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Attempts to detect the impact of financialization on commodity futures prices are often subject to the criticism of weak identification. This paper addresses the issue by investigating the rebalancing of the S&P Goldman Sachs Commodity Index. Investment flows caused by the rebalancing are predetermined and not based on information about futures prices, providing a clear identification to study the price impact. Results show that average futures returns are not significantly different from zero during the rebalancing period and there is no or a weak negative causal link between index investment flows and commodity futures returns. This finding is consistent with the hypothesis that uninformed and predictable order flows tend to attract natural counterparties and would not disrupt the market.


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