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The Influence of Speculation in Food and Commodities and the Impact of Futures Prices on Spot Prices- Evidence from two Behavioral Experiments

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  • Christian A. Conrad

Abstract

This paper examines the impact of speculation on commodity and food futures on spot prices. Econometric studies contradict each other, coming not to a clear empirical outcome. Therefore, we take an alternative methodological approach with two behavioral experiments. The outcome shows, that tendencies in futures prices influence the price-setting behavior of market players in the spot market in the same direction. Since futures prices had no direct influence on profits and there were no other influences, futures prices must have influenced the expectations of market participants psychologically. Speculation with futures prices thus has an influence on spot prices via expectations. When speculation involves commodities and food in the future market serving crucial real economic functions it can lead to substantial misallocations and damages, why speculation should be regulated.

Suggested Citation

  • Christian A. Conrad, 2024. "The Influence of Speculation in Food and Commodities and the Impact of Futures Prices on Spot Prices- Evidence from two Behavioral Experiments," Applied Economics and Finance, Redfame publishing, vol. 11(4), pages 1-14, November.
    • Handle: RePEc:rfa:aefjnl:v:11:y:2024:i:4:p:1-14
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    References listed on IDEAS

    as
    1. Ing-Haw Cheng & Andrei Kirilenko & Wei Xiong, 2015. "Convective Risk Flows in Commodity Futures Markets," Review of Finance, European Finance Association, vol. 19(5), pages 1733-1781.
    2. Christian A. Conrad, 2014. "Commodity and Food Speculation, Is There a Need for Regulation? A Discussion of the International Research," Applied Economics and Finance, Redfame publishing, vol. 1(2), pages 58-64, November.
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    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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