IDEAS home Printed from https://ideas.repec.org/p/ags/saea15/196760.html

Agricultural Commodity Futures Market Volatility: A Case for Punctuated Equilibrium

Author

Listed:
  • Apperson, George P.

Abstract

Agricultural commodity futures markets have experienced dramatic price swings since 2007 as compared to previous periods. Applied economic research has not reached a consensus as to whether market fundamentals or speculative participation has been the cause of the increased volatility. Policy research has concentrated on the legislative intent of the law and how recent financial and commodity market regulation should revert back to the successful policies of the twentieth century. Policy scholars credit financial and commodity market turmoil to changes in regulatory policy, but no specific research has been identified that associates changes in market behavior with changes in regulatory policy. This paper addresses the following research question: why has agricultural commodity futures price volatility changed over time? Applying quasi-experimental analysis methodology with change-point analysis design and econometric modeling, this research uses cotton futures price variability (volatility) as a measurement of commodity market behavior. The findings indicate that commodity futures market regulation is one of many factors that may lead to a change in cotton futures market volatility.

Suggested Citation

  • Apperson, George P., 2014. "Agricultural Commodity Futures Market Volatility: A Case for Punctuated Equilibrium," 2015 Annual Meeting, January 31-February 3, 2015, Atlanta, Georgia 196760, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea15:196760
    DOI: 10.22004/ag.econ.196760
    as

