Do long-short speculators destabilize commodity futures markets?
AbstractThis paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long–short commodity portfolios and their conditional correlations with traditional assets (stocks and bonds). Using several groups of trading strategies that hedge fund managers are known to implement, we show that long–short speculators do not cause changes in the volatilities of the portfolios they hold or changes in the conditional correlations between these portfolios and traditional assets. Thus calls for increased regulation of commodity money managers are, at this stage, premature. Additionally, long–short speculators can take comfort in knowing that their trades do not alter the risk and diversification properties of their portfolios.
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Bibliographic InfoArticle provided by Elsevier in its journal International Review of Financial Analysis.
Volume (Year): 30 (2013)
Issue (Month): C ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/inca/620166
Financialization; Commodity markets; Speculators; Volatility; Correlation;
Find related papers by JEL classification:
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
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