Measuring Financial Investor Presence Through Term Structure Deflection
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2021
Author(s)
Abstract
We estimate the presence of financial investors in commodity futures markets from deflections in the term structure. We argue that large-scale inflows from financial investors cause systematic deviations in nearby futures contracts that reflect excessive buying pressure in commodities. We compare this new speculation indicator to popular existing measures including reported CFTC data and the Hamilton and Wu (2014) risk premium. We find substantial financial investor presence in commodity markets from 2004 to 2014. We show that our new speculation measure is better at explaining the variation in crude oil volatility than other existing measures.
Language
English
Keywords
Termstructure
deflection
financialization
spline interpolation
HSG Classification
contribution to scientific community
HSG Profile Area
SOF - System-wide Risk in the Financial System
Publisher
SoF-HSG
Publisher place
St.Gallen
Volume
2021/08
Number
08
Pages
35
Subject(s)
Contact Email Address
zeno.adams@unisg.ch
Eprints ID
263131
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21_08_SBF_Adams_Collot_Kirilenko_Measuring Financial Investor Presence through Term Structure Deflection.pdf
Size
599.85 KB
Format
Adobe PDF
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