The formation of price expectations: a case study of the soybean market

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1982
Authors
Langley, Suchada
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Economics

The Department of Economic Science was founded in 1898 to teach economic theory as a truth of industrial life, and was very much concerned with applying economics to business and industry, particularly agriculture. Between 1910 and 1967 it showed the growing influence of other social studies, such as sociology, history, and political science. Today it encompasses the majors of Agricultural Business (preparing for agricultural finance and management), Business Economics, and Economics (for advanced studies in business or economics or for careers in financing, management, insurance, etc).

History
The Department of Economic Science was founded in 1898 under the Division of Industrial Science (later College of Liberal Arts and Sciences); it became co-directed by the Division of Agriculture in 1919. In 1910 it became the Department of Economics and Political Science. In 1913 it became the Department of Applied Economics and Social Science; in 1924 it became the Department of Economics, History, and Sociology; in 1931 it became the Department of Economics and Sociology. In 1967 it became the Department of Economics, and in 2007 it became co-directed by the Colleges of Agriculture and Life Sciences, Liberal Arts and Sciences, and Business.

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1898–present

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  • Department of Economic Science (1898–1910)
  • Department of Economics and Political Science (1910-1913)
  • Department of Applied Economics and Social Science (1913–1924)
  • Department of Economics, History and Sociology (1924–1931)
  • Department of Economics and Sociology (1931–1967)

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Abstract

Stochastic dynamic optimization is performed for a representative consumer and producer in the soybean market. Each is assumed to maximize the expected value of the infinite sum of the present value of his (her) income stream. Optimum rules for each side are solved as a function of, among other things, expected future prices. Three price expectations are applied--rational, adaptive, and cash-futures. Estimation, based upon the aggregate U.S. soybean market. Time series analysis and Granger-causality test are utilized at the first stage of estimation in order to obtain information which help to forecast prices. The derived decision rules under rational expectations hypothesis are nonlinear function of parameters appearing in agents' objective functions. All variables that are in the information set which help to predict future values of prices are in the decision rules. The response functions of all decision rules under rational expectations hypothesis depend upon the values of all structural parameters. Dynamic simulation of Quasi-Rational expectations model is performed with relatively good results. The estimation under the other two hypotheses--adaptive and cash-futures price expectations--are relatively inferior.

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Fri Jan 01 00:00:00 UTC 1982