Measures Of Price Volatility Research Articles

Vulnerability of a developing stock market to openness: One-way return and volatility transmissions

Drawing from two independent literature sources on vulnerability and stock price volatility, we show that the high magnitude and persistence of stock return volatility evident in the Nigerian Exchange Group (NGX) are, at least in part, indications of vulnerability to openness, which paves the way for the transmission of external shocks. Using a uniquely modified set of bivariate asymmetric GARCH models, we investigate one-way return and volatility transmissions from the international Brent oil market, natural gas markets, carbon markets, and naira-dollar exchange market to the NGX. Firstly, we document direct and asymmetric return and volatility transmissions from the Brent oil market to the NGX, denoting the fragile sensitivity of the NGX to international oil price turbulence. Secondly, we find a direct volatility transmission from natural gas markets to the NGX, implying an increasing reliance on natural gas exports by the Nigerian government. Thirdly, we document an inverse volatility transmission from carbon markets to the NGX, indicating Nigeria's negative reaction, as a major oil and gas producer, to increasing global sustainable production activities. Fourthly, the insignificant effect of the naira-dollar official exchange rate on volatility in the NGX demonstrates the spurious impression that Nigeria's exertion of control over the exchange rate is shielding the economy. In sum, our results confirm that the openness of the NGX makes it vulnerable to external shock transmissions from related external markets subsisting outside Nigeria. Our results are robust to an alternative estimation procedure that employs a different measure of price volatility from the three external markets.

Price volatility and speculative activities in futures commodity markets: A combination of combinations of p-values test

The present study investigates the relation between different measures of price volatility (conditional, historical and implied) and different types of speculation (short-run, long-run and excessive) in futures commodity markets for the period 2000–2015. To this purpose, we first use a pairwise Granger causality analysis for 28 individual commodities belonging to energy, agricultural and metal markets. Then, we implement a novel combination of combinations of p-values test to assess whether lead-lag relations exist between speculation and price volatility for broad categories of commodities. The results of both testing procedures show that the majority of significant relations refer to agricultural commodities and that tendentially short-run speculation leads volatility. This means that noise trading has a leading power on market volatility and scalpers are a class of volatility-drivers.

Effects of the agricultural commodity and the food price volatility on economic integration: an empirical assessment

This paper empirically examines the effects of the global agricultural commodity price volatility and the food price volatility on the level of economic integration over the period 1970–2012. The benchmark regressions are based on the data from 133 countries. The results indicate that the level of economic integration is negatively related to both the agricultural commodity price volatility and the food price volatility. In addition to this, the negative impacts of the agricultural commodity price volatility and the food price volatility on the level of economic integration are statistically significant in the middle- and the high-income countries. These findings remain robust when it considers different estimation techniques and different measures of price volatility, and deals with extreme cases.

Antecedents to consumer reference price orientation: an exploratory investigation

PurposeThis research paper aims to examine the relationships among the factors associated with changing shopping environment, consumer knowledge and reference price.Design/methodology/ approachA self administered online survey was used to collect data (final sample size was 265). After checking for non‐response bias, data was factor analyzed and checked for reliability and validity. Hypotheses were tested using structural Equation Modeling procedure.FindingsProduct search opportunity is associated with product and price knowledge. Price volatility is negatively associated with internal reference price. Further, consumers' price comparison propensity and price knowledge positively influence external reference price. Finally, price volatility has a significant negative influence on consumer knowledge and IRP orientation.Research limitations/implicationsThe sampling frame is a major limitation, in addition to not including variables such as product type and other measures of price volatility. Future research should expand the sampling frame and include other variables as well as other aspects of price volatility.Practical implicationsThese findings provide insights into advertised price claims in the information rich internet age. Managers also benefit from the finding that the internet, particularly price comparison, influences external reference price. Consequently, managers must be cautious with their advertised price claims and not exaggerate the value of offerings or cost savings too much.Originality/valueThis topic is important because retailers extensively use reference price or price comparison to increase consumers' perception of the product value. However, not much research attention has been given to this topic.

A Front Office and Risk Management Tool for Pricing OTC 
 Derivatives

In this paper we propose a proxy for the implied volatility of OTC equity derivatives. Our methodology rests on two pillars: (1) we exploit the information embedded in the price of the underlying asset by combining two measures of price volatility (2) we pool the stocks by sector in order to make a better use of their common features. After estimating a relationship between implied volatility of traded options and traditional risk measures using a set of panels, we are able to test the model performance both in sample and out of sample. We show that using our volatility measure leads to considerably more accurate pricing results than those obtained using the RiskMetrics only.

Crude oil prices between 1985 and 1994: how volatile in relation to other commodities?

It is said that since the mid-1980s oil has become a commodity like others, and exhibits noticeable price volatility. How then do oil price fluctuations compare with those of other commodities? To address this question, we examine three aspects of price volatility for two marker crude oils and nine other widely traded commodities. Our results suggest that between 1985 and 1994 crude oil is in the upper end of the range of all measures of price volatility studied, but is not clearly beyond the bounds set by other commodities. Implications of this result for the oil industry are discussed.