UM
Theories of risk: Testing investor behavior on the taiwan stock and stock index futures markets
Clark,Ephraim1; Qiao,Zhuo2; Wong,Wing Keung3
2016-04-01
Source PublicationEconomic Inquiry
ISSN14657295 00952583
Volume54Issue:2Pages:907-924
AbstractThis article considers four utility functions-concave, convex, S-shaped, and reverse S-shaped-to analyze the behavior of different types of investors on the Taiwan stock index and its corresponding index futures. Using stochastic dominance (SD) rules, we show that the existence of all four investor types is plausible. Risk averters prefer spot to futures, whereas risk seekers prefer futures to spot. Investors with S-shaped utility functions prefer spot (futures) to futures (spot) when markets move upward (downward). Investors with reverse S-shaped utility functions prefer futures (spot) to spot (futures) when markets move upward (downward). We show that both spot and futures markets can exist when only risk averters are present, but futures can dominate spot only if there is some risk-seeking behavior. These results are robust with respect to subperiods, spot returns including dividends, and diversification.
DOI10.1111/ecin.12288
URLView the original
Language英语
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Cited Times [WOS]:10   [WOS Record]     [Related Records in WOS]
Document TypeJournal article
CollectionUniversity of Macau
Affiliation1.Middlesex University Business School,,London,United Kingdom
2.Faculty of Business Administration,University of Macau,,Macau,Macao
3.Department of Economics,Hong Kong Baptist University,,Hong Kong
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GB/T 7714
Clark,Ephraim,Qiao,Zhuo,Wong,Wing Keung. Theories of risk: Testing investor behavior on the taiwan stock and stock index futures markets[J]. Economic Inquiry,2016,54(2):907-924.
APA Clark,Ephraim,Qiao,Zhuo,&Wong,Wing Keung.(2016).Theories of risk: Testing investor behavior on the taiwan stock and stock index futures markets.Economic Inquiry,54(2),907-924.
MLA Clark,Ephraim,et al."Theories of risk: Testing investor behavior on the taiwan stock and stock index futures markets".Economic Inquiry 54.2(2016):907-924.
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