Index funds do impact agricultural prices

Simone Pfuderer and Christopher L. Gilbert

No 156220, 53rd Annual Conference, Berlin, Germany, September 25-27, 2013 from German Association of Agricultural Economists (GEWISOLA)

Abstract: We use contemporaneous causality tests based on instrumental variables (IV) methods to re-examine causality from Commodity Index Trader positions to agricultural futures prices. A number of recent studies found that no Granger-causal impacts are discernible for agricultural commodity markets. Market microstructure theory suggests that the impact of index-based trading on agricultural futures markets should be contemporaneous and the data should fail to support Granger-causality despite the presence of a contemporaneous causal. IV-based tests for contemporaneous causality provide evidence for impacts in six of the twelve commodities. These are predominantly the less active contracts as measured by open interest.

Keywords: Demand and Price Analysis; Financial Economics (search for similar items in EconPapers)
Pages: 2
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:ags:gewi13:156220

DOI: 10.22004/ag.econ.156220

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