Preference to Oil Spot or Oil Futures for Risk-Seekers

Hooi , Hooi Lean and Michael , McAleer and Wing , Keung Wong (2006) Preference to Oil Spot or Oil Futures for Risk-Seekers. In: Management Of Risk Factors In Economically Relevant Human Activities, 31 August - 2 September 2006, Rome, Italy.

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Abstract

This paper develops the stochastic dominance (SD) tests for risk seekers, We find both MV criterion and CAPM mesures unable to draw any conclusive preference between the returns but our SD results show that spot dominates futures in the downside risk while futures dominate spot in the upside profit. It also shows that the risk-averse investors prefer investing in spot index while risk seekers are attracted to futures index to maximize their utility, In addition, our SD results enable us to conclude that there is no arbitrage opportunity between these two prices and fail to reject market efficiency and market rationality.

Item Type: Conference or Workshop Item (Paper)
Subjects: H Social Sciences
Divisions: Pusat Pengajian Sains Kemasyarakatan (School of Social Sciences) > Conference or Workshop Item
Depositing User: Mr Noorazilan Noordin
Date Deposited: 20 Oct 2016 07:03
Last Modified: 05 Jan 2018 08:35
URI: http://eprints.usm.my/id/eprint/30827

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