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Index funds do impact agricultural prices

Author

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  • Pfuderer, Simone
  • Gilbert, Christopher L.

Abstract

We use contemporaneous causality tests based on instrumental variables (IV) methods to re-examine causality from Commodity Index Trader positions to agricultural futures prices. A number of recent studies found that no Granger-causal impacts are discernible for agricultural commodity markets. Market microstructure theory suggests that the impact of index-based trading on agricultural futures markets should be contemporaneous and the data should fail to support Granger-causality despite the presence of a contemporaneous causal. IV-based tests for contemporaneous causality provide evidence for impacts in six of the twelve commodities. These are predominantly the less active contracts as measured by open interest.

Suggested Citation

  • Pfuderer, Simone & Gilbert, Christopher L., 2013. "Index funds do impact agricultural prices," 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 156220, German Association of Agricultural Economists (GEWISOLA).
    • Handle: RePEc:ags:gewi13:156220
    DOI: 10.22004/ag.econ.156220
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    Cited by:

    1. Haase, Marco & Seiler Zimmermann, Yvonne & Zimmermann, Heinz, 2016. "The impact of speculation on commodity futures markets – A review of the findings of 100 empirical studies," Journal of Commodity Markets, Elsevier, vol. 3(1), pages 1-15.

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