No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Alpaca Lies? Speculative Bubbles in Agriculture: Why They Happen and How to Recognize Them
Abstract
The speculative bubble phenomenon has been studied extensively by economists and psychologists in recent years. The recent
literature is surveyed and extended to enhance the understanding of speculative bubbles in agricultural industries. The analysis
is applied to the U.S. alpaca industry, where prices for breeding stock are many times higher than in Peru, home of the world's
largest alpaca herd. We present a framework to assess whether current prices for U.S. alpaca stock are supported by market
fundamentals or are likely to represent a speculative bubble. Finally, we identify “warning signs” common to agricultural
bubbles.
... Recently, we have had the opportunity to broaden our sample of mammals by studying the hearing abilities of alpacas (Vicugna pacos), a domestic species important in South America and, more recently, in the United States (Saitone and Sexton, 2007). In addition to representing the niche of large desert herbivores in comparative analyses, their soundlocalization ability may be of interest because all hoofed mammals tested so far, including pigs, cattle, goats, horses, and Indian elephants, differ from other mammals in that they are either completely unable to use the binaural intensitydifference cue to localize sound or else the frequency range over which they use it is severely restricted (Heffner and Heffner, 2003). ...
Behavioral audiograms and sound localization abilities were determined for three alpacas (Vicugna pacos). Their hearing at a level of 60 dB sound pressure level (SPL) (re 20 μPa) extended from 40 Hz to 32.8 kHz, a range of 9.7 octaves. They were most sensitive at 8 kHz, with an average threshold of -0.5 dB SPL. The minimum audible angle around the midline for 100-ms broadband noise was 23°, indicating relatively poor localization acuity and potentially supporting the finding that animals with broad areas of best vision have poorer sound localization acuity. The alpacas were able to localize low-frequency pure tones, indicating that they can use the binaural phase cue, but they were unable to localize pure tones above the frequency of phase ambiguity, thus indicating complete inability to use the binaural intensity-difference cue. In contrast, the alpacas relied on their high-frequency hearing for pinna cues; they could discriminate front-back sound sources using 3-kHz high-pass noise, but not 3-kHz low-pass noise. These results are compared to those of other hoofed mammals and to mammals more generally.
The article presents the relationships among the selected macroeconomic factors and the economic situation of the agriculture in Poland and Russia. The analysis takes into account: GDP growth rate, standardized budgetary deficit, the interest rate, the real effective exchange rate, terms of trade, and the inflation rate. Attention is paid to the different economic situation of examined economies and the different situation of agriculture itself. The model of the pendulum of interest rate and budgetary deficit is applied to evaluate the economic policy and macroeconomic determinants of agricultural policy. The influence of the solutions applied in the financial support of the agriculture and the impact of the macroeconomic environment on agriculture is evaluated on the basis of price scissors in the agriculture and the parity of earnings of farms. Using the methodology of World Bank the authors show the differentiation in the flow of retransfers to the agriculture indicating the depreciation of the agriculture in the market system, however tothe different extent in the two examined countries.
In recent decades, small rural entrepreneurs in Western Australia have contributed to the development and emergence of several rural industries, including wine and olives. Although still in their growing phase, these sectors have achieved some success and gained recognition both within and beyond the state’s borders. However, to date very little is known about other rural sectors and activities that, as the case of alpaca ownership/breeding are rela-tively new to Australia. Moreover, academic or industry studies discussing the objectives of alpaca breeders, or challenges they face within their sector is non-existent. Using face-to-face, but predominantly telephone interviews, this study investigates these aspects from a group of 32 Western Australian alpaca owners. The developmental stage of this emerging rural activity is identified in the findings, with 59.3 per cent of respondents breeding alpacas as a business or as part of a business. While there is general consensus that the scope for attaining commercial benefits in breeding and marketing alpacas exists, identifying marketing channels for both animals and their products (fibre) is a concern among respondents. Addressing this aspect appears critical for the future development of this nascent activity, particularly in view of increasing competition from more owners, alpacas and fibre.
The efficient market hypothesis is an elegant economic concept which has been extensively researched. The results of the research are broadly supportive of the concept for developed and competitive securities markets. Yet many, perhaps even most corporate executives and investors have serious reservations about or even reject market efficiency. Why? We argue that there are reasons to expect that, in general, people will systematically underestimate the level of efficiency in a market or of a security. We develop this position and group the discussion into market structure reasons and behavioural reasons.
