Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures

Robert Shiller

No 1036, Cowles Foundation Discussion Papers from Cowles Foundation for Research in Economics, Yale University

Abstract: Two proposals are made that may facilitate the creation of derivative market instruments, such as futures contracts, cash-settled based on economic indices. The first proposal concerns index number construction: indices based on infrequent measurements of nonstandardized items may control for quality change by using a hedonic repeated measures method, an index number construction method that follows individual assets or subjects through time and also takes account of measured quality variables. The second proposal is to establish markets for perpetual claims on cash flows matching indices of dividends or rents. Such markets may help us to measure the prices of the assets generating these dividends or rents even when the underlying asset prices are difficult or impossible to observe directly. A perpetual futures contract is proposed that would cash settle every day in terms of both the change in the futures price and the dividend or rent index for that day.

Pages: 35 pages
Date: 1992-11
Note: CFP 856.
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Citations: View citations in EconPapers (3)

Published in Journal of Finance (June 1993), 48(3): 911-931

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Journal Article: Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures Indices and Perpetual Futures (1993)
Working Paper: Measuring Asset Values for Cash Settlement in Derivative Markets: Hedonic Repeated Measures indices and Perpetual Futures (1993)
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