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Commodity Financialization and Information Transmission

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  • ITAY GOLDSTEIN
  • LIYAN YANG

Abstract

We provide a model to understand the effects of commodity futures financialization on various market variables. We distinguish between financial speculators and financial hedgers and study their separate and combined effects on the informativeness of futures prices, the futures price bias, the comovement of futures prices with other markets, and the predictiveness of financial trading. We capture the interactions between commodity futures financialization and the real economy through spot prices and production decisions. A dynamic extension illustrates how key variables change over time in a period of acute financialization in a way that is consistent with observed empirical patterns.

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  • Itay Goldstein & Liyan Yang, 2022. "Commodity Financialization and Information Transmission," Journal of Finance, American Finance Association, vol. 77(5), pages 2613-2667, October.
    • Handle: RePEc:bla:jfinan:v:77:y:2022:i:5:p:2613-2667
    DOI: 10.1111/jofi.13165
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    2. Pankaj K. Jain & Ayla Kayhan & Esen Onur, 2024. "Determinants of commodity market liquidity," The Financial Review, Eastern Finance Association, vol. 59(1), pages 9-30, February.
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    4. Itay Goldstein, 2023. "Information in Financial Markets and Its Real Effects," Review of Finance, European Finance Association, vol. 27(1), pages 1-32.
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    6. Ramesh Adhikari & Kyle J. Putnam, 2024. "Financial Market Stress and Commodity Returns: A Dynamic Approach," Commodities, MDPI, vol. 3(1), pages 1-23, January.
    7. Feng, Ling & Wang, Jieyu, 2023. "Random sources correlations and carbon futures pricing," International Review of Financial Analysis, Elsevier, vol. 86(C).
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