Testing for multiple bubbles in the copper price: Periodically collapsing behavior

Chi-Wei Su, Xiao-Qing Wang, Haotian Zhu, Ran Tao, Nicoleta-Claudia Moldovan and Oana-Ramona Lobonţ

Resources Policy, 2020, vol. 65, issue C

Abstract: This study investigates whether multiple bubbles exist in the copper price on the basis of the Generalized Supremum Augmented Dickey-Fuller (GSADF) approach (Phillips et al., 2013). This technique delivers date-stamping strategies for the emergence as well as collapse of explosive bubble episodes and is best suited for practical application to time series. The results reveal that four explosive bubbles are detected over the period of 1980–2019 when copper price deviates from fundamental value. Besides, this finding is in accordance with the asset pricing model (Gürkaynak, 2008), which generally considers both fundamental and bubble components in the presence of asset prices. Based on the empirical results, the multiple emergence and collapse of multiple price bubbles are attributed to speculation, depreciation of the U.S. dollar, an imbalance between supply and demand, and financial crises. Policymakers should actively recognize bubble episodes and monitor their evolution, which could be conducive to achieving the effective stabilization of the international copper price. To reduce excess price fluctuations and explosive copper bubbles, authorities should impose restrictions on excessive speculative behaviors under extreme market conditions.

Keywords: Copper price; Multiple bubbles; Mildly explosive behavior; Macroeconomic factors (search for similar items in EconPapers)
JEL-codes: C22 G12 Q02 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (19)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jrpoli:v:65:y:2020:i:c:s0301420719301825

DOI: 10.1016/j.resourpol.2020.101587

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