Speculative Activity Research Articles

Measuring the degree of speculation in the residential housing market: A spatial econometric model and its application in China

Since the housing marketization reform, China's real estate industry has rapidly developed and commercial housing prices have risen sharply. The main reason for this is the speculative demand for housing, which breaks the equilibrium of supply and demand, leading to housing prices deviating from their basic value. The housing market in China is not isolated by province, since speculative behavior in one part of the country can affect other regions. This paper analyzes the spatial relevance in housing prices among different provinces in China by calculating Moran's I index and by measuring the speculation degree through spatial autoregressive model (SAR), a spatial economic model combined with a spatial weight matrix. For commercial housing speculation degree measurement and comparison, 31 provinces in China were chosen along with the following variables: housing prices, personal disposable income, one-year personal housing mortgage rates, housing prices growing rates, the rent, amount of residential investment, and the construction areas of houses. The results show that China's housing prices have a clear interaction among the selected cities, and that housing speculation behavior also influences each other in space. Although there are speculation activities in China, from a global perspective the degree of speculation, which varies from region to region, is still just within internationally acceptable limits. Although there are some regions with high degrees of housing speculation, the speculation is not yet China-wide.

Identifying Corporate Speculation Reading Public Disclosures Why Firms Speculate

To date, readers of financial statements are not able to identify speculation as risk-increasing activity from public corporate disclosures. We examine a unique regulatory environment, in which the regulating authority recommends additional FX-disclosures in excess of prevailing reporting standards and find that these optional publications enable, henceforth, the identification of speculative activities. Further, we help solve the puzzle of the determinants of speculation and find that frequent speculators are smaller, have more growth opportunities and possess lower internal resources, which indicates unprecedented empirical evidence for the convexity theories of Campbell & Kracaw (1999) and Adam, Dasgupta, & Titman (2007). Our findings substantiate the significance of an extended reporting with optional disclosures that might unlock numerous benefits for both share- and stakeholders.

EL ESTADO Y EL CAPITAL FINANCIERO EN ARGENTINA ENTRE 2002 Y 2012. LA DEUDA PÚBLICA

In order to elucidate the role of financial capital in the dynamics of the Argentine economy between 2002 and 2012, this paper analyzes several aspects of the relationship between financial capital and the State. “Debt reduction” partially dismantled public debt as the backbone of speculative activity, although it maintained its profitability and priority position in economic policy decision-making. On the other hand, financial regulation contributed to keeping the mechanism of debt and did not significantly alter the central role played by financial capital.

Особливості формування раціональної поведінки учасників фінансового ринку

The main premise of the hypothesis of an efficient market is the assumption that the market participants behave rationally, which is, accordingly, the basis for the development of other theories, but in practice, it is much more difficult to apply when it comes to monitoring investors' behavior. It should be noted that, according to the theory, investors are characterized by homogeneity, and it is assumed that all market participants are guided by the rationality of using all the information received, having the same tools for assessing the current and future situation. From the assumption of the rationality of behavior, it follows from the need to recognize the assumption of the rationality of expectations (predictions), since participants in the financial market function rationally, therefore, they should also rationally predict the future. Specification of the model of rational expectations of the subject corresponds to the principles of the process of specification of predictive models (predictions). Depending on the choice of the dependent variable (endogenous), the choice of independent (exogenous) variables is performed, as well as the nature of the model. In practice, very different models are often used simultaneously: from classical linear models with one-level or multi-level structure to complex multi-dimensional models of random variables. In the most general form among the explanatory variables one can distinguish: a dependent variable (endogenous) taken with a one-time time advance in predictive models; Dependent variable (endogenous) during different time periods in dynamic regression models; Exogenous variables affecting or correlated with a dependent variable, in structural causation models or symptomatic ones. The rational expectation hypothesis implies that all market participants are guided by rationality in their actions and capable of rational predictions based on the same amount of available information, using the same scheme of considerations or formal model, and, consequently, obtain the same result. Consequently, the hypothesis of an efficient market over a long period of time was the dominant concept that explained the behavior of financial markets, shaped the relation to the possibility of forecasting financial markets and served as a methodological basis for the development of tools for forecasting in financial markets. However, current trends in the modification of financial markets functioning mechanisms have demonstrated accumulation of the critical level of systemic risk, under conditions of underestimation of moral risks by market participants, their high speculative activity and asymmetry of information, rationality of their behavior and expectations.

