Hoard Behavior During Commodity Bubbles

53 Pages Posted: 24 Feb 2015

See all articles by Aureo de Paula

Aureo de Paula

University College London - Department of Economics; Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics; National Bureau of Economic Research (NBER)

Vishal Singh

New York University (NYU) - Department of Marketing

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Date Written: February 2015

Abstract

Hoarding by large speculators is often blamed for contributing to commodity market panics and bubbles. Using supermarket scanner data on US household purchases during the 2008 Rice Bubble, we show that hoarding is in fact more systemic, affecting even households who have no resale motive. Export bans led to a spike in prices worldwide in the first half of 2008, which spilled over into US markets. Anticipating shortages, US households with previous purchases of rice, especially those of Asian ethnicity, nearly doubled their buying around the peak of the bubble. We document transmission mechanisms through over-extrapolation from high prices and contagion, as many households bought rice for the first and last time during the bubble.

Keywords: Commodity Bubbles, Commodity Pricing, Hoarding, Rice

JEL Classification: G00, Q11

Suggested Citation

de Paula, Aureo and Hong, Harrison G. and Singh, Vishal, Hoard Behavior During Commodity Bubbles (February 2015). CEPR Discussion Paper No. DP10441. Available at SSRN: https://ssrn.com/abstract=2569270

Aureo De Paula (Contact Author)

University College London - Department of Economics ( email )

Gower Street
London WC1E 6BT, WC1E 6BT
United Kingdom

Getulio Vargas Foundation (FGV) - Sao Paulo School of Economics

Rua Itapeva 474 s.1202
São Paulo, São Paulo 01332-000
Brazil

Harrison G. Hong

Columbia University, Graduate School of Arts and Sciences, Department of Economics ( email )

420 W. 118th Street
New York, NY 10027
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Vishal Singh

New York University (NYU) - Department of Marketing ( email )

Henry Kaufman Ctr
44 W 4 St.
New York, NY
United States

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