Testing for bubbles in agriculture commodity markets

Balcombe, Kelvin; Rapsomanikis, George

doi:10.7201/earn.2016.01.04

Cited by 14 publications

(16 citation statements)

References 40 publications

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“…In this 9 framework, the fundamental value of oil is defined as the sum of discounted oil dividends which are approximated by the convenience yield, see Lammerding, Stephan, Trede, and Wilfling (2013), Areal, Balcombe, and Rapsomanikis (2013) and Shi and Arora (2012)). …”

Section: Which Oil Price To Use?mentioning

confidence: 99%

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Fantazzini

2016

Energy Policy

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This paper suggests that there was a negative bubble in oil prices in 2014/15, which decreased them beyond the level justified by economic fundamentals. This proposition is corroborated by two sets of bubble detection strategies: the first set consists of tests for financial bubbles, while the second set consists of the log-periodic power law (LPPL) model for negative financial bubbles. Despite the methodological differences between these detection methods, they provided the same outcome: the oil price experienced a statistically significant negative financial bubble in the last months of 2014 and at the beginning of 2015. These results also hold after several robustness checks which consider the effect of conditional heteroskedasticity, model set-ups with additional restrictions, longer data samples, tests with lower frequency data and with an alternative proxy variable to measure the fundamental value of oil.

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Section: Which Oil Price To Use?mentioning

confidence: 99%

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Fantazzini

2016

Energy Policy

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“…If no bubble exists, i.e., = 0, the properties of are determined only by those of . However, if 0, current prices will exhibit an explosive behavior, as reflects a stochastic process in which the expected value of next period's value is greater than or equal to the current period's value (Areal et al, 2013). Therefore, we implement a right-tailed version of the standard ADF test for a unit root (which means = 0) against the alternative of an explosive root (…”

Section: Frameworkmentioning

confidence: 99%

Is There a Bubble in the Art Market?

2014

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Abstract:The record-breaking prices observed in the art market for the last three years have rais the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments ("Impressionist and Modern", "Post-war and Contemporary", "American", and "Latin American") for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today's "Post-war and Contemporary" and "American" fine art market segments. AbstractThe record-breaking prices observed in the art market over the last three years raise the question of whether we are experiencing a speculative bubble. Given the difficulty to determine the fundamental value of artworks, we apply a right-tailed unit root test with forward recursive regressions (SADF test) to detect explosive behaviors directly in the time series of four different art market segments ("Impressionist and Modern", "Post-warand Contemporary", "American", and "Latin American") for the period from 1970 to 2013. We identify two historical speculative bubbles and find an explosive movement in today's "Post-war and Contemporary" and "American" fine art market segments.Keywords: Art market; Alternative investments; Speculative bubbles; Explosive behavior JEL Codes: G12, G14, Z11 You can reach the authors via roman.kraussl@uni.lu, thorsten.lehnert@uni.lu, and nicolas.martelin@uni.lu. We thank Ali Nasser Edine for helpful comments.2

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“…For instance, Gilbert (2010) considers both monthly and daily nearby prices, finding evidence of bubbles in daily soybean prices but not in monthly prices. Areal et al (2014) attribute the lack of bubbles found in some commodities in their paper partly to the low-frequency of the data (monthly) used in the analysis. Second, from a policy perspective, lower-frequency data may be preferred as policy initiatives tend to be made over a longer horizon.…”

Section: Datamentioning

confidence: 94%

“…Daily prices are considered in Gutierrez (2013) and Etienne et al (2014Etienne et al ( , 2015, and monthly prices are used in and Areal et al (2014). Both of these frequencies are considered in Gilbert (2010).…”

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confidence: 99%

$25 spring wheat was a bubble, right?

Etienne

Irwin

Garcia

2015

Agricultural Finance Review

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Purpose -The purpose of this paper is to test for bubbles in the US hard red spring (HRS) wheat market from 2004 to 2014, with particular focus on 2007-2008 when the market experienced record-high price volatility. Design/methodology/approach -The authors apply a recently developed bubble testing procedure to cash, rolling nearby futures contract, and individual futures contract prices of HRS wheat sampled at daily, weekly, and monthly frequencies. Two critical value (CV) sequences are derived to date-stamp bubbles, one from Monte Carlo simulations, and the other from recursive wild bootstrap procedure. Findings -The authors find that regardless of the price series adopted, sampling frequency chosen, or CVs used, bubbles account for only a small fraction of the HRS wheat price behavior during 2004-2014. However, much sharper differences are detected regarding the key policy question of bubble behavior during 2007-2008. Individual futures contract prices during this period suggest only a minimal number of bubble days, while rolling nearby futures and cash prices indicate bubbles lasting much longer. Since theory suggests that prices for individual futures contracts are more likely to provide a clearer test of bubble components, the authors conclude there is little evidence that the spike in spring wheat prices to $25 per bushel in 2007-2008 was a bubble. Originality/value -This paper is the first in the literature to examine the sensitivity of bubble testing to different types of data, sampling frequencies, and inference procedures.

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Testing for bubbles in agriculture commodity markets

Cited by 14 publications

References 40 publications

The oil price crash in 2014/15: Was there a (negative) financial bubble?

The oil price crash in 2014/15: Was there a (negative) financial bubble?

Is There a Bubble in the Art Market?

$25 spring wheat was a bubble, right?

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