Essays on the effects of speculation in a futures market upon price stability /
This dissertation analyzes the effect of speculative behavior in a futures market on price stability. A futures market could introduce a new group of speculators endowed with private information on a random source different from an existing group's endowed private information. When an existin...
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| Format: | Thesis Book |
| Language: | English |
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[Place of publication not identified] :
[publisher not identified] ;
1998.
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| Online Access: | http://proxy.library.tamu.edu/login?url=http://proquest.umi.com/pqdweb?did=737692751&sid=1&Fmt=2&clientId=2945&RQT=309&VName=PQD |
| Summary: | This dissertation analyzes the effect of speculative behavior in a futures market on price stability. A futures market could introduce a new group of speculators endowed with private information on a random source different from an existing group's endowed private information. When an existing group has perfect information on one random shock, the introduction of a new group of speculators may add noises to the pricing system and destabilize prices. However, we draw a main conclusion that a small digression from the perfect private information for an existing group of traders removes the possibility of destabilizing speculation in a futures market. The second part of this dissertation analyzes the effect of a futures market on price stability when private information for both an existing and an incoming group of traders is costly. We use the same model as appears in the first essay to develop a model which analyzes endogenous information equilibrium. An equilibrium proportion of existing informed traders without a futures market must be altered by an introduction of a new group of traders. The analysis of price stability without considering costly information is changed by information acquisition. The introduction of a futures market may be more likely to destabilize prices when information is costly. However, a futures market tends to stabilize prices unless existing traders are extremely risk-averse and have very precise private information. |
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| Item Description: | Vita. "Major Subject: Economics". |
| Physical Description: | ix, 164 leaves : illustrations ; 28 cm. Issued also on microfiche from University Microfilms Inc. |
| Bibliography: | Includes bibliographical references: pages 127-129. |