What explains price volatility changes in commodity markets ? : answers from the world palm oil market

What are the sources of commodity prices volatility changes? This is the question we try to answer. Limited to palm oil market (1818-1999), our hypothesis is that the superimposition of short distance operators, located near the export supply, whose expectation horizon is limited to a few weeks, to long-distance operators further off the export supply, whose expectation horizon exceeds six months to one year, is responsible for volatility changes and market's instability. Because of the superimposition of horizons of trade, volatility changes and grows along with the development of short-distance trade. We prove this hypothesis using a trader-behaviour model derived from Day and Huang (1990) and Day (1994). Our simulation results challenge the argument that trade liberalisation and a market size enlargement sohuld help to reduce commodity prices volatility (résumé de l'auteur