A statistical study of the short‐ and long‐term drivers of crude oil prices

AbstractThe paper statistically examines whether the fluctuations in crude oil prices over the last 10 years are due to speculative activities or changes in market fundamentals. Following a brief review of the oil market developments and speculative activities in recent years, the paper employs two multivariate time series models—the vector autoregressive model (VAR) and the vector error correction model (VECM)—to evaluate observed fluctuations in crude oil prices. The VAR and its granger test allow for the detection of factors responsible for fluctuations in crude oil prices, while the VECM tests the co‐integration of the variables. The VAR includes both fundamental and non‐fundamental variables as covariates. The VECM results show that in both the short‐ and long‐term the significant variables of the VAR model are co‐integrated. The empirical results confirm that in the long‐term the fundamentals are the main drivers of crude oil prices. However, in the short term, both fundamentals and speculative positions in the oil futures market differentially cause fluctuations in crude oil prices. The effect of the fundamentals is more than double in the long term, when compared to the short‐term.

Does speculation in the oil market drive investor herding in emerging stock markets?

This paper examines whether the time variation in the level of investor herding in the stock markets of major oil exporting nations relates to speculation and volatility in the global oil market. We find that speculative activities in the oil market, rather than oil price movements, are positively correlated with anti-herding in the stock markets of major exporters. We argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market. While this pattern largely holds during calm (low volatility) market periods, we also find that significant herd behavior takes place during high volatility (or crisis) periods. The findings suggest that policy makers who are concerned about stability in their stock markets should monitor measures of speculative activities in the energy market in order to model and monitor volatility and/or risk transmissions into their markets.

International Real Estate Review

The quantitative easing policy adopted by the advanced economies since 2009 has led to an abundance in global liquidity. In the same period, the ASEAN-5 economies (Indonesia, Malaysia, the Philippines, Singapore and Thailand) have recorded strong capital inflows, particularly portfolio inflows. The asset prices, in particular, the house prices of these economies, have also experienced excess buoyancy. In this paper, the relationships among global liquidity, house prices and capital flows are studied. Empirically, capital inflows have a positive effect on the residential house prices of Indonesia, Malaysia, the Philippines and Singapore. After accounting for their own domestic demand (by using real GDP growth as a proxy), the capital inflows still have a positive impact in Indonesia and Singapore. The authorities of these economies have implemented similar macroprudential measures to safeguard financial stability and cool down speculative activities. The effectiveness of the measures is mainly the reduction in the transaction volume.

Accumulating through food crisis? Farmers, commodity traders and the distributional politics of financialization

ABSTRACTThis paper considers the domestic and international ramifications of financialization and grain price instability in the US agri-food sector. It finds that during the recent period of high and volatile prices, the average income of large-scale farms reached the earnings threshold of the top percentile of US households, and agricultural commodity traders markedly outperformed other corporate groups. In contrast, small-scale farms, particularly those involved in cattle and wheat production, have struggled to manage the uncertainty brought by price tumult. The paper goes on to examine the role that these uneven distributional dynamics play in debates around how hedging and speculation should be defined and regulated in the wake of the food crisis of 2007–08. It shows that a coalition of small-scale farmers has actively pushed for a far-reaching definition of speculation and concomitantly wide-ranging curbs on what they deem to be speculative activity. Conversely, the major commodity traders and a plurality of organizations representing large-scale grain producers have called for a narrower interpretation of speculation which leaves the extant regulatory regime largely in place. With these insights, I suggest that financialization and associated price volatility tend to reinforce inequality in rural America while possibly exacerbating social instability and hardship abroad.

Turbulent times: Uncovering the origins of US natural gas price fluctuations since deregulation

In this paper, we investigate supply and demand shocks in the U.S. natural gas market, focusing on how the effects of these shocks have changed over time. Using a sign-identified structural vector autoregression (SVAR) model that allows for both time-varying parameters and stochastic volatility, we find that supply and demand shocks are the main drivers of natural gas price fluctuations during 1993–2015, with speculative activities playing a minor role during a portion of the sample period. We also find that after the recent shale boom, the supply and demand of natural gas in the US have become somewhat more elastic. An examination of several volatile episodes during the sample period suggest that though natural gas price fluctuations are predominately determined by fundamental factors, supply and demand shocks have significantly evolved over time.

