Avner Wolf

The Derived Demand with Hedging Cost Uncertainty in the Futures Markets

This study explores the significance of production technology and other parameters on the employment of inputs and hedging. The paper establishes an explicit relationship between the risk as well as prices parameters and the derived demand, production and hedging. The authors find that the futures price relative to the expected spot price affects the demand for production factors. Additionally, the presence of basis risk determines the impact of prices and risk parameters on the derived demand for inputs. Production technology is instrumental in fixing the size of the change in the demand, given a change in the models parameters. Copyright 1992 by Royal Economic Society.

Production and hedging decisions in futures and forward markets

Abstract This paper establishes the properties of (1) separation between production and risk elements, and (2) full hedging under unbiased price even in the presence of basis risk in the futures market. Also, a comparative statics highlights the richer effect of a change in the risk aversion on hedging when futures and forward markets coexist compared to that in the presence of just one market for hedging.

Weekday variations in short-term contrarian profits in futures markets

Abstract This article documents and examines weekday patterns in short-term contrarian profits in futures markets. The Lo and Mackinlay (1990) methodology is used to construct contrarian portfolios and to compute daily contrarian profits. Contrarian portfolios are formed using daily closing prices and are based on the previous days performance relative to a benchmark. Contrarian profits are measured over subsequent half-day intervals. The empirical results suggest that there are weekday patterns in short-term contrarian profits in futures markets. On average, contrarian profits are largest on Fridays, followed by those on Wednesdays, and smallest on Mondays. For currency futures, however, contrarian profits are largest on Mondays and smallest on Fridays.

Long-Short Strategies May Not Be Factor-Neutral

This is an examination of three long-short investment strategies that may be used by investment managers. The factor strategy is long in small size and high book-equity/market equity (BE/ME) stocks and short in large size and low BE/ME stocks. The relative return strategy is long in stocks with the highest past returns and short in stocks with the lowest past returns. The relative earnings surprise strategy is long in stocks with the greatest (positive) earnings surprise and short in stocks with the worst earnings surprise. Only the relative return and relative earnings surprise strategies provide significant risk-adjusted returns; none of the three strategies is size and BE/ME-neutral. This suggests that other simple long-short strategies probably are not size and BE/ME-neutral. Investors should not equate long/short portfolios with the absence of systematic risk.