New empirical evidence in support of the theory of price volatility of storable commodities under rational expectations in spot and futures markets

Cole Goetz, Dragan Miljkovic and Nikita Barabanov

Energy Economics, 2021, vol. 100, issue C

Abstract: The impact of futures markets on the spot price volatility of storable commodities can be either stabilizing or destabilizing. The underlying theoretical model determines that the impact depends on whether the dominant/prevailing disturbance in the commodity market comes from consumption, production, or inventory holding. We use Directed Acyclic Graphs analysis to determine causality and endogeneity/exogeneity of our variables, resulting in spot and futures prices being endogenous and storage being an exogenous variable. Additionally, impulse response and variance decomposition specifications suggest destabilizing impacts of futures markets on corn spot prices and stabilizing impacts on oil spot prices.

Keywords: Directed acyclic graphs; Futures prices; US oil and corn markets; Spot price stabilization and volatility; Variance decomposition (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:eneeco:v:100:y:2021:i:c:s0140988321002784

DOI: 10.1016/j.eneco.2021.105375

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