Commodity price dynamics and the nonlinear market impact of technical traders: empirical evidence for the US corn market

Autor(en): Westerhoff, F
Reitz, S
Stichwörter: commodity markets; econophysics; HERD BEHAVIOR; nonlinearities; PERCOLATION MODEL; Physics; Physics, Multidisciplinary; STAR-GARCH approach; technical and fundamental analysis
Erscheinungsdatum: 2005
Herausgeber: ELSEVIER
Journal: PHYSICA A-STATISTICAL MECHANICS AND ITS APPLICATIONS
Volumen: 349
Ausgabe: 3-4
Startseite: 641
Seitenende: 648
Zusammenfassung: 
We develop a simple model with technical and fundamental traders to explain the cyclical motion of commodity prices. The crucial element of our model is a nonlinear market impact of technical traders: Estimation of our STAR-GARCH model using monthly US corn price data reveals that technical traders increasingly enter the market as booms or slumps enlarge. One reason may be that they only gradually learn about the emergence of persistent price trends. The behavior of trend-extrapolating speculators obviously enforces mispricings and thus contributes to cyclical motion as observed in actual commodity markets. (C) 2004 Elsevier B.V. All rights reserved.
ISSN: 03784371
DOI: 10.1016/j.physa.2004.11.015

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