Commodity markets, price limiters and speculative price dynamics
We develop a behavioral commodity market model with consumers, producers and heterogeneous speculators to characterize the nature of commodity price fluctuations and to explore the efectiveness of price stabilization schemes. Within our model, nonlinear interactions between market participants can create either bull or bear markets, or irregular price fluctuations between bulland bear markets. Both the imposition of a bottoming price level (to support producers) or a topping price level (to protect consumers) can reduce market price volatility. However, simple policy rules, such as price limiters, may have unexpected consequences in a complex environment: a minimum price level decreases the average price while a maximum price limit increases the average price. In addition, price limiters influence the price dynamics in an intricate way and may cause volatility clustering.
(This abstract was borrowed from another version of this item.)
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Canoles, W. Bruce & Thompson, Sarahelen R. & Irwin, Scott H. & France, Virginia G., 1997.
"An Analysis Of The Profiles And Motivations Of Habitual Commodity Speculators,"
ACE OFOR Reports
14768, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
- W. Bruce Canoles & Sarahelen Thompson & Scott Irwin & Virginia Grace France, 1998. "An analysis of the profiles and motivations of habitual commodity speculators," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 18(7), pages 765-801, October.
- W. Bruce Canoles & Sarahelen R. Thompson & Scott H. Irwin & Virginia G. France & ., 1997. "An Analysis of the Profiles and Motivations of Habitual Commodity Speculators," Finance 9705001, EconWPA.
- J. Doyne Farmer & Shareen Joshi, 2000.
"The Price Dynamics of Common Trading Strategies,"
00-12-069, Santa Fe Institute.
- Frank Westerhoff & Cristian Wieland, .
"Exchange rate dynamics, central bank interventions and chaos control methods,"
Modeling, Computing, and Mastering Complexity 2003
22, Society for Computational Economics.
- Wieland, Cristian & Westerhoff, Frank H., 2005. "Exchange rate dynamics, central bank interventions and chaos control methods," Journal of Economic Behavior & Organization, Elsevier, vol. 58(1), pages 117-132, September.
- Day, Richard H. & Huang, Weihong, 1990.
"Bulls, bears and market sheep,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 14(3), pages 299-329, December.
- Sonnemans, J. & Hommes, C.H. & Tuinstra, J. & van de Velden, H., 1999.
"The Instability of a Heterogeneous Cobweb economy: a Strategy Experiment on Expectation Formation,"
CeNDEF Working Papers
99-06, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Sonnemans, Joep & Hommes, Cars & Tuinstra, Jan & van de Velden, Henk, 2004. "The instability of a heterogeneous cobweb economy: a strategy experiment on expectation formation," Journal of Economic Behavior & Organization, Elsevier, vol. 54(4), pages 453-481, August.
- Deaton, A. & Laroque, G., 1989.
"On The Behavior Of Commodity Prices,"
145, Princeton, Woodrow Wilson School - Public and International Affairs.
- Carl Chiarella & Xue-Zhong He, 2001.
"Asset Price and Wealth Dynamics Under Heterogeneous Expectations,"
Research Paper Series
56, Quantitative Finance Research Centre, University of Technology, Sydney.
- C. Chiarella & X-Z. He, 2001. "Asset price and wealth dynamics under heterogeneous expectations," Quantitative Finance, Taylor & Francis Journals, vol. 1(5), pages 509-526.
- Xue-Zhong (Tony) He & Carl Chiarella, 2001. "Asset Price and Wealth Dynamics under Heterogeneous Expectations," CeNDEF Workshop Papers, January 2001 5A.2, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Chiarella, Carl & He, Xue-Zhong, 2003.
"Dynamics of beliefs and learning under aL-processes -- the heterogeneous case,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 27(3), pages 503-531, January.
- Carl Chiarella & Xue-Zhong He, 2001. "Dynamics of Beliefs and Learning Under aL Processes - The Heterogeneous Case," Research Paper Series 55, Quantitative Finance Research Centre, University of Technology, Sydney.
