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The purpose of this study is to extend the work of DeFusco, Ivanov and Karels by examining pricing deviation of DIA, SPY and QQQQ on intradaily basis.
Abstract
Purpose
The purpose of this study is to extend the work of DeFusco, Ivanov and Karels by examining pricing deviation of DIA, SPY and QQQQ on intradaily basis.
Design/methodology/approach
The DIA is designed to be one hundredth of the DJIA, the SPY is designed to be one tenth of the S&P 500 and QQQQ is designed to be one fortieth of the NASDAQ 100. This feature of ETFs requires the estimation of the difference between the proportional level of the index and the price of the ETF, which is the ETF pricing deviation.
Findings
The paper finds that the DIA, SPY and QQQQ pricing deviations are 0.0429, −0.0743 and 0.4298, respectively. The findings indicate that the prices of DIA and QQQQ are on average lower than the underlying indexes. SPY is the exception having a price which is higher than the theoretical price of the S&P 500 index. The author finds that this is due to the increased demand for the SPY. Additionally, the paper provides an explanation for the large change (increase) in the pricing deviation of QQQQ after December 1, 2004 which DeFusco, Ivanov and Karels could not explain. On December 1, 2004 QQQQ trading was consolidated on NASDAQ. The paper finds negative growth in the volume of QQQQ after December 1, 2004 indicating decrease in popularity of this ETF. The decrease in popularity of QQQQ might explain the increase in its pricing deviation.
Research limitations/implications
The paper uses high frequency data in the analysis of pricing deviation which might be artificially deflating standard errors and thus inflating the t‐test significance values.
Originality/value
The paper contributes to the ongoing search in the finance literature of precision ETF performance metrics.
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Kim Hin David Ho and Shea Jean Tay
The purpose of this paper is to examine the risk neutral and non-risk neutral pricing of Singapore Real Estate Investment Trusts (S-REITs) via comparing the average of the…
Abstract
Purpose
The purpose of this paper is to examine the risk neutral and non-risk neutral pricing of Singapore Real Estate Investment Trusts (S-REITs) via comparing the average of the individual ratios (of deviation between expected and observed closing price/observed closing price) with the ratio (of standard deviation/mean) for closing prices via the binomial options pricing tree model.
Design/methodology/approach
If the ratio (of standard deviation/mean) ratio > the ratio (of deviation between expected and observed closing price/observed closing price), then the deviation of closing prices from the expected risk neutral prices is not significant and that the S-REIT is consistent with risk neutral pricing. If the ratio (of deviation between expected and observed closing price/observed closing price) is greater, then the S-REIT is not consistent with risk neutral pricing.
Findings
Capitacommercial Trust (CCT), Capitamall Trust (CMT) and Keppel Real Estate Investment Trust (REIT) have large positive differences between the two ratios (39.86, 30.79 and 18.96 percent, respectively), implying that these S-REITs are not trading at risk neutral pricing. Suntec REIT has a small positive difference of 2.35 percent between both ratios, implying that it is trading at risk neutral pricing. Ascendas REIT has the largest negative difference between the two ratios at −4.24 percent, to be followed by Mapletree Logistics Trust at −0.44 percent. Both S-REITs are trading at risk neutral pricing. The analysis shows that CCT, CMT and Keppel REIT exhibit risk averse pricing.
Research limitations/implications
Results are consistent with prudential asset allocation for viable S-REIT portfolio investing but that not all these S-REITs exhibit strong market efficiency in their pricing.
Practical implications
Pricing may be risk neutral over a certain period but investor sentiments, fear of risks and speculative activities could affect an S-REIT’s risk neutrality.
Social implications
With enhanced risk diversification activities, the S-REITs should attain risk neutral pricing.
Originality/value
Virtually no research of this nature has been undertaken for S-REITS.
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Preeti Narwal and Jogendra Kumar Nayak
The purpose of this paper is to explore the applicability of Pay-What-You-Want (PWYW) pricing multi-channel retailing. Specifically, the impact of PWYW endogenous price…
Abstract
Purpose
The purpose of this paper is to explore the applicability of Pay-What-You-Want (PWYW) pricing multi-channel retailing. Specifically, the impact of PWYW endogenous price discrimination on consumers’ price fairness perception of and reactions to PWYW is investigated.
Design/methodology/approach
Three empirical studies with different product categories were conducted through lab experiments with student sample using scenario-based experimental approach.
Findings
Results indicate the viability of PWYW with lower suggested external reference price. The impact of PWYW endogenous price discrimination is dependent upon the magnitude of price deviation from regular market price and product category. Consumers’ negative perceptions of price differentiation interacted with their underlying beliefs about the retailer’s cost of products across different channels. PWYW acceptance can be fostered in multi-channel by communication of additional-value generated in offline selling.
Originality/value
The current research is possibly the first to explore PWYW viability in the multi-channel context by exploring the consumer’s price perception process and critical consumer reactions through a well-structured research framework.