Potential Impacts of the Planned Market Stability Reserve on Speculatorss Behavior in the EU Emissions Trading System

In early 2019, the market stability reserve (MSR), a volume-based regulatory regime for tackling the surplus in emission allowances (EUAs) in the EU Emissions Trading System (EU ETS), will enter into force. The MSR will take EUAs out of the market when the amount of banked and thus unused EUAs exceeds an upper threshold and will release EUAs into the market when the amount of banked EUAs falls under a lower threshold. Over the last years, the design of the MSR has been the topic of controversial discussion. Among other concerns, scientists are afraid that the MSR may increase price volatility and uncertainty, which in turn may enhance speculative activity. In this paper we analyze the effect of the MSR on the behavior of a speculator with market power. For this purpose, the interlinked electricity and carbon market is modeled with an open-source agent-based model, which is expanded by adding the banking behavior of the speculator. The results indicate that with the MSR mechanism being active in the EU ETS, both speculative banking activity and speculator profit increase. We further test the hypothesis that the MSR mechanism itself could be used by a speculator to increase his returns, leading to the conclusion that while this is theoretically possible, it is unlikely to actually happen. The results obtained can help to understand future behavior of market participants in the EU ETS.

Macroeconomic environment of bull markets in Malaysia

PurposeThe aim of this paper is to investigate the circumstances and events surrounding bull runs in Malaysia from 1990 to 2015. The research question posed here is: What were the historical circumstances and events surrounding bull runs in Malaysia?Design/methodology/approachCase study approach is used. This research resorts to multiple resources such as academic journals, macroeconomic statistics, official publications, stock broker reports, annual reports of listed companies as well as articles from regional newspaper and magazines.FindingsThe results show that the bull runs in recent years happened with lower volatility after the Asian Financial Crisis. It can be conjectured that the specific environment in which the bull runs occurred can be somewhat different from period to period. Based on stylised facts and historical evidence, this study identified five major themes that were behind the bull markets in Malaysia, which include capital flow, spill-over effect from global development, change in ratings, speculative activities and investors’ sentiment, as well as government policies announcement. The findings have practical implications for investors who seek to understand and predict stock market boom through lessons learned from historical perspective.Research limitations/implicationsThe analysis in this paper may have limitation, as the facts gathered are from secondary sources, which sources are derived from the observations of others. Therefore, secondary sources inevitably reflect the assumptions and biases of the people who wrote them. As the availability of data is limited by factors that are not under the control of the researcher, results may likely be limited in their generalizability. This case study does not attempt to establish causality or relationship between macroeconomic variables and stock prices. Further studies would therefore be necessary to examine the evolving nature of the relationship that may exist.Practical implicationsThe findings of this study have significant policy implications for Malaysia, and also for other emerging markets. First, a prudent macroeconomic measures and concerted stance on fiscal, monetary and exchange rate policy to improve fundamentals and smooth volatility in the business cycle is vital for a bullish stock market. Second, the stock market derived significant benefits from openness to foreign capital and its resilience can be enhanced by fostering deeper and more liquid capital markets with diverse institutional investors, including domestic and foreign participants. Third, the environment that affects a stock market could be related to the political, regulatory and global environments. Malaysia stock market is susceptible to extreme events, capital flow, speculative activities and government interventions. Having a good grasp of which themes are operative at any point in time is central to investment decision making. Continuous rebalancing of portfolios based on information arriving in the market is also vital.Originality/valuePrevious studies on Malaysian stock market movement focus on quantitative analysis based on macroeconomic variable. This research is original in terms of giving background information and additional context to explain phenomena missed by quantitative research methods. The construction of quantitative model is also constraint by the measurability of non-quantitative data and data with different frequencies (such as annual, quarterly and monthly data). Therefore, it is important to contemplate the importance of non-quantitative factors, such as political, legal, regulatory and governance considerations. This study seeks to fill in this void.

Transfer of development rights and urban land markets

Transfer of development rights (TDR) is seen as an important tool for land use planning, in large part because it leverages market mechanisms. TDR extends market concepts used primarily in emissions trading programs to the arena of land use. However, with the exception of a handful of success stories, TDR programs generate few transfers. Although researchers generally attribute the weak performance of TDR to program design flaws, this study demonstrates that the unique conditions presented by urban land markets explain, in part, why TDR programs often underperform. I present a case study of a TDR program in Sarasota, Florida, to address two questions. First, what attributes of urban land markets may impact TDR program design and outcomes? Second, is TDR a planning tool that can achieve desired planning goals, given the conditions of land markets? I find that the unique features of land markets—specifically (1) the sensitivity of development to timing; (2) imperfect information, uncertainty, and speculative activity; (3) unique features of land; (4) the limited number of buyers and sellers; and (5) the development orientation of urban political and planning institutions—distort the market for transferable development rights. The Sarasota case demonstrates how local land market characteristics contributed to a set of incremental program design and implementation decisions that, in sum, amounted to significant departures from fundamental program principles and mechanisms. These resulted in imperfect market conditions and rendered the TDR program ineffective.

