| Article ID | Journal | Published Year | Pages | File Type |
|---|---|---|---|---|
| 9727857 | Physica A: Statistical Mechanics and its Applications | 2005 | 8 Pages |
Abstract
We develop a simple model with technical and fundamental traders to explain the cyclical motion of commodity prices. The crucial element of our model is a nonlinear market impact of technical traders: Estimation of our STAR-GARCH model using monthly US corn price data reveals that technical traders increasingly enter the market as booms or slumps enlarge. One reason may be that they only gradually learn about the emergence of persistent price trends. The behavior of trend-extrapolating speculators obviously enforces mispricings and thus contributes to cyclical motion as observed in actual commodity markets.
Related Topics
Physical Sciences and Engineering
Mathematics
Mathematical Physics
Authors
Frank Westerhoff, Stefan Reitz,