Index Investment and Financialization of Commodities / Ke Tang, Wei Xiong.

Format:

Book

Author/Creator:

Tang, Ke.

Contributor:

National Bureau of Economic Research.

Xiong, Wei.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16385.

NBER working paper series no. w16385

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

This paper finds that, concurrent with the rapid growing index investment in commodities markets since early 2000s, futures prices of different commodities in the US became increasingly correlated with each other and this trend was significantly more pronounced for commodities in the two popular GSCI and DJ-UBS commodity indices. This finding reflects a financialization process of commodities markets and helps explain the synchronized price boom and bust of a broad set of seemingly unrelated commodities in the US in 2006-2008. In contrast, such commodity price comovements were absent in China, which refutes growing commodity demands from emerging economies as the driver.

Notes:

Print version record

September 2010.