The efficient market hypothesis states that asset prices in financial markets should reflect all available information; as a consequence, prices should always be consistent with ‘fundamentals’. In this paper, we discuss the main ideas behind the efficient market hypothesis, and provide a guide as to which of its predictions seem to be borne out by empirical evidence, and which do not. In examining the empirical evidence, we concentrate on the stock and foreign exchange markets. The efficient market hypothesis is almost certainly the right place to start when thinking about asset price formation. The evidence suggests, however, that it cannot explain some important and worrying features of asset market behaviour. Most importantly for the wider goal of efficient resource allocation, financial market prices appear at times to be subject to substantial misalignments, which can persist for extended periods of time.
This article reviews the theory of speculative bubbles. Bubbles are a promising candidate as an explanation for the stock price run-up and collapse of the 1990s in the United States. The theory considers both irrational and rational bubbles, with emphasis on the latter. Rational bubbles, defined as the excess of security or portfolio prices over present values, can occur under conditions that are well understood. One argument relies on the assumed Pareto-optimality of equilibrium that rules out rational bubbles, but it is suggested that this argument is implausible.
I he possibility that movements in prices could be due to the self-fulfilling prophecies of market participants has long intrigued observers of free mar- kets. Such self-fulfilling prophecies are often called "bubbles" or "sunspots" to denote their dependence on events that are extraneous to the market. The folklore of such episodes includes the tulip bubble, the South Sea bubble and the Mississippi bubble (all discussed in Peter Garber's article in this issue). and the increase in equity prices during the "Roaring 20's" followed by the 1929 crash (discussed in Eugene White's article in this journal). More recently, the rise and crash of stock prices from 1982 to 1987, the appreciation of the dollar on foreign exchange markets that peaked in 1985, and sudden housing price increases in California and Massachusetts have been attributed to speculative bubbles. The idea that bubbles might exist is often traced to John Maynard Keynes's (1936) description of an equity market as an environment in which speculators anticipate "what average opinion expects average opinion to be," rather than focusing on things fundamental to the market. If bubbles exist in asset markets, market prices of assets will differ from their fundamental values. Markets would not necessarily be allocating the savings of individuals to the best possible investment uses. Public policies might be designed to attempt to rid the markets of bubbles. Although these problems have been discussed for a long time, academic economists conducted relatively little formal empirical analysis of actual markets until recently, probably because economists' analytical and
This study shows how the emotional phases that accompany market crisis can be related to an underlying cycle of actions, attributions, and regulatory reactions among participants in the market environment. The action-attribution-regulation process is here called "enactment," in order to focus on how market participants create the environment that then impinges on their activity. We illustrate this process with a case study of the 1980 crisis in the silver futures market, when prices soared from 10 per ounce to 50 per ounce and fell back to 10 per ounce in seven months. The traditional mania/distress/panic model of speculative bubbles is reframed as a cycle of organizing, focusing on the strategic actions of buyers, sellers, bankers, and government agencies. The paper shows how the crisis, enacted by market participants who created speculative opportunities, was resolved through the cooperation of powerful organizations that sought to protect the solvency of insiders and the integrity of the market. This view of market process suggests a cycle of action and institutional constraint that shapes the structure of market environments.
The U.S. ostrich industry was introduced in the 1980s and experienced rapid expansion in the late 1980s and early 1990s. Breeding
stock prices rose rapidly and subsequently plummeted during 1993–1995. High prices are to be expected in the introductory
stage of an industry. However, the magnitude of prices in the ostrich industry is likely due to overestimates of ostrich productivity
and future demand for ostrich products, as well as speculation in the ostrich market. This paper discusses the evolution of
the industry from the mid-1980s to the present.
This book is a non-technical introduction to auction theory; its practical application in auction design (including many examples); and its uses in other parts of economics. It can be used for a graduate course on auction theory, or - by picking selectively - an advanced undergraduate or MBA course on auctions and auction design. Part A introduces the basic theory. Part B shows how modern auction-theoretic tools illuminate a range of mainstream economic questions that are superficially unconnected with auctions. Part C discusses practical auction design. Part D describes the one-hundred-billion dollar 3G mobile-phone license auctions. None of the writing is technical, except in the Appendices. The material was presented as the inaugural (2003) Toulouse Lectures in Economics and is forthcoming at Princeton University Press. This document contains the Contents, Preface and Introduction to the book. A draft of the FULL BOOK is available.
