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When Chinese mania meets global frenzy: Commodity price bubbles

Author

Listed:
  • Fan, John Hua
  • Fernandez-Perez, Adrian
  • Indriawan, Ivan
  • Todorova, Neda

Abstract

This paper examines price bubbles in global commodity markets. We find that positive bubbles are more driven by fundamental shocks, while negative bubbles are more influenced by pessimistic market views on prices and the economy. Furthermore, bubble determinants vary across geographic regions. Trader behavior and policy uncertainty play prominent roles in influencing price bubbles in China, while global bubbles are predominantly shaped by rational responses to inventory, growth, and inflation. Finally, only positive bubbles exhibit contagion across regions. Overall, our findings suggest that asset price bubbles arise from traders' behavioral responses to a combination of fundamental, macroeconomic, and idiosyncratic shocks.

Suggested Citation

  • Fan, John Hua & Fernandez-Perez, Adrian & Indriawan, Ivan & Todorova, Neda, 2024. "When Chinese mania meets global frenzy: Commodity price bubbles," Journal of Commodity Markets, Elsevier, vol. 36(C).
    • Handle: RePEc:eee:jocoma:v:36:y:2024:i:c:s2405851324000564
    DOI: 10.1016/j.jcomm.2024.100437
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    More about this item

    Keywords

    Bubbles; Contagion; Commodity; Futures market; China;
    All these keywords.

    JEL classification:

    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • N25 - Economic History - - Financial Markets and Institutions - - - Asia including Middle East

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