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On The Economic Rationality Of Market Participants: The Case Of Expectations In The U.S. Pork Market

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  • Chavas, Jean-Paul

Abstract

This study investigates the nature of price expectations in a competitive market. The approach is illustrated in an application to the U.S. pork market, which exhibits cyclical patterns and biological production lags. Pork price equations are estimated under different expectation regimes. The empirical results suggest the presence of heterogeneous price expectations among market participants. A large proportion of the market (73%) is found to be associated with backward-looking expectations, where future prices are anticipated on the basis of their observed historical patterns.

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  • Chavas, Jean-Paul, 1999. "On The Economic Rationality Of Market Participants: The Case Of Expectations In The U.S. Pork Market," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(01), July.
  • Handle: RePEc:ags:jlaare:30882
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    Cited by:

    1. Plantinga, Andrew J. & Provencher, Bill, 2001. "Internal Consistency In Models Of Optimal Resource Use Under Uncertainty," 2001 Annual meeting, August 5-8, Chicago, IL 20712, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Femenia, Fabienne, 2010. "Impacts of Stockholding Behaviour on Agricultural Market Volatility: A Dynamic Computable General Equilibrium Approach," Journal of International Agricultural Trade and Development, Journal of International Agricultural Trade and Development, vol. 59(3).
    3. Féménia, Fabienne & Gohin, Alexandre, 2011. "Dynamic modelling of agricultural policies: The role of expectation schemes," Economic Modelling, Elsevier, vol. 28(4), pages 1950-1958, July.
    4. Brorsen, B. Wade, 2009. "Research: Are We Valuing the Right Stuff?," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 34(1), April.
    5. Hommes, C.H., 2001. "Modeling the stylized facts in finance through simple nonlinear adaptive systems," CeNDEF Working Papers 01-06, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
    6. SaangJoon Baak, 1999. "Heterogeneous Expectations, Market Dynamics, and Social Welfare," Computing in Economics and Finance 1999 222, Society for Computational Economics.
    7. Chao, Hui-Ping, 1998. "Regime Switching In Us Livestock Cycles," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20824, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    8. Brock, W.A. & Hommes, C.H., 1997. "Models of Compelxity in Economics and Finance," Working papers 9706, Wisconsin Madison - Social Systems.
    9. Peterson, Hikaru Hanawa & Tomek, William G., 2000. "Implications Of Deflating Commodity Prices For Time-Series Analysis," 2000 Conference, April 17-18 2000, Chicago, Illinois 18944, NCR-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    10. Imad A. Moosa, 2004. "What Is Wrong with Market-Based Forecasting of Exchange Rates?," International Journal of Business and Economics, College of Business and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 3(2), pages 107-121, August.
    11. Frechette, Darren L., 1999. "The Supply Of Storage Under Heterogeneous Expectations," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 31(03), December.
    12. Ng, Desmond & Chen, Liming, 2016. "Learning to Learn: A Case for the Heterogeneous Expectations Hypothesis in Industrialized Markets," International Journal on Food System Dynamics, International Center for Management, Communication, and Research, vol. 7(3).
    13. Stępień Sebastian & Polcyn Jan, 2016. "The phenomenon of cyclical fluctuations on the pork market - global perspective," Management, De Gruyter Open, vol. 20(1), pages 382-396, May.
    14. Kim, In Seck & Plain, Ronald L. & Bullock, J. Bruce & Jei, Sang Young, 2008. "Correction of Measurement Error in Monthly USDA Pig Crop: Generating Alternative Data Series," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 40(02), August.
    15. Tomek, William G., 2000. "Commodity Prices Revisited," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(2), October.
    16. Arnaud Rault & Stéphane Krebs, 2011. "Catastrophic risk and risk management, what do we know about livestock epidemics? State of the art and prospects," Working Papers SMART - LERECO 11-05, INRA UMR SMART-LERECO.
    17. Yankou Diasso, 2014. "Dynamique du prix international du coton : aléas, aversion au risque et chaos," Recherches économiques de Louvain, De Boeck Université, vol. 80(4), pages 53-86.

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