Commodity price cycles and heterogeneous speculators: a STAR-GARCH model

Autor(en): Reitz, Stefan
Westerhoff, Frank
Stichwörter: BEHAVIOR; Business & Economics; chartists and fundamentalists; commodity markets; Economics; Mathematical Methods In Social Sciences; nonlinearities; Social Sciences, Mathematical Methods; STAR-GARCH model
Erscheinungsdatum: 2007
Herausgeber: PHYSICA-VERLAG GMBH & CO
Journal: EMPIRICAL ECONOMICS
Volumen: 33
Ausgabe: 2
Startseite: 231
Seitenende: 244
Zusammenfassung: 
We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR-GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types.
ISSN: 03777332
DOI: 10.1007/s00181-006-0100-7

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