Influence of Creative Accounting on Reliability and Objectivity of Financial Reporting (Factors Responsible For Adoption of Creative Accounting Practices in Pakistan).

Purpose: Intellectual modifications (creative accounting) in financial reports to make them attractive are very emerging and vastly accepted practices around the globe. But these practices are deceiving and unethical. This study aims to explore the factors encourage the adoption of creative accounting practices like agency problem, corporate governance, company's ethical value, company's future orientation etc. as well as how these practices affect the reliability and objectivity of financial reporting.
 Methodology: This research is an empirical research and data is collected from accounting and management professionals of manufacturing industry of Punjab via structured questionnaire. Convenient sampling technique used to select sample size and SPSS software used for data analysis.
 Findings: Results of this research explored the positive association between agency problem and creative accounting while corporate governance, company's ethical value, company's future orientation have negative impact on creative accounting. It is also verified that creative accounting has significant negative impact on reliability as well as objectivity of financial reporting.
 Implications: Results of this study will assist the company's management how to control adverse influence of these manipulative activities on reliability and objectivity of financial reports as well as provide literacy to investors to be aware of such extensively using speculative activities.
 Limitations: Limitations of this study are that it is only considering few factors as well as manufacturing industry of Punjab.

When Will Occur the Crude Oil Bubbles?

In this paper, we apply a recursive unit root test to investigate whether there exist multiple bubbles in crude oil price. The method is best suited for a practical implementation of a time series and delivers a consistent date-stamping strategy for the origination and termination of multiple bubbles. The empirical result indicates that there exist six bubbles during 1986–2016 when the oil price deviate from its intrinsic value based on market fundamentals. Specifically, oil price contains the fundamentals and bubble components. The dates of the bubbles correspond to specific events in the politics and financial markets. The authorities should actively fight speculative bubbles or just observe their evolutions and speculation activities may decrease, which is favour of the stabilisation of the staple commodities including crude oil price. These findings have important economic and policy implications to recognise the cause of bubbles and take corresponding measures to reduce the impact on the real economy cause of the fluctuation of crude oil price.

Exta (haruspex remix)

Abstract Exta is a curatorial project consisting of a ‘primer’ exhibition of artists’ film and sculpture, two forthcoming exhibitions, and a film currently in production. The project traces the speculative activities of haruspicy, the divination of future events from the reading of entrails gathered from a sacrificed entity. Here, we expand on this mystic act as a ‘somatechnic’ ritual: how the artworks and our curatorial narrative work towards an imagined future populace divined from the entrails of a dead body-politic. With reference to Jon Abbink’s studies of contemporary haruspicy and some of its precedents in ancient practices, we situate Exta as a publicdivinatory reading that conjures a vision of an alien, future populace. We compare this to popular methods of articulating and narrativising post-human futures, by describing a mode of speculation inscribed with the occult potencies of haruspicy and, referring to Reza Negarestani, how it operates as a vector of decay in its monstrous corruption of such idealised narratives.

The effect of gold market speculation on REIT returns in South Africa: a behavioral perspective

This study provides novel insight to the evolution of herd behavior during crisis periods by relating the time-variation in investor herding to speculation in gold, an asset traditionally considered a safe haven during periods of market crisis. We find that higher level of speculation in gold significantly contributes to herding in the emerging South African real estate investment trust (REIT) market, particularly during the mid-2008 to 2011 period, matching the duration and aftermath of the global financial crisis. The evidence of herding in this market is in contrast to the static and two-regime model specifications that fail to detect herding, underscoring the significance of econometric specifications that directly track the time-variation in herd behavior. Our findings suggest that speculative activities in the gold market contain valuable information regarding market fundamentals that drive investor behavior in emerging markets and that regulators should monitor indicators of speculative activities in gold in order to implement circuit breakers in their markets that may help mitigate the negative effects of herd behavior.

