Social and Behavioral Sciences Commons^™

Heterogeneity And Chaotic Dynamics Incommodity Markets, Catherine Kyrtsou, Walter Labys, Michael Terraza

Regional Research Institute Working Papers

The nonlinear testing and modeling of economic and financial time series has increased substantially in recent years, enabling us to better understand market and price behavior, risk and the formation of expectations. Such tests have also been applied to commodity market behavior, providing evidence of heteroskedasticity, chaos, long memory, cyclicity, etc. More recently the evaluation of empirical financial models suggests that chaotic structure in asset prices can result from the heterogeneity of trader’s expectations. The present evaluation of futures price behavior confirms that the resulting price movements can be random, suggesting noisy chaotic behavior. The root cause of this behavior …