Does Futures Speculation Destabilize Spot Prices? New Evidence for Commodity Markets

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the growing market shares of futures speculators destabilize commodity spot prices. We approximate conditional volatility and analyze how it is affected by speculative open interest. In this context, we split our sample into two equally long subperiods and document whether the speculative impact on conditional volatility increases. With respect to six heavily traded agricultural and energy commodities, we do not find robust evidence that this is the case.We thus conclude that the financialization of raw material markets does not make them more volatile.


Editor(s):
Marchant, Mary A.
Bosch, Darrell J.
Issue Date:
Nov 01 2013
Publication Type:
Journal Article
Record Identifier:
http://ageconsearch.umn.edu/record/157413
PURL Identifier:
http://purl.umn.edu/157413
Published in:
Journal of Agricultural and Applied Economics, Volume 45, Number 4
Page range:
595-616
Total Pages:
21
JEL Codes:
G10; G18; Q14; Q18; Q40
Series Statement:
45
4




 Record created 2017-04-01, last modified 2018-01-22

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