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Khaled Hesham Hyari and Mujahed Thneibat
Skewed pricing is a typical tactic used by tenderers in unit price projects to gain additional advantages at the expense of the owner or other competing tenderers. This paper aims…
Abstract
Purpose
Skewed pricing is a typical tactic used by tenderers in unit price projects to gain additional advantages at the expense of the owner or other competing tenderers. This paper aims to describe the development of a model for detecting skewed pricing in competitive tendering for unit price contracts.
Design/methodology/approach
The model evaluates how much the offered unit rates for work items deviate from the reasonable rate identified from the item’s submitted unit rates. Item rate deviations are integrated into a total deviation score for each submitted tender based on the relative weight of the work item to the total project amount. The model allows for assigning higher weights to work items that are more prone to skewed pricing, such as those that are performed early and those that are expected to experience quantity fluctuations.
Findings
The paper presents a detection model that uses only the submitted prices of the competing tenderers to perform the needed calculations, which reduces subjectivity in identifying skewed tenders. Two examples are given to demonstrate how the model may be used to detect skewed tenders.
Originality/value
The model supports tendering officials in the challenging task of identifying skewed tenders, which is required by rules and regulations governing public procurement. The model’s ease of use is expected to make it more widely used as a decision-support tool during the tender evaluation stage of real-world projects.
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Fahad Almudhaf and Bader Alhashel
This paper aims to investigate the pricing efficiency of Saudi Sharia-compliant (i.e. Islamic) exchange-traded funds (ETFs).
Abstract
Purpose
This paper aims to investigate the pricing efficiency of Saudi Sharia-compliant (i.e. Islamic) exchange-traded funds (ETFs).
Design/methodology/approach
The paper adheres to a positivist research philosophy with a deductive research approach where data is collected, analyzed and interpreted to examine a hypothesis. Ordinary least squares (OLS) regressions are applied to investigate pricing efficiency and persistence.
Findings
The results show that Saudi ETFs do not currently offer proper diversification for investors, possibly due to their low trading volumes and the delays of market prices in reflecting net asset value (NAV). On average, ETFs trade at a premium to their NAVs. Moreover, the authors find that the deviations of ETF prices from their NAVs (i.e. premiums or discounts) do not disappear in one day. The results reveal a significant positive relationship between the trading volume of Saudi ETFs and volatility, a significant positive correlation between ETF returns and contemporaneous deviations and a significant negative relationship between returns and lagged deviations. These findings can be interpreted as evidence against the market efficiency of Saudi ETFs.
Practical implications
Individual and institutional investors can use Saudi ETFs, especially as their efficiency improves with increased trading volume (liquidity). Saudi regulators must increase their efforts to educate market participants and expand the availability of information to enhance transparency and awareness of the benefits of investing in ETFs, which will positively affect liquidity and pricing efficiency in the future.
Originality/value
This paper is the first to perform empirical tests on Saudi ETFs. Saudi Arabia deserves further attention because it is the most significant stock market in the Gulf Cooperation Council and only recently allowed foreigners to participate.
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Monsurat Ayojimi Salami and Razali Haron
The purpose of this paper is to examine the pricing efficiency of the Malaysian crude palm oil (CPO) market before and after the structural break. This study uses the daily…
Abstract
Purpose
The purpose of this paper is to examine the pricing efficiency of the Malaysian crude palm oil (CPO) market before and after the structural break. This study uses the daily closing price of CPO and CPO futures (CPO-F) for the period ranging from June 2009 to August 2016 while taking structural breaks into account.
Design/methodology/approach
In this study, symmetric and asymmetric long-run relationship model are employed, such as the Johansen cointegration, VECM, TAR and M-TAR models, to examine the impact of structural breaks on the pricing efficiency of the Malaysian CPO market.
Findings
This finding establish that Malaysian CPO price is efficient before and after the structural break. The consistent efficiency of the Malaysian CPO market supports the trading of the CPO-F in Globex and the use of Malaysian CPO pricing as the reference price. This study establishes that a structural break in the Malaysian CPO price series does not affect the pricing efficiency of the market.
Research limitations/implications
This study shows that using Malaysian CPO price as a reference price is sustainable even in the event of a structural break. Therefore, market participants in the Malaysian CPO market have less to worry about the CPO price as it supports the weak form of efficiency. Price deviation in the short run may not lead to arbitrage profit as transaction cost may not be covered.
Practical implications
This study implies that if there is distortion in the price due to shocks, both manufacturers and producers need to hedge their positions in the futures market (subject to their positions in the underlying market). By entering into the futures market, pricing is locked in advance; hence, price risk is eliminated. Such a distortion could also affect the efficiency of the CPO price, therefore this study also addresses the issue of efficiency of the local CPO market.
Originality/value
Previous studies on Malaysian CPO pricing efficiency did not take the effect of structural break into consideration, making it difficult for these studies to show consistency in the efficiency of the Malaysian CPO market.
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Hongyi Li, Fang‐Fang Tang, Liang Huang and Fiona Song
The purpose of this paper is to analyze the online DVD market in Australia, which has not been researched so far, and to examine whether the pricing patterns in this market…
Abstract
Purpose
The purpose of this paper is to analyze the online DVD market in Australia, which has not been researched so far, and to examine whether the pricing patterns in this market exhibit any regularity consistent or inconsistent with research findings in other markets.
