Commodity market

About: Commodity market is a research topic. Over the lifetime, 1188 publications have been published within this topic receiving 17964 citations.

An Experimental Study of Competitive Market Behavior

Abstract: INTRODUCTION RECENT years have witnessed a growing interest in experimental L. games such as management decision- making games and games designed to simulate oligopolistic market phenomena. This article reports on a series of experimental games designed to study some of the hypotheses of neoclassical competitive market theory. Since the organized stock, bond, and commodity exchanges would seem to have the best chance of fulfilling the conditions of an operational theory of supply and demand, most of these experiments have been designed to simulate, on a modest scale, the multilateral auction-trading process characteristic of these organized markets. I would emphasize, however, that they are intended as simulations of certain key features of the organized markets and of competitive markets generally, rather than as direct, exhaustive simulations of any particular organized exchange. The experimental conditions of supply and demand in force in these markets are modeled closely upon the supply and demand curves generated by the limit price orders in the hands of stock and commodity market brokers at the opening of a trading day in any one stock or commodity, though I would consider them to be good general models of received short-run supply and demand theory. A similar experimental supply and demand model was first used by E. H. Chamberlin in an interesting set of experiments that pre-date contemporary interest in experimental games.

Equilibrium Pricing and Optimal Hedging in Electricity Forward Markets

Abstract: Spot power prices are volatile and since electricity cannot be economically stored, familiar arbitrage-based methods are not applicable for pricing power derivative contracts. This paper presents an equilibrium model implying that the forward power price is a downward biased predictor of the future spot price if expected power demand is low and demand risk is moderate. However, the equilibrium forward premium increases when either expected demand or demand variance is high, because of positive skewness in the spot power price distribution. Preliminary empirical evidence indicates that the premium in forward power prices is greatest during the summer months. WHOLESALE POWER MARKETS, where producers trade electricity among themselves and with power-marketing and power-distribution companies, have grown rapidly in recent years. 1 The U.S. Department of Energy ~2000! reports that U.S. wholesale power transactions during 1999 amounted to approximately 2.6 billion megawatt hours ~MWh!, or about $85 billion. The U.S. wholesale power market is soon likely to comprise the world’s largest commodity market. Electricity as a commodity has many interesting characteristics, most of which stem from the fact that it cannot be economically stored. 2 Market

Futures Trading and Investor Returns: An Investigation of Commodity Market Risk Premiums

Abstract: The long-standing controversy over whether speculators in a futures market earn a risk premium is analyzed within the context of the capital asset pricing model recently developed by Sharpe, Lintner, and others. Under that approach the risk premium required on a futures contract should depend not on the variability of prices but on the extent to which the variations in prices are systematically related to variations in the return on total wealth. The systematic risk was estimated for a sample of wheat, corn, and soybean futures contracts over the period 1952 to 1967 and found to be close to zero in all three cases. Average realized holding period returns on the contracts over the same period were close to zero.

Dating the timeline of financial bubbles during the subprime crisis

Abstract: A new recursive regression methodology is introduced to analyze the bubble characteristics of various financial time series during the subprime crisis. The methods modify a technique proposed in Phillips, Wu, and Yu (2011) and provide a technology for identifying bubble behavior with consistent dating of their origination and collapse. The tests serve as an early warning diagnostic of bubble activity and a new procedure is introduced for testing bubble migration across markets. Three relevant financial series are investigated, including a financial asset price (a house price index), a commodity price (the crude oil price), and one bond price (the spread between Baa and Aaa). Statistically significant bubble characteristics are found in all of these series. The empirical estimates of the origination and collapse dates suggest a migration mechanism among the financial variables. A bubble emerged in the real estate market in February 2002. After the subprime crisis erupted in 2007, the phenomenon migrated selectively into the commodity market and the bond market, creating bubbles which subsequently burst at the end of 2008, just as the effects on the real economy and economic growth became manifest. Our empirical estimates of the origination and collapse dates and tests of migration across markets match well with the general dateline of the crisis put forward in the recent study by Caballero, Farhi, and Gourinchas (2008a).