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Financialization of Commodity Markets

Author

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  • Ing-Haw Cheng

    () (Tuck School of Business, Dartmouth College, Hanover, New Hampshire 03755)

  • Wei Xiong

    () (Department of Economics and
    Bendheim Center for Finance, Princeton University, Princeton, New Jersey 08540
    National Bureau of Economic Research, Cambridge, Massachusetts 02138)

Abstract

The large inflow of investment capital to commodity futures markets in the past decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows caused 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, 2014. "Financialization of Commodity Markets," Annual Review of Financial Economics, Annual Reviews, vol. 6(1), pages 419-441, December.
  • Handle: RePEc:anr:refeco:v:6:y:2014:p:419-441
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    References listed on IDEAS

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    More about this item

    Keywords

    financialization; speculation; hedging; risk sharing; information discovery;

    JEL classification:

    • G1 - Financial Economics - - General Financial Markets

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