CEU Electronic Theses and Dissertations, 2012
| Author | Holler, Zsuzsa Éva |
|---|---|
| Title | Changing patterns of price evolution in commodity markets - Can it be explained by a rational commodity pricing model? |
| Summary | This empirical work aims to contribute to the debate on the possible causes of increased volatility and rising prices in commodity markets, and whether the role of financial investors is significant or only the changes of fundamental factors induced the changed behavior of prices in commodity markets. My empirical strategy is to test the adequacy of a rational commodity pricing model on the 1991 - 2012 period of wheat and crude oil markets in order to gain evidence on or against different theories explaining the observed events. I estimate linear regressions and vector autoregressive models on commodity prices, futures prices and other relevant variables, and test restrictions implied by the theory. I also use a test to find structural breaks with unknown date in the data. Finally I examine the consistency of the hypotheses on the possible driving forces of commodity prices within the model. My results show that the rational commodity pricing model I apply fits well on wheat but not on oil data. Test results on oil suggest that the assumptions of the rational commodity pricing model are not satisfied. Results for the wheat market suggest that wheat prices might have been affected by the activity of financial investors, but the price couldn't have experienced such a huge spike without suddenly increased demand on spot markets caused by some kind of panic, and without the effect of liquidity problems of market participants. Information on future price movements seems to have become less reliable before the spike, which suggests that fake signals caused by the behavior of financial investors could have influenced price movements. However, the approach I use is not capable to provide strong evidence on this point because extraordinary events of the 2007-2008 period make hard to filter out the relevant information. |
| Supervisor | Kondor, Péter |
| Department | Economics MA |
| Full text | https://www.etd.ceu.edu/2012/holler_zsuzsa-eva.pdf |
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