Essays on applied econometrics: applications of the futures markets and the international tourism demand

Abstract

[ACCESS RESTRICTED TO THE UNIVERSITY OF MISSOURI AT AUTHOR'S REQUEST.] My dissertation applies econometric methods to analyze the optimal hedge ratios, basis variability, and dynamic tourism demand. In the first essay, using daily data of the spot and futures returns of corn and soybeans, I find asymmetric and flexible density specifications help increase the goodness-of-fit of the estimated models, but do not guarantee higher hedging performance. I also find that there is a close link between the variance of hedge ratios and hedging effectiveness. In the second essay, I specify and estimate time-varying spatial models which describe significant factors affecting corn and soybean basis for the period January 1996 to December 2006. Understanding factors affecting crop basis patterns helps agribusiness persons and producers make better strategies. Based on the spatial analysis, I find an increase in lagged basis, futures liquidity, differenced cash prices and seasonality strengthen the grain basis, while an increase transportation costs weaken the grain basis. Moreover, as the grain basis theoretically varies based on spatial competition between other market points, I find there exist significant spatial effects. I find that accounting for spatial serial correlation between market locations explains a majority of the basis variation. In the third essay, I extend the existing literature on dynamic international tourism demand by segregating trip purposes and by introducing a new measurement of travel costs and their determinants for the U.S. Based on the panel OLS and the GMM-IV estimates of the dynamic tourism demand model, I find that the new measurement of travel costs has improved model accuracy. Second, I find tourism demand elasticities that are different across trip purpose. The later finding is even though the large shift in the coefficient for the lagged dependent variables in the GMM-IV estimator indicates the potential bias in the OLS estimator due to the country-specific fixed effects, the result of the GMM-IV estimator as well as the OLS estimator clearly showed that the results strongly support the typical assumption that business travelers have more inelastic demand than pleasure travelers.