REIT market efficiency through a binomial option pricing tree approach

Purpose– The purpose of this paper is to examine the risk neutral and non-risk neutral pricing of Singapore Real Estate Investment Trusts (S-REITs) via comparing the average of the individual ratios (of deviation between expected and observed closing price/observed closing price) with the ratio (of standard deviation/mean) for closing prices via the binomial options pricing tree model.Design/methodology/approach– If the ratio (of standard deviation/mean) ratio > the ratio (of deviation between expected and observed closing price/observed closing price), then the deviation of closing prices from the expected risk neutral prices is not significant and that the S-REIT is consistent with risk neutral pricing. If the ratio (of deviation between expected and observed closing price/observed closing price) is greater, then the S-REIT is not consistent with risk neutral pricing.Findings– Capitacommercial Trust (CCT), Capitamall Trust (CMT) and Keppel Real Estate Investment Trust (REIT) have large positive differences between the two ratios (39.86, 30.79 and 18.96 percent, respectively), implying that these S-REITs are not trading at risk neutral pricing. Suntec REIT has a small positive difference of 2.35 percent between both ratios, implying that it is trading at risk neutral pricing. Ascendas REIT has the largest negative difference between the two ratios at −4.24 percent, to be followed by Mapletree Logistics Trust at −0.44 percent. Both S-REITs are trading at risk neutral pricing. The analysis shows that CCT, CMT and Keppel REIT exhibit risk averse pricing.Research limitations/implications– Results are consistent with prudential asset allocation for viable S-REIT portfolio investing but that not all these S-REITs exhibit strong market efficiency in their pricing.Practical implications– Pricing may be risk neutral over a certain period but investor sentiments, fear of risks and speculative activities could affect an S-REIT’s risk neutrality.Social implications– With enhanced risk diversification activities, the S-REITs should attain risk neutral pricing.Originality/value– Virtually no research of this nature has been undertaken for S-REITS.

How to identify housing bubbles? A decision support model

PurposeThe purpose of this paper is to provide a decision support model for the early diagnosis of housing bubbles in the UK during the maturity process of the phenomenon.Design/methodology/approachThe development process of the model is divided into four stages. These stages are driven by the normal distribution theorem coupled with the case study approach. The application of normal distribution theory is allowed through the usage of several parametric tools. The case studies tested in this research include the last two UK housing bubbles, 1986 to 1989 and 2001/2002 to 2007. The central hypothesis of the model is that during housing bubbles, all speculative activities of market participants follow an approximate synchronisation, and therefore, an irrational, synchronous and periodic increase on a wide range of relevant variables must occur to anticipate the bubble component. An empirical application of the model is conducted on UK housing market data over the period of 1983-2011.FindingsThe new approach successfully identifies the well-known UK historical bubble episodes over the period of 1983-2011. The study further determines that for uncovering housing bubbles in the UK, house price changes have the same weight with the debt–burden ratio when their velocity is positive. Finally, the application of this model has led us to conclude that the model’s outputs fluctuate approximately in line with phases of the UK real estate cycle.Originality/valueThis paper proposes a new measure for studying the presence of housing bubbles. This measure is not simply an ex post detection technique but dating algorithms that use data only up to the point of analysis for an on-going bubble assessment, giving an early warning diagnostic that can assist market participants and regulators in market monitoring.

The Retail Spot Foreign Exchange Market Structure and Participants

The retail foreign exchange (forex) market is one which is only just starting to become a focus of research. Importantly, while it shares similarities and linkages to the more well-known institutional spot forex market, there are some key differences. These variations allow for a more concentrated arena in which to observe speculative activity. This paper documents the major features of retail forex trading and how it relates to the institutional market. It also examines the market participants and their behaviour. In doing so it provides a reference point for those not familiar with retail forex and introduces some potential areas for research development.

Does Speculation in the Oil Market Drive Investor Herding in Net Exporting Nations?

This paper examines whether speculation in the global oil market contributes to herd behavior in the stock markets of net exporting nations. Using firm level data from the Gulf Arab stock markets, we show that investors display herd behavior during periods of high volatility while anti-herding is prevalent during calm markets. Anti-herding in the stock market is also found to be positively related to speculative activities in the global oil market as investors use signals from the oil market in their trades by trading away from the market consensus. We argue that traders take the speculative signals from the oil market as a sign of positive expectations and try to generate superior profits by going against the crowd in their local market.