Testing rational expectations in primary commodity markets
The standard method used to test the rational expectations hypothesis (REH) in primary commodity markets is by means of a structural approach. In this paper, a parsimonious vector error correction model in the price and stock equation is derived that maintains almost complete information of the underlying structural model. The empirical section utilizes 1955-2000 US copper data to investigate the properties of the model extended to the macroeconomic variables. The estimation results are statistically robust and are in keeping with economic theory. Three different results are found: (i) price adjustments depend on the short-run dynamic of the stock equation, whereas the long-run dynamic is statistically rejected; (ii) the over-identification restrictions, including the test for the REH, are not rejected; (iii) the forecast simulations on price are well performed.
Volume (Year): 37 (2005)
Issue (Month): 15 ()
|Contact details of provider:|| Web page: http://www.tandfonline.com/RAEC20 |
|Order Information:||Web: http://www.tandfonline.com/pricing/journal/RAEC20|
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.:
- John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
- Claudio Agostini, 2006. "Estimating Market Power in the US Copper Industry," Review of Industrial Organization, Springer, vol. 28(1), pages 17-39, 02.
- Johansen, Soren, 1991. "Estimation and Hypothesis Testing of Cointegration Vectors in Gaussian Vector Autoregressive Models," Econometrica, Econometric Society, vol. 59(6), pages 1551-80, November.
When requesting a correction, please mention this item's handle: RePEc:taf:applec:v:37:y:2005:i:15:p:1705-1718. 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: (Michael McNulty)
If references are entirely missing, you can add them using this form.