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Autoregressive conditional heteroscedasticity in commodity spot prices

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  • Stacie Beck

    (Department of Economics, University of Delaware, Newark, DE 19716, USA)

Abstract

Muth's (1961) rational expectations model of commodity markets implies that inventory carryover creates ARCH processes in prices. The model also indicates that the expected price variance is an explanatory variable in price regressions. Hypotheses were tested on price data of twenty commodities using a variation of Engle et al. (1987) ARCH-M technique. An ARCH process was found in storable and not in non-storable commodity data, as expected. However, changes in expected price variance have no significant impact on price. Copyright © 2001 John Wiley & Sons, Ltd.

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Article provided by John Wiley & Sons, Ltd. in its journal Journal of Applied Econometrics.

Volume (Year): 16 (2001)
Issue (Month): 2 ()
Pages: 115-132

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Handle: RePEc:jae:japmet:v:16:y:2001:i:2:p:115-132

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Cited by:
  1. Joseph P. Byrne & Giorgio Fazio & Norbert Fiess, 2010. "Primary commodity prices: co-movements, common factors and fundamentals," Working Papers 2010_27, Business School - Economics, University of Glasgow.
  2. Kilima, Fredy & Chung, Chanjin & Kenkel, Philip L. & Mbiha, Emanuel, 2004. "The Impact Of Market Reforms On Spatial Volatility Of Maize Price In Tanzania," 2004 Annual meeting, August 1-4, Denver, CO 20332, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  3. Casson, Catherine & Fry, J. M., 2011. "Revolutionary change and structural breaks: A time series analysis of wages and commodity prices in Britain 1264-1913," MPRA Paper 27866, University Library of Munich, Germany.
  4. Ederington, Louis H. & Guan, Wei, 2013. "The cross-sectional relation between conditional heteroskedasticity, the implied volatility smile, and the variance risk premium," Journal of Banking & Finance, Elsevier, vol. 37(9), pages 3388-3400.
  5. Jean-Thomas Bernard & Lynda Khalaf & Maral Kichian & Sebastien Mcmahon, 2008. "Forecasting commodity prices: GARCH, jumps, and mean reversion," Journal of Forecasting, John Wiley & Sons, Ltd., vol. 27(4), pages 279-291.
  6. Laure Bamière & Vincent Martinet & Christophe Gouel, 2013. "Stochastic viability of second generation biofuel chains: Micro-economic spatial modeling in France," Working Papers 2013/02, INRA, Economie Publique.
  7. Power, Gabriel J. & Turvey, Calum G., 2010. "Long-range dependence in the volatility of commodity futures prices: Wavelet-based evidence," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(1), pages 79-90.
  8. He, Dequan & Holt, Matthew T., 2004. "Efficiency Of Forest Commodity Futures Markets," 2004 Annual meeting, August 1-4, Denver, CO 20344, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  9. Lee, Yen-Hsien & Hu, Hsu-Ning & Chiou, Jer-Shiou, 2010. "Jump dynamics with structural breaks for crude oil prices," Energy Economics, Elsevier, vol. 32(2), pages 343-350, March.
  10. de Nicola, Francesca & De Pace, Pierangelo & Hernandez, Manuel A., 2014. "Co-movement of major commodity price returns : time-series assessment," Policy Research Working Paper Series 6845, The World Bank.
  11. Bernard, Jean-Thomas & Khalaf, Lynda & Kichian, Maral & McMahon, Sébastien, 2008. "Oil Prices: Heavy Tails, Mean Reversion and the Convenience Yield," Cahiers de recherche 0801, GREEN.
  12. Dahl, Christian M. & Iglesias, Emma M., 2009. "Volatility spill-overs in commodity spot prices: New empirical results," Economic Modelling, Elsevier, vol. 26(3), pages 601-607, May.
  13. Bouakez, Hafedh & Essid, Badye & Normandin, Michel, 2013. "Stock returns and monetary policy: Are there any ties?," Journal of Macroeconomics, Elsevier, vol. 36(C), pages 33-50.
  14. de Nicola, Francesca & De Pace, Pierangelo & Hernandez, Manuel A., 2014. "Co-movement of major commodity price returns: A time-series assessment:," IFPRI discussion papers 1354, International Food Policy Research Institute (IFPRI).
  15. Serra, Teresa & Zilberman, David, 2013. "Biofuel-related price transmission literature: A review," Energy Economics, Elsevier, vol. 37(C), pages 141-151.

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