Commodity Spot Prices: An Exploratory Assessment of Market Structure and Forward-Trading Effects

28 Pages Posted: 8 May 2006

See all articles by Margaret E. Slade

Margaret E. Slade

University of Warwick - Department of Economics

Henry Thille

University of Guelph - College of Social and Applied Human Sciences - Department of Economics

Abstract

We assess how characteristics of product and forward markets affect levels and volatilities of commodity spot prices. We examine (i) how product market structure and forward market trading affect spot market games, (ii) the links between product market structure and spot price stability, (iii) whether forward trading destabilizes spot prices, and (iv) how information arrival affects price volatility and the volume of trade. We find that market structure models of the price level but not of price stability receive support, that increased forward trading leads to lower prices, and that the relationship between trading and price instability is indirect via a common causal factor.

Suggested Citation

Slade, Margaret E. and Thille, Henry, Commodity Spot Prices: An Exploratory Assessment of Market Structure and Forward-Trading Effects. Economica, Vol. 73, No. 290, pp. 229-256, May 2006, Available at SSRN: https://ssrn.com/abstract=896815 or http://dx.doi.org/10.1111/j.1468-0335.2006.00480.x

Margaret E. Slade (Contact Author)

University of Warwick - Department of Economics ( email )

Coventry CV4 7AL
United Kingdom

Henry Thille

University of Guelph - College of Social and Applied Human Sciences - Department of Economics ( email )

MCKN Rm:745
Guelph, Ontario N1G 2W1
Canada
519-824-4120 x52733 (Phone)

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