- C. H. Hommes, 2001.
"Financial markets as nonlinear adaptive evolutionary systems,"
Taylor & Francis Journals, vol. 1(1), pages 149-167.
- Cars H. Hommes, 2001. "Financial Markets as Nonlinear Adaptive Evolutionary Systems," Tinbergen Institute Discussion Papers 01-014/1, Tinbergen Institute.
- Hommes, C.H., 2000. "Financial Markets as Nonlinear Adaptive Evolutionary Systems," CeNDEF Working Papers 00-03, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
- Westerhoff, Frank, 2003. "Speculative markets and the effectiveness of price limits," Journal of Economic Dynamics and Control, Elsevier, vol. 28(3), pages 493-508, December.
- Theresa Osborne, 2004. "Market News in Commodity Price Theory: Application to the Ethiopian GrainMarket," Review of Economic Studies, Wiley Blackwell, vol. 71(1), pages 133-164, 01.
- Weiner, Robert J., 2002. "Sheep in wolves' clothing? Speculators and price volatility in petroleum futures," The Quarterly Review of Economics and Finance, Elsevier, vol. 42(2), pages 391-400.
- Michael Kopel, 1997. "Improving the performance of an economic system: Controlling chaos," Journal of Evolutionary Economics, Springer, vol. 7(3), pages 269-289.
- Chiarella, Carl & Dieci, Roberto & Gardini, Laura, 2002.
"Speculative behaviour and complex asset price dynamics: a global analysis,"
Journal of Economic Behavior & Organization,
Elsevier, vol. 49(2), pages 173-197, October.
- Carl Chiarella & Roberto Dieci & Laura Gardini, 2001. "Speculative Behaviour and Complex Asset Price Dynamics," Research Paper Series 49, Quantitative Finance Research Centre, University of Technology, Sydney.
- Hommes, Cars H., 1994. "Dynamics of the cobweb model with adaptive expectations and nonlinear supply and demand," Journal of Economic Behavior & Organization, Elsevier, vol. 24(3), pages 315-335, August.
- repec:att:wimass:9530 is not listed on IDEAS
- Goeree, Jacob K. & Hommes, Cars H., 2000. "Heterogeneous beliefs and the non-linear cobweb model," Journal of Economic Dynamics and Control, Elsevier, vol. 24(5-7), pages 761-798, June.
- Brock, William A. & Hommes, Cars H., 1998.
"Heterogeneous beliefs and routes to chaos in a simple asset pricing model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 22(8-9), pages 1235-1274, August.
- Brock, W.A. & Hommes, C.H., 1996.
"A Rational Route to Randomness,"
9530r, Wisconsin Madison - Social Systems.
- repec:cup:cbooks:9780521364560 is not listed on IDEAS
- Carl Chiarella, 1992. "The Dynamics of Speculative Behaviour," Working Paper Series 13, Finance Discipline Group, UTS Business School, University of Technology, Sydney.
- Kaas, Leo, 1998. "Stabilizing chaos in a dynamic macroeconomic model," Journal of Economic Behavior & Organization, Elsevier, vol. 33(3-4), pages 313-332, January.
- Deaton, Angus & Laroque, Guy, 1996. "Competitive Storage and Commodity Price Dynamics," Journal of Political Economy, University of Chicago Press, vol. 104(5), pages 896-923, October.
- repec:cup:cbooks:9780521326162 is not listed on IDEAS
- Lux, T. & M. Marchesi, . "Volatility Clustering in Financial Markets: A Micro-Simulation of Interacting Agents," Discussion Paper Serie B 437, University of Bonn, Germany, revised Jul 1998.
- Roy Bailey and Marcus Chambers, .
"A Theory of Commodity Price Fluctuations,"
Economics Discussion Papers
432, University of Essex, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:eee:dyncon:v:29:y:2005:i:9:p:1577-1596. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If references are entirely missing, you can add them using this form.