The article considers the possibility that asset prices might deviate
from intrinsic values based on market fundamentals. Three broad categories of
theory are surveyed: (a) growing bubbles (b) fads and (c) information bubbles.
'Sunspot' theories are also discussed. The paper covers both theory and evidence,
and directions for future research are discussed.
A dynamic model of insider trading with sequential auctions, structured to resemble a sequential equilibrium, is used to examine the informational content of prices, the liquidity characteristics of a speculative market, and the value of private information to an insider. The model has three kinds of traders: a single risk neutral insider, random noise traders, and competitive risk neutral market makers. The insider makes positive profits by exploiting his monopoly power optimally in a dynamic context, where noise trading provides camouflage which conceals his trading from market makers. As the time interval between auctions goes to zero, a limiting model of continuous trading is obtained. In this equilibrium, prices follow Brownian motion, the depth of the market is constant over time, and all private information is incorporated into prices by the end of trading.
Recent development cooperation with Guinea-Bissau, focusing on good governance, statebuilding and conflict prevention, did not contribute to democratization nor to the stabilization of volatile political, military and economic structures. The portrayal of Guinea- Bissau as a failed “narco-state”, as well as Western aid meant to stabilize this state, are both based on dubious concepts. Certainly, the impact of drug trafficking could endanger democratization and state-building if continued unchecked. However, the most pressing need is not state-building facilitated by external aid that is poorly rooted in the social and political fabric of the country. Rather, it is grassroots nation-building that is a pre-condition for the creation of viable state institutions.
"Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street," observed legendary speculator Jesse Livermore. History tells us that periods of major technological innovation are typically accompanied by speculative bubbles as economic agents overreact to genuine advancements in productivity. Excessive run-ups in asset prices can have important consequences for the economy as firms and investors respond to the price signals, resulting in capital misallocation. On the one hand, speculation can magnify the volatility of economic and financial variables, thus harming the welfare of those who are averse to uncertainty and fluctuations. But on the other hand, speculation can increase investment in risky ventures, thus yielding benefits to a society that suffers from an underinvestment problem.
My initial motivation for considering volatility measures in the efficient markets models was to clarify the basic smoothing properties of the models to allow an understanding of the assumptions which are implicit in the notion of market efficiency. The efficient markets models, which are described in section II below ,relate a price today to the expected present value of a path of future variables. Since present values are long weighted moving averages, it would seem that price data should be very stable and smooth. These impressions can be formalized in terms of inequalities describing certain variances (section III). The results ought to be of interest whether or not the data satisfy these inequalities, and the procedures ought not to be regarded as just "another test" of market efficiency. Our confidence of our understanding of empirical phenomena is enhanced when we learn how such an obvious property of data as its "smoothness" relates to the model, and to alternative models (section IV below).On further examination of the volatility inequalities, it became clear that the inequalities may also suggest formal tests of market efficiency that have distinct advantages over conventional tests. These advantages take the form of greater power in certain circumstances of robustness to data errors such as misalignment and of simplicity and understandability. An interpretation of volatility tests versus regression tests in terms of the likelihood principle is offered in section V.
"Nowhere does history indulge in repetitions so often or so uniformly as in Wall Street," observed legendary speculator Jesse Livermore. History tells us that periods of major technological innovation are typically accompanied by speculative bubbles as economic agents overreact to genuine advancements in productivity. Excessive run-ups in asset prices can have important consequences for the economy as firms and investors respond to the price signals, resulting in capital misallocation. On the one hand, speculation can magnify the volatility of economic and financial variables, thus harming the welfare of those who are averse to uncertainty and fluctuations. But on the other hand, speculation can increase investment in risky ventures, thus yielding benefits to a society that suffers from an underinvestment problem.
The Alpaca: A South America Camelid: A Trade Environment Database Study
- M Vega
Vega, M. "The Alpaca: A South America Camelid: A Trade Environment Database Study." Number
667: 2002. Available at http://www.american.edu/TED/alpaca.html, accessed March 11, 2004.
