Agricultural commodities and financial markets
AbstractThe sharp raise of the price of agricultural commodities between 2006 and 2008 seems to have a rationalization that goes beyond the mere interaction between supply and demand. Data evidence suggests that financial factors, rather than real determinants, played an important role in determining the dynamics of agricultural commodity prices. In particular, there seems to be a common source underlying food price changes and the financial markets dynamics. Evidence based on principal components supports the view that large fluctuations of food commodity prices can be related to portfolios adjustments of financial agents. We find robust evidence of a strong inverse correlation between financial markets’ returns and the movements of food commodity prices. Moreover, such an inverse relationship has clearly emerged during the recent financial crisis.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36416.
Date of creation: 30 Jul 2011
Date of revision: 30 Sep 2011
International Financial Markets; Commodity Prices; Portfolio Diversification;
Find related papers by JEL classification:
- C10 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - General
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-AGR-2012-02-20 (Agricultural Economics)
- NEP-ALL-2012-02-20 (All new papers)
- NEP-OPM-2012-02-20 (Open Economy Macroeconomics)
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