TY  - JOUR
AU  - Bobenrieth, Eugenio S. A
AU  - Bobenrieth, Juan R. A
AU  - Wright, Brian D
TI  - Bubble Troubles? Rational Storage, Mean Reversion and Runs in Commodity Prices.
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19037
PY  - 2013
Y2  - May 2013
DO  - 10.3386/w19037
UR  - http://www.nber.org/papers/w19037
L1  - http://www.nber.org/papers/w19037.pdf
N1  - Author contact info:
Eugenio Bobenrieth
Pontificia Universidad Católica de Chile
Santiago, Chile
E-Mail: ebobenrieth@uc.cl

Juan R. A. Bobenrieth
Universidad del Bío-Bío
E-Mail: jbobenri@ubiobio.cl

Brian Wright
University of California, Berkeley
Agricultural and Resource Economics
Berkeley, CA   94720-3310
E-Mail: bwright@berkeley.edu
M1  - published as Eugenio S. A. Bobenrieth, Juan R. A. Bobenrieth, Brian D. Wright. "Bubble Troubles? Rational Storage, Mean Reversion, and Runs in Commodity Prices," in Jean-Paul Chavas, David Hummels, and Brian D. Wright, editors, "The Economics of Food Price Volatility" University of Chicago Press (2014)

M3  - presented at "The Economics of Food Price Volatility Conference", August 15-16, 2012
AB  - High and volatile prices of major commodities have generated a wide array of analyses and policy prescriptions, including influential studies identifying price bubbles in periods of high volatility. Here we consider a model of the market for a storable commodity in which price expectations are unbounded. We derive its implications for price time series and empirical tests of price behavior. In this model commodity price is equal to marginal consumption value, and hence bubbles as defined in financial economics cannot occur. However the model generates episodes of price runs that could be characterized as "explosive" and might seem to be bubble-like. At sufficiently long holding periods, a price path can yield average returns consistent with mean reversion, even though the long run expectation of price is infinite.
ER  -