The Case for Closure in 1998 Alpaca Library: Industry Issues
- M Safley
Safley, M. "The Case for Closure in 1998." Alpaca Library: Industry Issues. Available at http:// www.alpacas.com/alpacalibrary, accessed December 10, 2004a.
Risk, Uncertainty, and Divergence of Opinion Office of the United States Trade RepresentativeFirst Report to the Congress on the Operation of the Andean Trade Preference Act As AmendedPractical Llama and Alpaca Health Alpaca and Llama Health Information
- E Miller
Miller, E. "Risk, Uncertainty, and Divergence of Opinion." J. Finan. 32(September 1977):151-68. Office of the United States Trade Representative. "First Report to the Congress on the Operation of the Andean Trade Preference Act As Amended," April 30, 2003. Purdy, S. "Practical Llama and Alpaca Health." Alpaca and Llama Health Information. Available at http:/ / www.purdyvet.com/pracnut.html, accessed October 23, 2004.
Alpaca Breeders Pin Hopes on a Herd of Buyers The New York Times
- S Kershaw
Kershaw, S. "Alpaca Breeders Pin Hopes on a Herd of Buyers." The New York Times. Available at http:/ / www.nytimes.com/2004/11 /28 /national/28alpaca.html?ex= 1259298000&en=f27fd50a 557a0861&ei=5090&partner=rssuserland, accessed November 29, 2004.
Microchips Counter Andes Alpaca Smuggling ABC News Available at http://abcnews.go.com/International/wireStory?id=474567The Role of Speculation and Information in the Early Evolution of the United States Ostrich Industry: An Industry Case Study
- M Gil
- J Gillespie
- A Schupp
Gil, M. "Microchips Counter Andes Alpaca Smuggling." ABC News. Available at http://abcnews.go.com/International/wireStory?id=474567, accessed September 5, 2005. Gillespie, J., and A. Schupp. "The Role of Speculation and Information in the Early Evolution of the United States Ostrich Industry: An Industry Case Study." Rev. Agr. Econ. 24(Spring/Summer 2002):278-92.
Alpaca Value Alpaca Registry IncWorld and North American Census by State and Province Animal PeopleThe Efficient Market Hypothesis: A Survey
- Alpaca Owners
- Breeders Association
- D Gruen
- J Vickery
Alpaca Owners and Breeders Association. "Alpaca Value." Available at http://www.alpacainfo. com/newsite/invest/values.html, accessed August 30, 2004. Alpaca Registry Inc. "World and North American Census by State and Province." Available at http: / /www.alpacaregistry.net/resources/statistics/census.htm, accessed August 15, 2006. Animal People. "Ostrich and Emu Speculators: Will They Get Rich Quick or Just Get the Bird?" January 1994. Available at http://www.animalpeoplenews.org/Ostrich.html, accessed January 3, 2005. Beechey, M., D. Gruen, and J. Vickery. "The Efficient Market Hypothesis: A Survey." Economic Re-search Department, Reserve Bank of Australia Working Paper, 2000.
Agriculture Crazes: A Neglected Chapter in American Economic History
- A Cole
Cole, A. "Agriculture Crazes: A Neglected Chapter in American Economic History." Amer. Econ. Rev.
16(December 1926):622-39.
Far from Andes, Alpacas Turn Heads and Earn Profits
- G Collins
Collins, G. "Far from Andes, Alpacas Turn Heads and Earn Profits." New York Times August
11, 2000. Available at http://proquest.umi/pqdlink?did=57819658&sid=3&Fmt=3&clientld,
accessed July 29, 2005.
Microchips Counter Andes Alpaca Smuggling ABC News Available at http://abcnews.go.com/International/wireStory?id=474567
- M Gil
Gil, M. " Microchips Counter Andes Alpaca Smuggling. " ABC News. Available at
http://abcnews.go.com/International/wireStory?id=474567, accessed September 5, 2005.
From Efficient Market Theory to Behavioral Finance
——. " From Efficient Market Theory to Behavioral Finance. " J. Econ. Perspect. 17(Spring 2003):83–104.
World and North American Census by State and Province
- Alpaca Registry Inc
Alpaca Registry Inc. " World and North American Census by State and Province. " Available at
http://www.alpacaregistry.net/resources/statistics/census.htm, accessed August 15, 2006.
