Speculative bubbles in agricultural commodity markets

Abstract

Numerous factors have been proposed in the literature as explaining the recent commodity price movements. In this paper we focus on one of the most widely discussed factors, the impact of speculative bubbles. We investigate whether commodity prices during the spike of 2007-2008 might have deviated from their intrinsic values based on market fundamentals. To do this, we use a bootstrap methodology to compute the finite sample distributions of recently proposed tests. Monte-Carlo simulations show that the bootstrap methodology works well, and allows us to identify explosive processes and collapsing bubbles for wheat, corn and rough rice. There was less evidence of exuberance in soya bean prices. © 2012 Oxford University Press and Foundation for the European Review of Agricultural Economics all rights reserved.