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Spot Price Modelling of Industrial Metals – An heterogeneous agent based model for Copper

Listed author(s):
  • Helyette Geman

    (Department of Economics, Mathematics & Statistics, Birkbeck)

  • Matthias Scheiber

    (Department of Economics, Mathematics & Statistics, Birkbeck)

Registered author(s):

    We will show in this paper the role of inventories in explaining copper price volatility. Using a three factor model we derive a fundamental long-term value for copper. Second, we emphasis the significance of this fundamental long-term value by considering an agent based model approach in which mean-reversion focused fundamental investors trade with chartists who follow price trends. We show that fundamental investors take increasing positions in copper when the spot price of copper deviated from its fundamental value (i.e. the fundamental value is higher than the spot price) and chartists loose relative significance.

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    File URL: http://www.bbk.ac.uk/ems/research/wp/2014/PDFs/BWPEF1404.pdf
    File Function: First version, 2014
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    Paper provided by Birkbeck, Department of Economics, Mathematics & Statistics in its series Birkbeck Working Papers in Economics and Finance with number 1404.

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    Date of creation: May 2014
    Handle: RePEc:bbk:bbkefp:1404
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    1. François Longin, 2001. "Extreme Correlation of International Equity Markets," Journal of Finance, American Finance Association, vol. 56(2), pages 649-676, 04.
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