When Do Futures Destabilize Spot Prices?
AbstractFutures markets allow agents to shift price risk onto speculators and encourages them to take riskier decisions. Historically their main impact has been to encourage the storage of commodities, thus arbitraging prices over time and reducing price fluctuations. This paper presents a simple model in which opening futures markets in a nonstorable commodity encourages producers to choose riskier production techniques which destabilizes supply and hence the spot price. Copyright 1987 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 28 (1987)
Issue (Month): 2 (June)
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- Geert Bekaert & Campbell R. Harvey, 2000.
"Foreign Speculators and Emerging Equity Markets,"
Journal of Finance,
American Finance Association, vol. 55(2), pages 565-613, 04.
- Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," William Davidson Institute Working Papers Series 79, William Davidson Institute at the University of Michigan.
- Geert Bekaert & Campbell R. Harvey, 1997. "Foreign Speculators and Emerging Equity Markets," NBER Working Papers 6312, National Bureau of Economic Research, Inc.
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