Empirical Economics

, Volume 33, Issue 2, pp 231–244 | Cite as

Commodity price cycles and heterogeneous speculators: a STAR–GARCH model

  • Stefan Reitz
  • Frank Westerhoff
Original Paper


We propose an empirical commodity market model with heterogeneous speculators. While the power of trend-extrapolating chartists is constant over time, the symmetric impact of stabilizing fundamentalists adjusts endogenously according to market circumstances: Using monthly data for various commodities such as cotton, sugar or zinc, our STAR–GARCH model indicates that their influence positively depends on the distance between the commodity price and its long-run equilibrium value. Fundamentalists seem to become more and more convinced that mean reversion will set in as the mispricing enlarges. Commodity price cycles may thus emerge due to the nonlinear interplay between different trader types.


Commodity markets Chartists and fundamentalists Nonlinearities STAR-GARCH model 

JEL classification

C51 D84 Q11 


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Copyright information

© Springer Verlag 2006

Authors and Affiliations

  1. 1.Department of EconomicsDeutsche BundesbankFrankfurtGermany
  2. 2.Department of EconomicsUniversity of OsnabrückOsnabrückGermany

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