The Financialization of Commodity Markets
November 25, 2013 Leave a comment
The Financialization of Commodity Markets
Ing-Haw Cheng Dartmouth College – Tuck School of Business
Wei Xiong Princeton University – Department of Economics; National Bureau of Economic Research (NBER)
October 1, 2013
Abstract:
The large inflow of investment capital to commodity futures markets in the last decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows either did or did not cause a price bubble, we critically review academic studies through the perspective of how financial investors affect risk sharing and information discovery in commodity markets. We argue that financialization has substantially changed commodity markets through these mechanisms.