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Department of Finance and Real Estate

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This digital collection includes faculty publications from the Department of Finance and Real Estate and publications from the Everitt Real Estate Center.

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Browsing Department of Finance and Real Estate by Author "Chatrath, Arjun, author"

Now showing 1 - 6 of 6
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    An examination of the flow characteristics of crude oil: evidence from risk-neutral moments
    (Colorado State University. Libraries, 2015-10-10) Chatrath, Arjun, author; Miao, Hong, author; Ramchander, Sanjay, author; Wang, Tianyang, author; Energy Economics, publisher
    This paper examines the information content of risk-neutral moments to explain crude oil futures returns. Implied volatility and higher moments are extracted from observed crude oil option prices using a model-free implied volatility framework and the Black–Scholes model. We find a tenuous and time-varying association between returns and implied volatility and its innovations. Specifically, changes in implied volatility are found to be meaningfully associated with crude returns only over the period spanning the recent financial crisis. The results lead us to conclude that crude oil prices are determined primarily in a flow demand/supply environment. Finally, we document that oil risk is priced into the cross-section of stock returns in the oil and transportation sectors.
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    Corporate bonds, macroeconomic news, and investor flows
    (Colorado State University. Libraries, 2012-06-30) Chatrath, Arjun, author; Miao, Hong, author; Ramchander, Sanjay, author; Villupuram, Sriram, author; Journal of Fixed Income, publisher
    This article examines the impact of macroeconomic announcements on corporate bond prices and investor migrations across various types of bonds over time. In addition, the authors compare the responses of investor-grade bonds and speculative corporate bonds. They find corporate bond responses to be different from those of Treasury bonds. Positive macrosurprises are followed by declining (rising) yields on corporate bonds (Treasuries), implying that investors may be migrating between Treasuries and corporate bonds very rapidly. They also identify that the sensitivity of junk bonds is more pronounced than that of investment-grade bonds. Finally, they document that the behavior of corporate bonds is very similar to that of their equity counterparts in that they exhibit greater sensitivity to negative macroshocks than to positive shocks.
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    Crude oil moments and PNG stock returns
    (Colorado State University. Libraries, 2014-04-24) Chatrath, Arjun, author; Miao, Hong, author; Ramchander, Sanjay, author; Energy Economics, publisher
    We examine the risk-neutral moments of crude oil and their relationship to stock returns in the Petroleum and Natural Gas (PNG) industry. We find substantial overlaps in the association between returns and S&P 500- and crude oil higher moments. Net of these overlaps, PNG stocks share a significant negative relationship with crude volatility and positive relationships with crude skewness and kurtosis. Large cap stocks and those with a history of hedging exhibit negative loadings on crude volatility. However, after controlling for S&P 500- and crude oil returns and their risk-neutral moments, there is little evidence that PNG stocks systematically and significantly price either S&P 500- or crude oil volatility. We document a weak pricing of crude skewness, but find no evidence for the pricing of the implied higher moments of market returns.
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    Currency jumps, cojumps and the role of macro news
    (Colorado State University. Libraries, 2013-05) Chatrath, Arjun, author; Miao, Hong, author; Ramchander, Sanjay, author; Villupuram, Sriram, author; Journal of International Money and Finance, publisher
    This study investigates the impact of macro news on currency jumps and cojumps. The analysis uses intra-day data, sampled at 5-min frequency, for four currencies for the period 2005–2010. Results indicate that currency jumps are a good proxy for news arrival. We find 9–15% of currency jumps can be directly linked to U.S. announcements. Notably, news can explain 22–56% of the 5-min jump returns, and there is evidence that better-than-expected news about the U.S. economy has a negative impact on currency jumps. Cojump statistics suggest close dependencies among European currencies, especially between the euro and the Swiss franc. We also provide evidence on the uncertainty resolution to news.
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    Is the price of crude responsive to macroeconomic news? A test of the stock-flow hypothesis
    (Colorado State University. Libraries, 2011-01-21) Chatrath, Arjun, author; Miao, Hong, author; Ramchander, Sanjay, author; Journal of Futures Markets, publisher
    A recent study indicates that the daily price of crude oil is mostly unresponsive to macroeconomic news, at times exhibiting response-coefficients that carry the "wrong sign". The study concludes that the price of crude oil is predetermined to macro aggregates, and hence determined in a flow demand and flow supply framework. We make the economic argument that inferences on commodity price determination should be drawn from news responses only after the standard tests are subject to inventory (or stock) controls. Using both daily and intraday data for crude oil, and using rudimentary tools to isolate perceived inventory levels, we test for the stock-flow hypothesis for crude oil. We find only weak evidence on the role of inventory levels for crude oil. We also assess the extent to which the dynamics of the dollar plays in the results, and find its role to be limited. Overall, the prior conclusion that crude oil is priced primarily in a flow-environment is supported by our data. The initial (intraday) response in energy prices to macro news appears to be the result of noise trading.
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    Short-term options: clienteles, market segmentation, and event trading
    (Colorado State University. Libraries, 2015-09-10) Chatrath, Arjun, author; Christie-David, Rohan A., author; Miao, Hong, author; Ramchander, Sanjay, author; Journal of Banking & Finance, publisher
    We compare clientele and information share in weekly- (Weeklys) and monthly-expiring options (Monthlys) on the S&P 500 index. Striking dissimilarities between the two instruments are found, most apparent being the much smaller trade size and substantially higher implied volatility in Weeklys, consistent with both speculation and event trading. Additionally, the price discovery contribution of Weeklys, albeit modest when compared to the underlying index itself, is substantially larger than that of Monthlys. The cumulative evidence points to an increasingly segmented options market. Thus, studies employing only standard options to investigate price discovery will likely underestimate the informational role of options.