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Financialization of commodity markets ten years later

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  • Kang, Wenjin
  • Tang, Ke
  • Wang, Ningli

Abstract

In this study, we examine whether the key findings in Tang and Xiong (2012) hold in the more recent sample years after their publication. We also explore the impact of financialization on different aspects of commodity futures markets in more detail. Our analysis shows that financialization leads to a significant increase of the correlation between the commodity and stock market returns. This return correlation structure change is robust to different commodity and stock market return computation methods, and is persistent for the more recent post-Tang-and-Xiong-(2012) subsample period. We find that after financialization, the importance of non-commercial traders elevates, the pairwise correlation between the indexed commodity futures increases, and the basis becomes more negative on commodity futures markets.

Suggested Citation

  • Kang, Wenjin & Tang, Ke & Wang, Ningli, 2023. "Financialization of commodity markets ten years later," Journal of Commodity Markets, Elsevier, vol. 30(C).
    • Handle: RePEc:eee:jocoma:v:30:y:2023:i:c:s240585132300003x
    DOI: 10.1016/j.jcomm.2023.100313
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    6. Zunxin Zheng & Gaiyan Zhang & Yingzhao Ni, 2024. "Financial regulatory arbitrage and the financialization of commodities," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 44(5), pages 826-853, May.

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