Quality Factors Available at http:// www.afcna.com/member
- Alpaca Fiber
- Cooperative Of North
- America
Alpaca Fiber Cooperative of North America. " Quality Factors. " April 19, 2004. Available at http://
www.afcna.com/member/2004-quality.html, accessed April 19, 2004.
Understanding Vitamin and Mineral Supplements for Camelids: Reading between the Lines Paper presented at the 12th Annual Oregon State University/Willamette Valley Llama Associate Herd Health Conference
- R Van Saun
Van Saun, R. " Understanding Vitamin and Mineral Supplements for Camelids: Reading between
the Lines. " Paper presented at the 12th Annual Oregon State University/Willamette Valley
Llama Associate Herd Health Conference, 1999. Available at http://www.belleauwood.com/
alpacacare&nutrition.htm, accessed October 23, 2004.
Practical Llama and Alpaca Health Alpaca and Llama Health Information
- S Purdy
Purdy, S. " Practical Llama and Alpaca Health. " Alpaca and Llama Health Information. Available at http://
www.purdyvet.com/pracnut.html, accessed October 23, 2004.
Ostrich and Emu Speculators: Will They Get Rich Quick or Just Get the Bird?
- Alpaca Registry Inc
Alpaca Registry Inc. "World and North American Census by State and Province." Available at
http://www.alpacaregistry.net/resources/statistics/census.htm, accessed August 15, 2006.
Animal People. "Ostrich and Emu Speculators: Will They Get Rich Quick or Just Get the Bird?" January
1994. Available at http://www.animalpeoplenews.org/Ostrich.html, accessed January 3, 2005.
Economic Research Department, Reserve Bank of Australia Working Paper
- M Beechey
- D Gruen
- J Vickery
Beechey, M., D. Gruen, and J. Vickery. "The Efficient Market Hypothesis: A Survey." Economic Research Department, Reserve Bank of Australia Working Paper, 2000.
Microchips Counter Andes Alpaca Smuggling
- M Gil
Gil, M. "Microchips Counter Andes Alpaca Smuggling." ABC News. Available at
http://abcnews.go.com/International/wireStory?id=474567, accessed September 5, 2005.
Alpaca Breeders Pin Hopes on a Herd of Buyers
- S Kershaw
Kershaw, S. "Alpaca Breeders Pin Hopes on a Herd of Buyers." The New York Times. Available at
http://www.nytimes.com/2004/11/28/national/28alpaca.html?ex=1259298000&en=f27fd50a
557a0861&ei=5090&partner=rssuserland, accessed November 29, 2004.
Klemperer, P. Auctions: Theory and Practice
- C Kindleberger
- Panics Manias
Kindleberger, C. Manias, Panics, and Crashes. New York: John Wiley and Sons Inc., 1978.
Klemperer, P. Auctions: Theory and Practice. Princeton, NJ: Princeton University Press, 2004.
Krishna, V. Auction Theory. San Diego, CA: Academic Press, 2002.
Office of the United States Trade Representative
- E Miller
Miller, E. "Risk, Uncertainty, and Divergence of Opinion." J. Finan. 32(September 1977):151-68.
Office of the United States Trade Representative. "First Report to the Congress on the Operation of
the Andean Trade Preference Act As Amended," April 30, 2003.
Alpaca and Llama Health Information
- S Purdy
Purdy, S. "Practical Llama and Alpaca Health." Alpaca and Llama Health Information. Available at http://
www.purdyvet.com/pracnut.html, accessed October 23, 2004.
Alpaca Library: Industry Issues
- M Safley
Safley, M. "The Case for Closure in 1998." Alpaca Library: Industry Issues. Available at http://
www.alpacas.com/alpacalibrary, accessed December 10, 2004a.
Paper presented at the 12th Annual Oregon State University/Willamette Valley Llama Associate Herd Health Conference
- R Van Saun
Van Saun, R. "Understanding Vitamin and Mineral Supplements for Camelids: Reading between
the Lines." Paper presented at the 12th Annual Oregon State University/Willamette Valley
Llama Associate Herd Health Conference, 1999. Available at http://www.belleauwood.com/
alpacacare&nutrition.htm, accessed October 23, 2004.