IDEAS home Printed from https://ideas.repec.org/a/cii/cepiie/2011-q2-3-126-127-4.html
   My bibliography  Save this article

Index trading and agricultural commodity prices: A panel Granger causality analysis

Author

Listed:
  • Gunther Capelle-Blancard
  • Dramane Coulibaly

Abstract

This paper investigates the causality between prices and index-based trading activity for twelve grain, livestock, and other soft commodity futures markets. We use panel Granger causality estimations based on SUR systems and Wald tests with market-specific bootstrap critical values in order to take into account the possible contemporaneous dependence across markets. Our results confirm that there is no causality between index-based positions and commodity futures prices.

Suggested Citation

  • 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.
    • Handle: RePEc:cii:cepiie:2011-q2-3-126-127-4
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S2110701713600360
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Jeffrey A Frankel & Andrew K Rose, 2010. "Determinants of Agricultural and Mineral Commodity Prices," RBA Annual Conference Volume (Discontinued), in: Renée Fry & Callum Jones & Christopher Kent (ed.),Inflation in an Era of Relative Price Shocks, Reserve Bank of Australia.
    2. Hart, Oliver D & Kreps, David M, 1986. "Price Destabilizing Speculation," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 927-952, October.
    3. Ke Tang & Wei Xiong, 2012. "Index Investment and the Financialization of Commodities," Financial Analysts Journal, Taylor & Francis Journals, vol. 68(6), pages 54-74, November.
    4. Gunther Capelle-Blancard, 2010. "Are Derivatives Dangerous? A Literature Survey," International Economics, CEPII research center, issue 123, pages 67-89.
    5. Guesnerie, Roger & Rochet, Jean-Charles, 1993. "(De)stabilizing speculation on futures markets : An alternative view point," European Economic Review, Elsevier, vol. 37(5), pages 1043-1063, June.
    6. Dietrich Domanski & Alexandra Heath, 2007. "Financial investors and commodity markets," BIS Quarterly Review, Bank for International Settlements, March.
    7. Anne E. Peck, 1976. "Futures Markets, Supply Response, and Price Stability," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 90(3), pages 407-423.
    8. Tomek, William G., 1971. "A Note on Historical Wheat Prices and Futures Trading," Food Research Institute Studies, Stanford University, Food Research Institute, vol. 10(1), pages 1-5.
    9. Dwight R. Sanders & Scott H. Irwin, 2010. "A speculative bubble in commodity futures prices? Cross‐sectional evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 41(1), pages 25-32, January.
    10. Gary Gorton & K. Geert Rouwenhorst, 2004. "Facts and Fantasies about Commodity Futures," NBER Working Papers 10595, National Bureau of Economic Research, Inc.
    11. Dumitrescu, Elena-Ivona & Hurlin, Christophe, 2012. "Testing for Granger non-causality in heterogeneous panels," Economic Modelling, Elsevier, vol. 29(4), pages 1450-1460.
    12. V. V. Chari & Ravi Jagannathan & Larry Jones, 1990. "Price Stability and Futures Trading in Commodities," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 105(2), pages 527-534.
    13. B. Wade Brorsen & Charles M. Oellermann & Paul L. Farris, 1989. "The live cattle futures market and daily cash price movements," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 9(4), pages 273-282, August.
    14. Fleming, Jeff & Ostdiek, Barbara, 1999. "The impact of energy derivatives on the crude oil market," Energy Economics, Elsevier, vol. 21(2), pages 135-167, April.
    15. Masahiro Kawai, 1983. "Spot and Futures Prices of Nonstorable Commodities Under Rational Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(2), pages 235-254.
    16. Turnovsky, Stephen J, 1983. "The Determination of Spot and Futures Prices with Storable Commodities," Econometrica, Econometric Society, vol. 51(5), pages 1363-1387, September.
    17. Stein, Jeremy C, 1987. "Informational Externalities and Welfare-Reducing Speculation," Journal of Political Economy, University of Chicago Press, vol. 95(6), pages 1123-1145, December.
    18. Hernandez, Manuel & Torero, Maximo, 2010. "Examining the dynamic relationship between spot and future prices of agricultural commodities," IFPRI discussion papers 988, International Food Policy Research Institute (IFPRI).
    19. Janet S. Netz, 1995. "The Effect of Futures Markets and Corners on Storage and Spot Price Variability," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(1), pages 182-193.
    20. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    21. Robert D. Weaver & Aniruddha Banerjee, 1990. "Does futures trading destabilize cash prices? Evidence for U. S. live beef cattle," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 10(1), pages 41-60, February.
    22. Gunther Capelle-Blancard, 2010. "Are derivatives dangerous?," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00605908, HAL.
    23. Toda, Hiro Y. & Yamamoto, Taku, 1995. "Statistical inference in vector autoregressions with possibly integrated processes," Journal of Econometrics, Elsevier, vol. 66(1-2), pages 225-250.
