Commodity Futures: Orange Juice and Sentiment

Hersh Shefrin

in Beyond Greed and Fear

Published in print October 2002 | ISBN: 9780195161212
Published online November 2003 | e-ISBN: 9780199832996 | DOI:

Series: Financial Management Association Survey and Synthesis Series

 Commodity Futures: Orange Juice and Sentiment

Show Summary Details


From the perspective of market efficiency, the question about volatility in commodity prices boils down to whether commodity prices overreact to the flow of new material information. From the outside, it is often difficult to judge how material the flow of information actually is. However, there is one commodity market where it is relatively easy to evaluate those information flows. That commodity is orange juice concentrate, where the most relevant fundamental variables that change on a day‐to‐day basis are the weather around Orlando, Florida and the supply of oranges from Brazil. The bottom line is that heuristic‐driven bias by these traders causes the prices of orange juice concentrate to be excessively volatile relative to the underlying fundamentals. In other words, sentiment impacts the market for concentrate. Usually, excess volatility is a manifestation of trader overreaction, either to news that has occurred, or to the absence of news altogether.

Keywords: Brazil; Florida; Orange juice; sentiment; volatility; weather

Chapter.  3096 words.  Illustrated.

Subjects: Financial Markets

Full text: subscription required

How to subscribe Recommend to my Librarian

Buy this work at Oxford University Press »

Users without a subscription are not able to see the full content. Please, subscribe or login to access all content.