Hoard Behavior and Commodity Bubbles

52 Pages Posted: 2 Mar 2015

See all articles by Harrison G. Hong

Harrison G. Hong

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

Aureo de Paula

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

Vishal Singh

New York University (NYU) - Department of Marketing

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.

Suggested Citation

Hong, Harrison G. and de Paula, Aureo and Singh, Vishal, Hoard Behavior and Commodity Bubbles (February 2015). NBER Working Paper No. w20974. Available at SSRN: https://ssrn.com/abstract=2572133

Harrison G. Hong (Contact Author)

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

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National Bureau of Economic Research (NBER)

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Aureo De Paula

University College London - Department of Economics ( email )

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

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Brazil

Vishal Singh

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

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New York, NY
United States

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