    Download full text from publisher

    File URL: https://ageconsearch.umn.edu/record/196760/files/SAEARegPolicy_CtnVolatility_PE_Submitted.pdf
    Download Restriction: no
    File URL: https://libkey.io/10.22004/ag.econ.196760?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Irwin, Scott H. & Sanders, Dwight R., 2012. "Financialization and Structural Change in Commodity Futures Markets," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 44(3), pages 371-396, August.
    2. Robles, Miguel & Torero, Maximo & von Braun, Joachim, 2009. "When speculation matters," Issue briefs 57, International Food Policy Research Institute (IFPRI).
    3. Irwin, Scott H. & Sanders, Dwight R. & Merrin, Robert P., 2009. "Devil or Angel? The Role of Speculation in the Recent Commodity Price Boom (and Bust)," Journal of Agricultural and Applied Economics, Cambridge University Press, vol. 41(2), pages 377-391, August.
    4. Peterson, Paul, . "More on Position Limits, Excessive Speculation and the Dodd-Frank Act," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2.
    5. Power, Gabriel J. & Robinson, John R.C., 2009. "Cotton Futures Dynamics: Structural Change, Index Traders and the Returns to Storage," 2009 Conference, April 20-21, 2009, St. Louis, Missouri 53044, NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management.
    6. Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.
    7. Brian D. Wright, 2011. "The Economics of Grain Price Volatility," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 32-58.
    8. John Baffes, 2005. "The "Cotton Problem"," The World Bank Research Observer, World Bank, vol. 20(1), pages 109-144.
    9. Howell, L. D., 1934. "Fluctuations in Prices of Cotton Futures Contracts," Technical Bulletins 164378, United States Department of Agriculture, Economic Research Service.
    10. Peterson, Paul, . "Position Limits, Excessive Speculation and the Dodd-Frank Act," farmdoc daily, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics, vol. 2.
    11. Robles, Miguel & Torero, Maximo & von Braun, Joachim, 2009. "When speculation matters," Issue Briefs 49999, CGIAR, International Food Policy Research Institute (IFPRI).
    12. Joseph P Janzen & Aaron Smith & Colin A Carter, 2018. "Commodity Price Comovement and Financial Speculation: The Case of Cotton," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 100(1), pages 264-285.
    13. Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Apperson, George P., "undated". "Agricultural Commodity Futures Price Volatility: A Market Regulatory Policy Study," 2017 Annual Meeting, July 30-August 1, Chicago, Illinois 258210, Agricultural and Applied Economics Association.
    2. Haase, Marco & Seiler Zimmermann, Yvonne & Zimmermann, Heinz, 2016. "The impact of speculation on commodity futures markets – A review of the findings of 100 empirical studies," Journal of Commodity Markets, Elsevier, vol. 3(1), pages 1-15.
    3. Boyd, Naomi E. & Harris, Jeffrey H. & Li, Bingxin, 2018. "An update on speculation and financialization in commodity markets," Journal of Commodity Markets, Elsevier, vol. 10(C), pages 91-104.
    4. Fan, John Hua & Mo, Di & Zhang, Tingxi, 2022. "The “necessary evil” in Chinese commodity markets," Journal of Commodity Markets, Elsevier, vol. 25(C).
    5. Etienne, Xiaoli L. & Irwin, Scott H. & Garcia, Philip, 2013. "Dissecting Corn Price Movements with Directed Acyclic Graphs," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 151279, Agricultural and Applied Economics Association.
    6. Brendan Bayley, 2024. "‘Because it matters’," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(1), pages 17-43, February.
    7. Miffre, Joëlle & Brooks, Chris, 2013. "Do long-short speculators destabilize commodity futures markets?," International Review of Financial Analysis, Elsevier, vol. 30(C), pages 230-240.
    8. Moses M. Kupabado & Juergen Kaehler, 2021. "Financialization, common stochastic trends, and commodity prices," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 41(12), pages 1988-2008, December.
    9. Yao, Wei, 2025. "The US Quantitative Easing Monetary Policy and Commodities’ Prices," Other publications TiSEM 185d14d3-9dc2-4276-82ec-e, Tilburg University, School of Economics and Management.
    10. Emiliano Magrini & Ayca Donmez, 2013. "Agricultural Commodity Price Volatility and Its Macroeconomic Determinants: A GARCH-MIDAS Approach," JRC Research Reports JRC84138, Joint Research Centre.
    11. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2011. "Price Discovery in Agricultural Commodities: The Shifting Relationship Between Spot and Future Prices," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114237, European Association of Agricultural Economists.
    12. repec:fpr:export:1344 is not listed on IDEAS
    13. Yao, Wei & Alexiou, Constantinos, 2024. "On the transmission mechanism between the inventory arbitrage activity, speculative activity and the commodity price under the US QE policy: Evidence from a TVP-VAR model," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1054-1072.
    14. Guo, Jin & Tanaka, Tetsuji, 2022. "Do biofuel production and financial speculation in agricultural commodities influence African food prices? New evidence from a TVP-VAR extended joint connectedness approach," Energy Economics, Elsevier, vol. 116(C).
    15. Fatima, Hira & Ahmed, Mumtaz, 2019. "Testing for Exuberance Behavior in Agricultural Commodities of Pakistan," MPRA Paper 95304, University Library of Munich, Germany.
    16. Cornelis Gardebroek & Manuel A. Hernandez & Miguel Robles, 2016. "Market interdependence and volatility transmission among major crops," Agricultural Economics, International Association of Agricultural Economists, vol. 47(2), pages 141-155, March.
    17. Go, You-How & Lau, Wee-Yeap, 2017. "Investor demand, market efficiency and spot-futures relation: Further evidence from crude palm oil," Resources Policy, Elsevier, vol. 53(C), pages 135-146.
    18. Mayer, Herbert & Rathgeber, Andreas & Wanner, Markus, 2017. "Financialization of metal markets: Does futures trading influence spot prices and volatility?," Resources Policy, Elsevier, vol. 53(C), pages 300-316.
    19. Ludwig, Michael, 2019. "Speculation and its impact on liquidity in commodity markets," Resources Policy, Elsevier, vol. 61(C), pages 532-547.
    20. Dwight R. Sanders and Scott H. Irwin, 2013. "Measuring Index Investment in Commodity Futures Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    21. Fishe, Raymond P.H. & Smith, Aaron, 2019. "Do speculators drive commodity prices away from supply and demand fundamentals?," Journal of Commodity Markets, Elsevier, vol. 15(C), pages 1-1.

    More about this item

    Keywords

    ;

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:ags:saea15:196760. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: AgEcon Search (email available below). General contact details of provider: https://edirc.repec.org/data/saeaaea.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.