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Autoregressive conditional heteroscedasticity in commodity spot prices

✍ Scribed by Stacie Beck

Publisher
John Wiley and Sons
Year
2001
Tongue
English
Weight
132 KB
Volume
16
Category
Article
ISSN
0883-7252

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✦ Synopsis

Abstract

Muth's (1961) rational expectations model of commodity markets implies that inventory carryover creates ARCH processes in prices. The model also indicates that the expected price variance is an explanatory variable in price regressions. Hypotheses were tested on price data of twenty commodities using a variation of Engle et al. (1987) ARCH–M technique. An ARCH process was found in storable and not in non‐storable commodity data, as expected. However, changes in expected price variance have no significant impact on price. Copyright Β© 2001 John Wiley & Sons, Ltd.

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