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Booms and Busts in Commodity Markets: Bubbles or Fundamentals?
Author(s) -
Brooks Chris,
Prokopczuk Marcel,
Wu Yingying
Publication year - 2015
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21721
Subject(s) - speculation , boom , commodity , economics , monetary economics , crude oil , financial economics , economic bubble , econometrics , keynesian economics , macroeconomics , market economy , environmental science , environmental engineering , petroleum engineering , engineering
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