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Arbitrage
Opportunities in the Futures Market: A Study of Nse Nifty Futures
-- Dheeraj Misra, R Kannan and Sangeeta D Misra
This
paper examines whether there is a violation of the spot-futures parity theorem
in the case of NSE Nifty futures, and tries to find out the different factors
behind such violation. The factors, which have been considered as the determinants
of arbitrage profits, are the time to maturity; whether violation is more in rising
markets or in declining markets; whether violation is more when theoretical futures
price exceeds actual futures price or when actual futures price exceeds theoretical
futures price; the number of contracts traded; and the change in open interest.
The results indicate that there is a violation of the spot-futures parity relationship
for many futures of the NSE Nifty. The results further indicate that arbitrage
profits are more for far month futures contracts than for near month futures contracts;
for undervalued futures market (relative to the spot market) than for overvalued
futures market (relative to the spot market); for high liquid futures than for
less liquid futures; and when new contracts are added than when outstanding contracts
are settled. The results do not support higher or lower arbitrage profits in declining
or in rising markets. ©
2006 IUP . All Rights Reserved.
Testing the Pecking
Order Theory of Capital Structure: Evidence from the Indian Corporate Sector
-- Jitendra Mahakud
By
applying the methods used by Shyam-Sunder and Myers, and Goyal and Frank, this
paper tests the Pecking Order Hypothesis in the context of Indian corporates,
using the data for 2000-01 to 2004-05. The analysis reveals that the Pecking Order
of Funds is not followed by the Indian companies.
©
2006 IUP . All Rights Reserved. Impact
of Diversification Strategy on Firm Performance: An Entropy Approach
--
Srinivasan Suresh, M Thenmozhi and P Vijayaraghavan
In
the pre-liberalized economy, which was characterized by inadequately developed
market and institutional mechanism, one of the critical success factors for industrial
groups' diversification into related and unrelated areas was their ability to
deal and interact with the governmental departments. It was expected that firms
would continue to make profits irrespective of their choice of related or unrelated
diversification strategy. This study explores the `diversification strategy-firm
performance' relationship in the large Indian companies of 1989, and examines
it in terms of `High' and `Low' total diversifiers, and `Related' and `Unrelated'
diversifiers. The analysis shows, contrary to expectation, that `Low' diversifiers
have higher profitability, though there seems to be no significant difference
in the profitability of `High' and `Low' total diversifiers. The results also
indicate that `Unrelated' diversifiers have a distinctly lower level of profitability
as compared to `Related' diversifiers, as well as other companies. An examination
of the effect of diversification on profitability and controlling for other determinants
of profitability, shows that `Unrelated' diversification explains profitability
better than `Total' diversification and `Related' diversification. The paper concludes
that the `diversification-firm performance' relationship is highly `context-specific'
and the `industry effects' have had a profound effect on the `diversification-firm
performance' relationship. ©
2006 IUP . All Rights Reserved.
Effect
of Monetary and Liquidity Aggregates on the Economic Activity in India
-- Purna Chandra Padhan
In
this paper, the causal nexus between monetary aggregates with real economic activity
(output) and liquidity aggregates with real economic activity output has been
empirically examined using Granger causality test in the context of India. Using
quarterly data from 1996: Q3 to 2005: Q3, it is found that there is unidirectional
Granger causality from monetary aggregates to output as well as liquidity aggregates
to output, except for reserve money which shows bidirectional causality. The data
is used in the first difference for two alternative definitions of money supply,
namely, M0 and M3 and two alternative definitions of liquidity
aggregates such as L1 and L2. The result suggests that by
altering either the monetary aggregates or liquidity aggregates, the monetary
authority can significantly affect the output in the economy.
©
2006 IUP . All Rights Reserved.
An Insight into
Carbon Trading: Understanding
the Behavior of Emissions Market with a Financial Perspective
-- Jatinder
S Bhatia and Harsh Bhargava
Every
country is making efforts to reduce the concentration of greenhouse gas emissions,
either voluntarily or due to the existent or expected regulatory constraints.
This has created an opportunity for the trade of emission credits both within
and outside of the regulated area, thereby laying the ground for a global "carbon
market". Among the emissions markets for environmental services currently
in operation, the carbon market has the widest reach. The objective of this paper
is to review where these markets stand as of today and to throw light on some
of the trends that are expected to emerge in the near future. The authors have
attempted to discuss issues related to carbon markets, which involve different
underlying assets, pricing mechanisms, contractual structures, and risk management.
The paper also discusses the global scenario and the opportunities in the Indian
context. ©
2006 IUP . All Rights Reserved.
Web Enablement
of Financial Decision Support Systems: A Study of Capital Budgeting Using the
Monte Carlo Simulation
-- Appa Rao Korukonda
The
Decision Support Systems (DSS) landscape has been witnessing a major shift from
mainframe to client-server implementation since the early 1990s. As a part of
this evolving trend, Web-based and Web-enabled DSS have been fast emerging as
a crucial part of managerial information and decision support systems. Web-based
DSS implementations, using technologies like Web Server, HTML, and SQL Server,
have made their appearance around mid-1990s. Since late 1990s, however, there
appears to be an increasing interest in, and some evidence of shift towards, Web-enabled
DSS. In contrast to total redevelopment using the Web technologies, in the Web-enabled
DSS, the key areas of an application continue to remain on the legacy system but
are made accessible using the Web technology. There is an argument in the literature
that Web-enabled DSS are much faster and more cost-effective compared to Web-based
DSS (Power, 2002). In this paper, a hypothetical case study involving the Monte
Carlo simulation for financial decision-making is presented to illustrate two
arguments. First, an argument is presented in favor of both Web-based and Web-enabled
DSS by illustrating how the required decision support functionality is made available
to the user through a browser and internet connectivity, without the need for
specific DSS software on the client computer. It is suggested to be very useful
for those economies which are particularly disadvantaged in terms of technological
base and infrastructure. Second, the distinction between Web-based and Web-enabled
technologies is discussed and it is argued that the current trend toward wholesale
abandonment of legacy systems needs to be reconsidered in favor of incremental
adaptation toward web-enablement. ©
2006 IUP . All Rights Reserved. | 
