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Testing for Speculative Bubbles in Agricultural Commodity Prices: A Regime Switching Approach

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  • Liu, Xiaoliang
  • Filler, Gunther
  • Odening, Martin

Abstract

The sharp increase in agricultural commodity prices in 2008 and in 2011 has triggered an intensive debate on the causes for these price booms. Speculative bubbles have been quoted as one factor among others for the price peaks. Against this background, our paper contributes to this discussion by implementing a novel test procedure for speculative bubbles which has been suggested in the stock market literature. We use a regime switching regression model to test the hypothesis that agricultural prices are driven by periodically collapsing bubbles. The analysis is conducted for wheat, which is one of the most important crops worldwide. Our results show that the data do not support this particular bubbles hypothesis.

Suggested Citation

  • Liu, Xiaoliang & Filler, Gunther & Odening, Martin, 2012. "Testing for Speculative Bubbles in Agricultural Commodity Prices: A Regime Switching Approach," 123rd Seminar, February 23-24, 2012, Dublin, Ireland 122554, European Association of Agricultural Economists.
  • Handle: RePEc:ags:eaa123:122554
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Jeanne Diesteldorf & Sarah Meyer & Jan Voelzke, 2016. "New evidence for explosive behavior of commodity prices," CQE Working Papers 5016, Center for Quantitative Economics (CQE), University of Muenster.
    2. Areal, Francisco José & Balcombe, Kevin & Rapsomanikis, George, 2016. "Testing for bubbles in agriculture commodity markets," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 16(1).
    3. López Cabrera, Brenda & Schulz, Franziska, 2016. "Volatility linkages between energy and agricultural commodity prices," Energy Economics, Elsevier, vol. 54(C), pages 190-203.
    4. Will, Matthias Georg & Prehn, Sören & Pies, Ingo & Glauben, Thomas, 2012. "Schadet oder nützt die Finanzspekulation mit Agrarrohstoffen? Ein Literaturüberblick zum aktuellen Stand der empirischen Forschung," Discussion Papers 2012-26, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    5. Stephanie-Carolin Grosche, 2014. "What Does Granger Causality Prove? A Critical Examination of the Interpretation of Granger Causality Results on Price Effects of Index Trading in Agricultural Commodity Markets," Journal of Agricultural Economics, Wiley Blackwell, vol. 65(2), pages 279-302, June.
    6. Adämmer, Philipp & Bohl, Martin T., 2015. "Speculative bubbles in agricultural prices," The Quarterly Review of Economics and Finance, Elsevier, vol. 55(C), pages 67-76.
    7. Brett Olsen & Jeffrey Stokes, 2015. "Is Farm Real Estate The Next Bubble?," The Journal of Real Estate Finance and Economics, Springer, vol. 50(3), pages 355-376, April.
    8. Benoît Guilleminot & Jean-Jacques Ohana & Steve Ohana, 2014. "The interaction of speculators and index investors in agricultural derivatives markets," Agricultural Economics, International Association of Agricultural Economists, vol. 45(6), pages 767-792, November.
    9. repec:eee:jrpoli:v:53:y:2017:i:c:p:135-146 is not listed on IDEAS

    More about this item

    Keywords

    Agricultural commodity market; net convenience yield; speculative bubbles; regime switching; fundamental values.; Risk and Uncertainty; C12; Q13; Q14;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • Q13 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Markets and Marketing; Cooperatives; Agribusiness
    • Q14 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Finance

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