price volatility than non‐government‐sponsored enterprises, arguably due to the government’s ability to buffer government‐sponsored enterprises against demand and cost shocks. The upshot for jurisdictions with fiscal space is that cash flows under public‐sector provision should be discounted at a lower rate than cash flows under private‐sector provision.

Assessing the Effects of Seasonal Tariff‐rate Quotas on Vegetable Prices in Switzerland

AbstractCausal estimation of the short‐term effects of tariff‐rate quotas (TRQs) on vegetable producer prices is hampered by the large variety and different growing seasons of vegetables and is therefore rarely performed. We quantify the effects of Swiss seasonal TRQs on domestic producer prices of a variety of vegetables based on a difference‐in‐differences estimation using a novel dataset of weekly producer prices for Switzerland and neighbouring countries. We find that TRQs increase prices of most vegetables by more than 20% above the prices in neighbouring countries during the main harvest time for most vegetables and even more than 50% for some vegetables. The effects are stronger for more perishable vegetables and for conventionally produced ones compared with organic vegetables. However, we do not find clear‐cut effects of TRQs on the week‐to‐week price volatility of vegetables although the overall lower price volatility in Switzerland compared with neighbouring countries might be a result of the TRQ system in place.

Bond Price Fragility and the Structure of the Mutual Fund Industry

We show that mutual funds with a large share of a bond issue sell their holdings of that issue to a lower extent when they experience redemptions, arguably because they attempt to avoid a drop in the bond price and the consequent negative feedback effects on the unsold part of their position. As a consequence, bond issues with more concentrated ownership experience higher returns during periods of turmoil and have lower price volatility. We provide evidence that the stabilizing trading of bond funds with a large share of an outstanding issue can help explain how the intervention of the Fed in the corporate bond market through the Secondary Market Corporate Credit Facility quickly stabilized both eligible and ineligible bonds.

Measuring the impact of COVID-19 on stock prices and profits in the food supply chain.

The coronavirus disease 2019 pandemic has shocked financial and commodity markets around the world. We are analyzing stock prices and information from financial reports to examine the impact of the pandemic on stock price volatility and profits of companies in the food supply chain. We use a data set of 71 major listed companies in the food value chain from stock indices in the US, Japan, and Europe. We calculate the annualized volatility per sector, screen the contents of the reports for stated effects of the pandemic on profits, and analyze stock price reactions in four different phases of the pandemic. The results show that stock markets have reacted with an increased price volatility. Manufacturers of fertilizers and agrochemicals as well as food distributors show particularly high volatilities in their stock prices. Low price volatility was observed in the stocks of food retailers. This pattern is also reflected in the profits of companies published in financial reports. Our regression analyses indicate that stocks of more profitable companies exhibited higher cumulative returns during the outbreak. In the phases thereafter, riskier stocks received higher discounts on returns. EconLit citations: G01, G12, E44, Q01.

Institutions, regulations and initial coin offerings: An international perspective

Investors and policy-makers still know little about the dynamics of initial coin offerings (ICOs) as a funding mechanism. Investors’ decisions to contribute to ICOs are essentially a leap of faith given ICOs’ decentralized nature coupled with the lack of regulatory oversight. Drawing on psychological theories on cognitive bias, we propose that one heuristic by which investors assess an ICO’s trustworthiness is the reputation of the ICO’s country of origin, which we proxy as institutional strength. Examining 2077 ICOs from 105 countries between 2015 and 2018, we find that ICOs originating in countries with stronger institutions are more likely to be traded, raise more funds, and experience lower price volatility. This relationship is particularly relevant for countries with no or few ICO regulations. Our results show that when faced with fewer regulations and higher uncertainty, investors use an ICO’s country of origin as a heuristic for the ICO’s unobserved trustworthiness.