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Rational Expectations and Price Determination in the US Oats Market

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  • BARRY A. GOSS
  • S. GULAY AVSAR
  • SIANG‐CHOO CHAN

Abstract

This paper develops a simultaneous rational expectations model of the US oats market Consistent estimates of the structural parameters are obtained by the instrumental variables method and 15 of 16 parameter estimates are significant at the 5 per cent level Estimated elasticities suggest that hedged stocks are more responsive to price changes than unhedged stocks, and that consumption demand for oats is more responsive to income changes than to changes in price. Post‐sample forecasts of the spot price derived from this model are employed to test the semi‐strong form efficient markets hypothesis (EMH), although the futures price outperforms the model as a predictor of the spot price. Hence the EMH cannot be rejected

Suggested Citation

  • Barry A. Goss & S. Gulay Avsar & Siang‐Choo Chan, 1992. "Rational Expectations and Price Determination in the US Oats Market," The Economic Record, The Economic Society of Australia, vol. 68(S1), pages 16-26, December.
    • Handle: RePEc:bla:ecorec:v:68:y:1992:i:s1:p:16-26
    DOI: 10.1111/j.1475-4932.1992.tb02292.x
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