Cobwebs, Rational Expectations and Futures Markets
AbstractIn the absence of futures markets, cobweb cycles and other behavior inconsistent with Muth rational expectations persist for long periods of time. When futures markets are introduced in commodities, these markets behave in a manner much more consistent with Muth rational expectations. By contrast, despite the existence of active forward and futures markets, the Muth rational expectations hypothesis is rejected in the financial and foreign exchange markets. The aim of this paper is to suggest an explanation of how futures markets change the structure of the supply response. Copyright 1992 by MIT Press.
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Bibliographic InfoArticle provided by MIT Press in its journal Review of Economics & Statistics.
Volume (Year): 74 (1992)
Issue (Month): 1 (February)
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- Garcia, Philip & Irwin, Scott H. & Leuthold, Raymond M. & Yang, Li, 1997. "The value of public information in commodity futures markets," Journal of Economic Behavior & Organization, Elsevier, vol. 32(4), pages 559-570, April.
- Christoph Engel & Hanjo Hamann, 2012. "The Hog-Cycle of Law Professors," Working Paper Series of the Max Planck Institute for Research on Collective Goods 2012_08, Max Planck Institute for Research on Collective Goods.
- Malliaris, A. G. & Stein, Jerome L., 1999. "Methodological issues in asset pricing: Random walk or chaotic dynamics," Journal of Banking & Finance, Elsevier, vol. 23(11), pages 1605-1635, November.
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