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Commodity Speculation and Commodity Investment

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  • Christopher L. Gilbert

Abstract

I distinguish between speculation and index-based investment in commodity futures stressing the differing motivations of the two groups and the differing instruments that they use. I discuss the amounts of money deployed in these activities. I document evidence of extrapolative behaviour in metals prices, consistent with speculation affecting prices, and show that in at least one market (soybeans) index-based investment has a significant and persistent price impact.

Suggested Citation

  • Christopher L. Gilbert, 2008. "Commodity Speculation and Commodity Investment," Department of Economics Working Papers 0820, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpde:0820
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    Citations

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    Cited by:

    1. Juan Ignacio Guzmán & Enrique Silva, 2018. "Copper price determination: fundamentals versus non-fundamentals," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 31(3), pages 283-300, October.
    2. van Huellen, Sophie, 2019. "Price discovery in commodity futures and cash markets with heterogeneous agents," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 1-13.
    3. Mark Cummins & Andrea Bucca, 2012. "Quantitative spread trading on crude oil and refined products markets," Quantitative Finance, Taylor & Francis Journals, vol. 12(12), pages 1857-1875, December.
    4. Gunther Capelle-Blancard & Dramane Coulibaly, 2011. "Index trading and agricultural commodity prices: A panel Granger causality analysis," International Economics, CEPII research center, issue 126-127, pages 51-71.
    5. Vijay Kumar Varadi, 2012. "An evidence of speculation in Indian commodity markets," EconStor Preprints 57430, ZBW - Leibniz Information Centre for Economics.
    6. Chiou-Wei, Song-Zan & Linn, Scott C. & Zhu, Zhen, 2014. "The response of U.S. natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 156-173.
    7. repec:kap:iaecre:v:17:y:2011:i:2:p:181-192 is not listed on IDEAS
    8. Batten, Jonathan A. & Ciner, Cetin & Lucey, Brian M., 2010. "The macroeconomic determinants of volatility in precious metals markets," Resources Policy, Elsevier, vol. 35(2), pages 65-71, June.
    9. Holtfort, Thomas & Horsch, Andreas & Schwarz, Joachim, 2022. "Economic, technological and social drivers of cryptocurrency market evolution and its managerial impact," Freiberg Working Papers 2022/01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    10. Nikolaos Sariannidis, 2011. "Stock, Energy and Currency Effects on the Asymmetric Wheat Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(2), pages 181-192, May.
    11. Ilva Isa, 2016. "Major Differences Between the Set of Rules of Accounting and Fiscal Policies in Albania," European Journal of Multidisciplinary Studies Articles, Revistia Research and Publishing, vol. 1, September.
    12. Piesse, Jenifer & Thirtle, Colin, 2009. "Three bubbles and a panic: An explanatory review of recent food commodity price events," Food Policy, Elsevier, vol. 34(2), pages 119-129, April.
    13. Robert Socha & Piotr Wdowiński, 2018. "Crude oil price and speculative activity: a cointegration analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(3), pages 263-304, September.
    14. Shikha Jha & P.V. Srinivasan, 2014. "Food price inflation, growth and poverty," Chapters, in: Raghbendra Jha & Raghav Gaiha & Anil B. Deolalikar (ed.), Handbook on Food, chapter 4, pages 72-99, Edward Elgar Publishing.
    15. Staritz, Cornelia, 2012. "Financial markets and the commodity price boom: Causes and implications for developing countries," Working Papers 30, Austrian Foundation for Development Research (ÖFSE).

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    More about this item

    Keywords

    Commodities; Speculation; Asset Allocation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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