    24. Konya, Laszlo, 2006. "Exports and growth: Granger causality analysis on OECD countries with a panel data approach," Economic Modelling, Elsevier, vol. 23(6), pages 978-992, December.
    25. Danthine, Jean-Pierre, 1978. "Information, futures prices, and stabilizing speculation," Journal of Economic Theory, Elsevier, vol. 17(1), pages 79-98, February.
    26. Christopher L. Gilbert, 2008. "Commodity Speculation and Commodity Investment," Department of Economics Working Papers 0820, Department of Economics, University of Trento, Italia.
    27. Stewart Mayhew, 2002. "Competition, Market Structure, and Bid‐Ask Spreads in Stock Option Markets," Journal of Finance, American Finance Association, vol. 57(2), pages 931-958, April.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Méndez Parra, Maximiliano, 2015. "Futures prices, trade and domestic supply of agricultural commodities," Economics PhD Theses 0115, Department of Economics, University of Sussex Business School.
    2. Ahmet Enis Kocagil, 1997. "Does futures speculation stabilize spot prices? Evidence from metals markets," Applied Financial Economics, Taylor & Francis Journals, vol. 7(1), pages 115-125.
    3. Arzu Uluc, 2018. "Stabilising House Prices: the Role of Housing Futures Trading," The Journal of Real Estate Finance and Economics, Springer, vol. 56(4), pages 587-621, May.
    4. Fizaine, Florian, 2015. "Minor metals and organized markets: News highlights about the consequences of establishing a futures market in a thin market with a dual trading price system," Resources Policy, Elsevier, vol. 46(P2), pages 59-70.
    5. Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.
    6. Baldi, Lucia & Peri, Massimo & Vandone, Daniela, 2011. "Price Discovery in Agricultural Commodities: The Shifting Relationship Between Spot and Future Prices," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114237, European Association of Agricultural Economists.
    7. Lusheng Shao & Derui Wang & Xiaole Wu, 2022. "Competitive trading in forward and spot markets under yield uncertainty," Production and Operations Management, Production and Operations Management Society, vol. 31(9), pages 3400-3418, September.
    8. Girardi, Daniele, 2011. "Do financial investors affect commodity prices? The case of Hard Red Winter Wheat," MPRA Paper 35670, University Library of Munich, Germany.
    9. Bohl, Martin T. & Diesteldorf, Jeanne & Siklos, Pierre L., 2015. "The effect of index futures trading on volatility: Three markets for Chinese stocks," China Economic Review, Elsevier, vol. 34(C), pages 207-224.
    10. Mihaela Nicolau, 2012. "Do Spot Prices Move towards Futures Prices? A study on Crude Oil Market," Acta Universitatis Danubius. OEconomica, Danubius University of Galati, issue 5(5), pages 166-176, October.
    11. Bassam Fattouh & Lavan Mahadeva, 2014. "Causes and Implications of Shifts in Financial Participation in Commodity Markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 34(8), pages 757-787, August.
    12. Patrick Artus & Claude Jessua, 1996. "La spéculation," Revue Économique, Programme National Persée, vol. 47(3), pages 409-424.
    13. Jian Li & Jean‐Paul Chavas, 2023. "A dynamic analysis of the distribution of commodity futures and spot prices," American Journal of Agricultural Economics, John Wiley & Sons, vol. 105(1), pages 122-143, January.
    14. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    15. Areal, Francisco José & Balcombe, Kevin & Rapsomanikis, George, 2016. "Testing for bubbles in agriculture commodity markets," Economia Agraria y Recursos Naturales, Spanish Association of Agricultural Economists, vol. 16(01), June.
    16. Holmberg, Pär & Willems, Bert, 2015. "Relaxing competition through speculation: Committing to a negative supply slope," Journal of Economic Theory, Elsevier, vol. 159(PA), pages 236-266.
    17. Hua, Renhai & Liu, Qingfu & Tse, Yiuman, 2016. "Extended trading in Chinese index markets: Informed or uninformed?," Pacific-Basin Finance Journal, Elsevier, vol. 36(C), pages 112-122.
    18. Changyun Wang, 2002. "The effect of net positions by type of trader on volatility in foreign currency futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 22(5), pages 427-450, May.
    19. Henry L. Bryant & David A. Bessler & Michael S. Haigh, 2006. "Causality in futures markets," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 26(11), pages 1039-1057, November.
    20. Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.

    More about this item

    Keywords

    Speculation; Financialization; Food Crisis; Soft Commodities; Index Funds; Panel Granger Causality;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • Q10 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - General

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cii:cepiie:2011-q2-3-126-127-4. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: the person in charge (email available below). General contact details of provider: https://edirc.repec.org/data/cepiifr.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.