Financialization and Structural Change in Commodity Futures Markets

The first decade of the 21st century has perhaps witnessed more structural change in commodity futures markets than all previous decades combined. Not only have trading volumes and open interest increased markedly, but this time period also saw historic changes in both trading and participants. The available literature indicates that the irrational and harmful impacts of the structural changes in commodity futures markets over the last decade have been minimal. In particular, there is little evidence that passive index investment caused a massive bubble in commodity futures prices. There is intriguing evidence of several other rational and beneficial impacts of the structural changes over the last decade. In particular, the expanding market participation may have decreased risk premiums, and hence, the cost of hedging, reduced price volatility, and better integrated commodity markets with financial markets.


Editor(s):
Wetzstein, Michael E.
Subject(s):
Issue Date:
2012-08
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/130280
Published in:
Journal of Agricultural and Applied Economics, Volume 44, Number 3
Page range:
371-396
Total Pages:
26
JEL Codes:
D84; G12; G13; G14; Q13; Q41




 Record created 2017-04-01, last modified 2017-08-26

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