Autoregressive conditional heteroscedasticity in commodity spot prices
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.
Volume (Year): 16 (2001)
Issue (Month): 2 ()
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