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Does Futures Speculation Destabilize Spot Prices? New Evidencefor Commodity Markets

Published online by Cambridge University Press:  26 January 2015

Martin T. Bohl  and
Patrick M. Stephan
Martin T. Bohl
Affiliation:
University of Münster, Münster, Germany
Patrick M. Stephan
Affiliation:
University of Münster, Münster, Germany
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Abstract

Motivated by repeated price spikes and crashes over the last decade, weinvestigate whether the growing market shares of futures speculatorsdestabilize commodity spot prices. We approximate conditional volatility andanalyze how it is affected by speculative open interest. In this context, wesplit our sample into two equally long subperiods and document whether thespeculative impact on conditional volatility increases. With respect to sixheavily traded agricultural and energy commodities, we do not find robustevidence that this is the case. We thus conclude that the financializationof raw material markets does not make them more volatile.

Keywords

agricultural and energy commoditiesspeculationvolatilityG10G18Q14Q18Q40
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 45 , Issue 4 , November 2013 , pp. 595 - 616
Copyright
Copyright © Southern Agricultural Economics Association 2013

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