Hoarding, the accumulation of inventories in the midst of high prices, is often blamed for causing commodity market panics and bubbles but evidence on hoarding is lacking. Using supermarket scanner data on US household purchases during the 2008 Rice Bubble, we document systemic household hoarding when export bans led to a spike in prices worldwide in the first half of 2008. Anticipating shortages, US households with previous purchases of rice, especially those of Asian ethnicity, nearly doubled their buying around the peak of the bubble. We document transmission mechanisms through over-extrapolation from high prices and contagion, as many households bought rice for the first and last time during the bubble.
Harrison Hong is the John Scully ’66 Professor of Economics and Finance at Princeton University, where he teaches courses in finance in the undergraduate, master and PhD programmes. Before joining Princeton in 2002, he was on the faculty of the Graduate School of Business at Stanford University. He received his BA in economics and statistics with highest distinction from the University of California at Berkeley in 1992 and his PhD in economics from MIT in 1997. His research has covered such topics as: behavioural finance and stock market efficiency; asset pricing and trading under market imperfections; incentives and biases in decision making; organisational form and performance; and social interaction and markets. He is on the editorial board of the Journal of Finance. He is a Director of the American Finance Association and a research associate at the National Bureau of Economic Research. In 2009, he was awarded the American Finance Association’s Fischer Black Prize, given biennially to the person under 40 who has contributed the most to the theory and practice of finance.