LOOKING FOR EVIDENCE OF SPECULATIVE STOCKHOLDING IN COMMODITY-MARKETS

The theory of commodity price with speculative storage predicts that p rices are a two-regime process depending on whether or not inventories are held. The price process is nonlinear in that it is nondifferentia ble at some p which separates the data into a history independent reg ime and an autoregressive process. This paper looks for evidence of no nlinearity in the price data and tests the theory in the context of th reshold autoregressive models under the assumption that shocks to harv est are i.i.d. While we find evidence for regime-specific behavior, we also find the degree of persistence in the stockout regime to be much stronger than that predicted by theory.