Index Investment and Financialization of Commodities
This paper finds that, concurrent with the rapid growing index investment in commodities markets since early 2000s, futures prices of different commodities in the US became increasingly correlated with each other and this trend was significantly more pronounced for commodities in the two popular GSCI and DJ-UBS commodity indices. This finding reflects a financialization process of commodities markets and helps explain the synchronized price boom and bust of a broad set of seemingly unrelated commodities in the US in 2006-2008. In contrast, such commodity price comovements were absent in China, which refutes growing commodity demands from emerging economies as the driver.
|Date of creation:||Sep 2010|
|Date of revision:|
|Publication status:||published as “Index Investment and Financialization of Commodities” (with Ke Tang) Financial Analysts Journal , 2012, Vol. 68, 54-74.|
|Contact details of provider:|| Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.|
Web page: http://www.nber.org
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Annastiina Silvennoinen & Susan Thorp, 2010.
"Financialization, Crisis and Commodity Correlation Dynamics,"
Research Paper Series
267, Quantitative Finance Research Centre, University of Technology, Sydney.
- Silvennoinen, Annastiina & Thorp, Susan, 2013. "Financialization, crisis and commodity correlation dynamics," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 24(C), pages 42-65.
- Bessembinder, Hendrik, 1992. "Systematic Risk, Hedging Pressure, and Risk Premiums in Futures Markets," Review of Financial Studies, Society for Financial Studies, vol. 5(4), pages 637-67.
- Michael J. Roberts & Wolfram Schlenker, 2013.
"Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate,"
American Economic Review,
American Economic Association, vol. 103(6), pages 2265-95, October.
- Michael J. Roberts & Wolfram Schlenker, 2010. "Identifying Supply and Demand Elasticities of Agricultural Commodities: Implications for the US Ethanol Mandate," NBER Working Papers 15921, National Bureau of Economic Research, Inc.
- Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2007.
"The Fundamentals of Commodity Futures Returns,"
NBER Working Papers
13249, National Bureau of Economic Research, Inc.
- Erkko Etula, 2013.
"Broker-Dealer Risk Appetite and Commodity Returns,"
Journal of Financial Econometrics,
Society for Financial Econometrics, vol. 11(3), pages 486-521, June.
- Geert Bekaert & Campbell R. Harvey, 1995.
"Emerging Equity Market Volatility,"
NBER Working Papers
5307, National Bureau of Economic Research, Inc.
- Kilian, Lutz, 2006.
"Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market,"
CEPR Discussion Papers
5994, C.E.P.R. Discussion Papers.
- Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-69, June.
- Acharya, Viral V & Lochstoer, Lars & Ramadorai, Tarun, 2009.
"Limits to Arbitrage and Hedging: Evidence from Commodity Markets,"
CEPR Discussion Papers
7327, C.E.P.R. Discussion Papers.
- Acharya, Viral V. & Lochstoer, Lars A. & Ramadorai, Tarun, 2013. "Limits to arbitrage and hedging: Evidence from commodity markets," Journal of Financial Economics, Elsevier, vol. 109(2), pages 441-465.
- Viral V. Acharya & Lars A. Lochstoer & Tarun Ramadorai, 2011. "Limits to Arbitrage and Hedging: Evidence from Commodity Markets," NBER Working Papers 16875, National Bureau of Economic Research, Inc.
- Gary Gorton & K. Rouwenhorst, 2004.
"Facts and Fantasies about Commodity Futures,"
Yale School of Management Working Papers
amz2619, Yale School of Management, revised 01 Mar 2005.
- de Roon, F.A. & Nijman, T.E. & Veld, C.H., 2000.
"Hedging pressure effects in futures markets,"
Other publications TiSEM
3dfe2c9f-3194-4751-9b34-1, Tilburg University, School of Economics and Management.
When requesting a correction, please mention this item's handle: RePEc:nbr:nberwo:16385. 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: ()
If references are entirely missing, you can add them using this form.