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Commodity Speculation and Commodity Investment

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  • Christopher L. Gilbert

Abstract

I distinguish between speculation and index-based investment in commodity futures stressing the differing motivations of the two groups and the differing instruments that they use. I discuss the amounts of money deployed in these activities. I document evidence of extrapolative behaviour in metals prices, consistent with speculation affecting prices, and show that in at least one market (soybeans) index-based investment has a significant and persistent price impact.

Suggested Citation

  • Christopher L. Gilbert, 2008. "Commodity Speculation and Commodity Investment," Department of Economics Working Papers 0820, Department of Economics, University of Trento, Italia.
    • Handle: RePEc:trn:utwpde:0820
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    Cited by:

    1. Juan Ignacio Guzmán & Enrique Silva, 2018. "Copper price determination: fundamentals versus non-fundamentals," Mineral Economics, Springer;Raw Materials Group (RMG);Luleå University of Technology, vol. 31(3), pages 283-300, October.
    2. van Huellen, Sophie, 2019. "Price discovery in commodity futures and cash markets with heterogeneous agents," Journal of International Money and Finance, Elsevier, vol. 95(C), pages 1-13.
    3. Mark Cummins & Andrea Bucca, 2012. "Quantitative spread trading on crude oil and refined products markets," Quantitative Finance, Taylor & Francis Journals, vol. 12(12), pages 1857-1875, December.
    4. Gunther Capelle-Blancard & Dramane Coulibaly, 2011. "Index trading and agricultural commodity prices: A panel Granger causality analysis," International Economics, CEPII research center, issue 126-127, pages 51-71.
    5. Vijay Kumar Varadi, 2012. "An evidence of speculation in Indian commodity markets," EconStor Preprints 57430, ZBW - Leibniz Information Centre for Economics.
    6. Chiou-Wei, Song-Zan & Linn, Scott C. & Zhu, Zhen, 2014. "The response of U.S. natural gas futures and spot prices to storage change surprises: Fundamental information and the effect of escalating physical gas production," Journal of International Money and Finance, Elsevier, vol. 42(C), pages 156-173.
    7. repec:kap:iaecre:v:17:y:2011:i:2:p:181-192 is not listed on IDEAS
    8. Batten, Jonathan A. & Ciner, Cetin & Lucey, Brian M., 2010. "The macroeconomic determinants of volatility in precious metals markets," Resources Policy, Elsevier, vol. 35(2), pages 65-71, June.
    9. Holtfort, Thomas & Horsch, Andreas & Schwarz, Joachim, 2022. "Economic, technological and social drivers of cryptocurrency market evolution and its managerial impact," Freiberg Working Papers 2022/01, TU Bergakademie Freiberg, Faculty of Economics and Business Administration.
    10. Nikolaos Sariannidis, 2011. "Stock, Energy and Currency Effects on the Asymmetric Wheat Market," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 17(2), pages 181-192, May.
    11. Matilda Pajo, 2021. "Consequences of the Totalitarian past on the Albanian Post- Communist Society," European Journal of Multidisciplinary Studies Articles, Revistia Research and Publishing, vol. 1, September.
    12. Piesse, Jenifer & Thirtle, Colin, 2009. "Three bubbles and a panic: An explanatory review of recent food commodity price events," Food Policy, Elsevier, vol. 34(2), pages 119-129, April.
    13. Robert Socha & Piotr Wdowiński, 2018. "Crude oil price and speculative activity: a cointegration analysis," Central European Journal of Economic Modelling and Econometrics, Central European Journal of Economic Modelling and Econometrics, vol. 10(3), pages 263-304, September.
    14. Shikha Jha & P.V. Srinivasan, 2014. "Food price inflation, growth and poverty," Chapters, in: Raghbendra Jha & Raghav Gaiha & Anil B. Deolalikar (ed.), Handbook on Food, chapter 4, pages 72-99, Edward Elgar Publishing.
    15. Staritz, Cornelia, 2012. "Financial markets and the commodity price boom: Causes and implications for developing countries," Working Papers 30, Austrian Foundation for Development Research (ÖFSE).

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    More about this item

    Keywords

    Commodities; Speculation; Asset Allocation;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions

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