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The Financialization of Commodity Markets

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  • Ing-Haw Cheng
  • Wei Xiong

Abstract

The large inflow of investment capital to commodity futures markets in the last decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows either did or did not cause a price bubble, we critically review academic studies through the perspective of how financial investors affect risk sharing and information discovery in commodity markets. We argue that financialization has substantially changed commodity markets through these mechanisms.

Suggested Citation

  • Ing-Haw Cheng & Wei Xiong, 2013. "The Financialization of Commodity Markets," NBER Working Papers 19642, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:19642
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    JEL classification:

    • G00 - Financial Economics - - General - - - General
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market
    • Q1 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture
    • Q4 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy

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