| Abstract: | In a recent article (Tilton, Humphreys, and Radetzki, 2011), Tilton et al. argue that even when investor stocks are declining an increase in investor demand can cause a commodity's price to rise. They contend that this conclusion, which is based on two hypothetical examples, is both contrary to conventional wisdom and counter-intuitive. In my comment on the article (Olle Östensson, 2011), I challenged this finding. In a reply to my article, Tilton et al. maintain that their original finding is valid: investor demand can be driving commodity prices higher even when stocks are falling. In my present reply, I contend that their argument with respect to the first example confuses the actions of a minority of investors with those of all investors and is well accommodated within the framework of traditional theory. I further argue that their second example rests on an assumption regarding investor behavior that is unproven and that in any case falls outside the framework of analysis of futures markets. |
