Booms and Busts in Commodity Markets: Bubbles or Fundamentals?

Abstract

This paper considers whether there were periodically collapsing rational speculative bubbles in commodity prices over a 40‐year period from the late 1960s. We apply a switching regression approach to a broad range of commodities using two different measures of fundamental values—estimated from convenience yields and from a set of macroeconomic factors believed to affect commodity demand. We find reliable evidence for bubbles only among crude oil and feeder cattle, showing the popular belief that the extreme price movements observed in commodity markets were caused by pure speculation to be unsustainable. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 35:916–938, 2015

Behavioural heterogeneity in wine investments

“…Similarly, Tsvetanov et al (2016) apply the GSADF test to crude oil prices, finding significant bubble periods. Alternative bubble detection methodologies have also been used, such as Zhou and Sornette's (2009) D-test (oil price in Zhang and Yao, 2016); van Norden and Schaller's (1993) switching regression model (grains, softs, animals and woods, precious metals, and energy in Brooks et al, 2015); or the momentum threshold autoregressive (MTAR) approach (US corn, soybean and wheat prices) of Adämmer and Bohl (2015).…”

Fast & furious: Do psychological and legal factors affect commodity price volatility?

“…volatility to increase more than a positive shock of the same magnitude. Such asymmetries are typically attributed to leverage effects (Brooks, 2008). Thus, in order to capture asymmetries, we extend the original EGARCH model by Nelson (1991) 4 to include our psychological and institutional factors:…”

The effects of investor attention on commodity futures markets

“…However, several studies reveal that the increased trading volumes of commodity futures contracts from speculators cannot be directly credited for the recent fluctuations in commodity futures prices (Brooks, Prokopczuk, & Wu, 2015;Fattouh, Kilian, & Mahadeva, 2012;Manera, Nicolini, & Vignati, 2013;Tse & Williams, 2013). Instead, the increased investor attention to commodity market is proposed as a possible factor.…”