Financialization in Commodity Markets: A Passing Trend or the New Normal?
Series
School of Finance Working Paper Series
Type
working paper
Date Issued
2014
Author(s)
Abstract
In this paper, we show that large inflows into commodity investments, a recent phenomenon known as financialization, has changed the behavior and dependence structure between commodities and the general stock market. The common perception is that the increase in comovements is the result of distressed investors selling both assets during the 2007-2009 financial crisis. We show that financial distress alone cannot explain the size and persistence of comovements. Instead, we argue that commodities have become an investment style for institutional investors. Given that institutional investors continue to target funds into commodities, we predict spillovers between commodities and the stock market to remain high in the future.
Language
English
Keywords
Financialization
commodities
risk spillovers
style investing
state-dependent sensitivity VaR
HSG Classification
contribution to scientific community
Refereed
No
Publisher
SoF - HSG
Publisher place
St. Gallen
Number
2014/13
Subject(s)
Eprints ID
234616
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Name
14_13_Adams et al_Financialization in Commodity Markets.pdf
Size
629.49 KB
Format
Adobe PDF
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