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A Model of Financialization of Commodities

The Journal of finance (New York), 2016-08, Vol.71 (4), p.1511-1556 [Peer Reviewed Journal]

2016 American Finance Association ;2016 the American Finance Association ;Copyright Blackwell Publishers Inc. Aug 2016 ;ISSN: 0022-1082 ;EISSN: 1540-6261 ;DOI: 10.1111/jofi.12408 ;CODEN: JLFIAN

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  • Title:
    A Model of Financialization of Commodities
  • Author: BASAK, SULEYMAN ; PAVLOVA, ANNA
  • Subjects: Commodities ; Commodity futures ; Commodity prices ; Economic indices ; Economic models ; Financial economics ; Futures market ; Institutional investments ; Investors ; Market prices ; Stock markets ; Studies ; Supply
  • Is Part Of: The Journal of finance (New York), 2016-08, Vol.71 (4), p.1511-1556
  • Description: We analyze how institutional investors entering commodity futures markets, referred to as the financialization of commodities, affect commodity prices. Institutional investors care about their performance relative to a commodity index. We find that all commodity futures prices, volatilities, and correlations go up with financialization, but more so for index futures than for nonindex futures. The equity-commodity correlations also increase. We demonstrate how financial markets transmit shocks not only to futures prices but also to commodity spot prices and inventories. Spot prices go up with financialization, and shocks to any index commodity spill over to all storable commodity prices.
  • Publisher: Cambridge: Blackwell Publishing Ltd
  • Language: English
  • Identifier: ISSN: 0022-1082
    EISSN: 1540-6261
    DOI: 10.1111/jofi.12408
    CODEN: JLFIAN
  • Source: Alma/SFX Local Collection
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