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The Impact of Index and Swap Funds on Commodity Futures Markets: Preliminary Results

Author

Listed:
  • Scott H. Irwin

    (University of Illinois)

  • Dwight R. Sanders

    (University of Southern Illinois)

Abstract

This preliminary study examines the impact of index and swap fund participation in agricultural and energy commodity futures markets. Based on new data and empirical analysis the study finds that index funds did not cause a bubble in agricultural futures prices. Using Granger causality methods the study finds no statistically significant relationship between changes in index and swap fund positions and increased market volatility. The evidence is strongest for agricultural futures markets because the data on index trader positions are measured with reasonable accuracy. The evidence is not as strong in the two energy markets examined here because of considerable uncertainty about the degree to which the available data actually reflect index trader positions in these markets.

Suggested Citation

  • Scott H. Irwin & Dwight R. Sanders, 2010. "The Impact of Index and Swap Funds on Commodity Futures Markets: Preliminary Results," OECD Food, Agriculture and Fisheries Papers 27, OECD Publishing.
  • Handle: RePEc:oec:agraaa:27-en
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    File URL: http://dx.doi.org/10.1787/5kmd40wl1t5f-en
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    Keywords

    agricultural futures markets; futures price volatility; index funds and swaps; speculation; speculative bubbles;

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