"This book documents a curated selection of papers on the impact of index investment on commodity futures prices. The 10 papers follow the evolving speculation debate with new author forewords highlighting the contribution and impact. Essential reading for scholars and researchers interested in futures markets, commodity prices, and speculation"--
Commodity futures prices exploded in 2007-08 and concerns about a new type of participant in commodity futures markets began to emerge. Market participants, regulators, and civic organizations began raising concerns that inflows from new "commodity index" investments were driving the increases in commodity prices instead of economic fundamentals. The main argument was that unprecedented buying pressure from these speculative long-only futures traders created massive bubbles that resulted in prices substantially exceeding fundamental value.
At the time, it was not uncommon to link concerns about speculation and high prices to world hunger, food crises, and civil unrest. Naturally, this outcry resulted in numerous regulatory proposals to restrict speculation in commodity futures markets through transaction taxes, speculative position limits, and even the bizarre idea of a "virtual reserve" whereby a public agency would take futures positions opposite speculators.
At the core, these assertions raised major economic questions about the efficiency of price discovery in commodity futures markets. Moreover, these so-called remedies did not come without a potential cost. Burdensome regulations would increase compliance and risk sharing costs across the global food system -- lowering prices for producers and increasing costs to consumers.
To guide this debate, a rigorous approach was needed to understand the dynamics between prices and commodity index activity. This book documents a curated selection of papers on the impact of index investment on commodity futures prices. The chronology of the papers roughly follows the timeline of our involvement in the world-wide debate about commodity speculation as it evolved after 2007. The 10 papers follow the evolving speculation debate with new author forwards highlighting the contribution and impact. Policy-makers, researchers, and market participants will find this not only as useful documentation of the debate; but, also a natural starting point when high commodity prices inevitably create the next speculation backlash.
Daugiau informacijos
Scholars and researchers interested in futures markets, commodity prices, and speculation. Journalists interested in understanding and reporting on markets and speculation. As well as policy-makers (staff) needing references to speculation-related research. Financial firms such as Goldman Sachs and Pimco who are heavily involved in offering commodity products to investors.
Chapter 1: Intersections
Chapter 2: Devil or Angel? The Role of
Speculation in the Recent Commodity Price Boom (and Bust)
Chapter 3: New
Evidence on the Impact of Index Funds in US Grain Futures Markets
Chapter 4:
The Impact of Index and Swap Funds in Commodity Futures Markets
Chapter 5:
Testing the Masters Hypothesis in Commodity Futures Markets
Chapter 6:
Financialization and Structural Change in Commodity Futures Markets
Chapter
7: A Reappraisal of Investing in Commodity Futures Markets
Chapter 8: The
'Necessity' of New Position Limits in Agricultural Futures Markets: The
Verdict from Daily Firm-level Position Data
Chapter 9: Bubbles, Froth and
Facts: Another Look at the Masters Hypothesis in Commodity Futures Markets
Chapter 10: Mapping Algorithms, Agricultural Futures, and the Relationship
between Commodity Investment Flows and Crude Oil Futures Prices
Chapter 11:
Sunshine versus Predatory Trading Effects in Commodity Futures Markets: New
Evidence from Index Rebalancing
Chapter 12: The Order Flow Cost of Index
Rolling in Commodity Futures Markets
Chapter 13: Lessons Learned
Scott H. Irwin (Author) Scott H. Irwin holds the Laurence J. Norton Chair of Agricultural Marketing in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. He is a national and international leader in the field of agricultural economics. His research on commodity markets is widely cited by other academic researchers and is in high demand among market participants, policymakers, and the media.
Dwight R. Sanders (Author) Dwight R. Sanders is a professor in Agribusiness Economics at Southern Illinois University Carbondale (SIUC). He received his Ph.D. in Agricultural Economics and M.S. in Finance from University of Illinois in 1995. After positions with The Pillsbury Company and Darden Resaurants, he joined the faculty at SIUC where his research interests are in futures markets, forecasting, and risk management.
