Devil or Angel? The Role of Speculation in the Recent Commodity Price Boom (and Bust)
It is commonly asserted that speculative buying by index funds in commodity futures and overâ€“theâ€“counter derivatives markets created a â€˜â€˜bubbleâ€™â€™ in commodity prices, with the result that prices, and crude oil prices, in particular, far exceeded fundamental values at the peak. The purpose of this paper is to show that the bubble argument simply does not withstand close scrutiny. Four main points are explored. First, the arguments of bubble proponents are conceptually flawed and reflect fundamental and basic misunderstandings of how commodity futures markets actually work. Second, a number of facts about the situation in commodity markets are inconsistent with the existence of a substantial bubble in commodity prices. Third, available statistical evidence does not indicate that positions for any group in commodity futures markets, including longâ€“only index funds, consistently lead futures price changes. Fourth, there is a historical pattern of attacks upon speculation during periods of extreme market volatility.
Volume (Year): 41 (2009)
Issue (Month): 02 (August)
|Contact details of provider:|| Web page: http://www.saea.org/jaae/jaae.htm|
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:ags:joaaec:53083. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.