Did grain futures prices overreact to the Russia–Ukraine war due to herding?

Colin Carter and Sandro Steinbach

Journal of Commodity Markets, 2024, vol. 35, issue C

Abstract: We study the impact of the 2022 Russian invasion of Ukraine on grain futures prices. The war allows us to evaluate whether commodity futures markets at the time were driven by investor herding. Using event study methods, we find that wheat futures prices rose by 35 percent above the counterfactual until the EU Solidarity Lanes were announced, more than corn futures prices, which were up 16 percent. This relative price response cannot be explained by herding behavior. Furthermore, prices for control commodities did not respond to the war at all, contradicting the herding theory. There is no statistical evidence of abnormal speculative pressure in the market around the time of the invasion, and we conclude the markets put a fair price on the wartime risk of Black Sea grain shipment disruptions.

Keywords: Russia–Ukraine war; War premium; Event study; Behavioral finance; Herding (search for similar items in EconPapers)
JEL-codes: G13 G14 Q02 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:35:y:2024:i:c:s2405851324000412

DOI: 10.1016/j.jcomm.2024.100422

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