Design/methodology/approach
A longitudinal data set of 27,030 price observations were collected weekly over one year. Various statistical tests – in particular, a least‐squares dummy variable (LSDV) panel data model with serial correlation – were applied to the data.
Findings
In general, the online branches of multi‐channel retailers have higher average prices and standard deviations than pure internet retailers. Overall, market prices decrease over time significantly within the sample period – about 17.4 per cent decrease for all titles, however, with popular titles' prices decreasing faster than those of random titles. Furthermore, prices do not seem to converge between the two types of online retailers. For individual retailers, brand name effect seems to matter in the results, with a significant difference on prices.
Research limitations/implications
This is an empirical study on a specific market. More data, testing and comparison are needed for any generalization of the findings whether they are consistent in the global sense.
Practical implications
Online marketers of different types of retailers may need to reflect on their pricing policies whether their pricing strategies have any space for improvement on profitability.
Originality/value
This study investigates the price movement of the Australian online DVD market using data collected over a one year time span.
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This paper aims to explore the relationship between market pricing and design quality within the development industry. Currently, there is a lack of research that examines real…
Abstract
Purpose
This paper aims to explore the relationship between market pricing and design quality within the development industry. Currently, there is a lack of research that examines real estate at the property level. Development quality is widely believed to have diminished over the past decades, while many investors seem uninterested in the design process. The study aims to address these issues through a pricing model that integrates design attributes. It is hoped that empirical findings will invite broader stakeholder interest in the design process.
Design/methodology/approach
The research establishes a framework for assessing spatial compliance across residential developments within London. Compliance is assessed across ten boroughs, with technical space guidelines used as a proxy for design quality. Transaction prices and spatial assessments are aligned within a hedonic pricing model. Empirical findings are used to establish whether undermining spatial standards presents a significant development risk.
Findings
Findings suggest a relationship between sale time and unit size, with “compliant” units typically transacting earlier than “non-compliant” units. Almost half of the 1,600 apartments surveyed appear to undermine technical guidelines.
Research limitations/implications
It is suggested that an array of design attributes be explored that extend beyond unit size. Additionally, future studies may consider the long-term implications of design quality via secondary transaction prices.
Practical implications
Practical implications include the development of a more scientific approach to design valuation. This may enhance the position of product design management within the development industry and architectural services.
Social implications
Social implications may include improvement in residential design.
Originality/value
An innovative approach combines a thorough understanding of both design and economic principles.
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The purpose of this paper is to provide a brief review of three strands of the literature on exchange‐traded funds.
Abstract
Purpose
The purpose of this paper is to provide a brief review of three strands of the literature on exchange‐traded funds.
Design/methodology/approach
The paper starts with a review of the history of the growth of exchange‐traded funds and their characteristics. The paper then examines the key factors and findings of the existing studies on, respectively, the pricing efficiency, the tracking ability/performance, and the impact on underlying securities of exchange‐traded funds.
Findings
Although there has been a substantial amount of research conducted to advance our knowledge on the trading, management, and effect of exchange‐traded funds, the findings are still far from conclusive in addressing a number of research questions.
Practical implications
Investors and other market participants will find this review informative in enhancing the understanding of exchange‐traded funds.
Originality/value
By highlighting the general theme of the related research findings, the paper provides a systematic review of the existing literature that future researchers can utilize in developing their research agenda.
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Gurumurthy Kalyanaram, Gordhan K. Saini, Suresh Mony and N. Jayasankaran
Pricing is always a fundamental marketing element. In the digital marketing/e-commerce context, there are two universal phenomena: desire to micro-segment and customize, and the…
Abstract
Purpose
Pricing is always a fundamental marketing element. In the digital marketing/e-commerce context, there are two universal phenomena: desire to micro-segment and customize, and the adverse reaction upon unfair perception of price. A third related question is how should firms consider price increases and decreases? Specifically, this paper aims to address the following three research and practice questions: What are the theoretical underpinnings of perception of fairness/unfairness in pricing, and what are the findings? What are the theoretical underpinnings of response to price increases and decreases? What should be online pricing strategy, consistent with the findings on (un)fairness perception of pricing and response to price increases and decreases?
Design/methodology/approach
The present approach is integrative review and critical analyses, and synthesis. The review dates back to 1960s, and is inter-disciplinary, including apposite findings in behavioral science, economics, marketing and operations management/research. The authors search for insights with significant empirical support to address these questions.
Findings
Perception of unfair price impacts consumer choice, probability of purchase, intent to buy and attitude to product/service/firm adversely. Consumers react differently to perceived unfair and fair prices. Consumers react more strongly and negatively to perceived unfair prices (compared to prices perceived to be fair) in their intent to buy and other related metrics. Consumers react differently to price increases and price decreases relative to the reference price. Consumers react more strongly to price increases than to price decreases. There is substantial heterogeneity in the magnitude of loss-aversion effect, depending on the product/service category and estimation methods.
Originality/value
The authors review and discuss potential viable pricing strategies. Based on the generalizable findings, this study provides actionable insights to managers for pricing in digital marketing context. Also, the authors provide useful directions for future research.
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