Agricultural commodities and financial markets

Matteo Modena

MPRA Paper from University Library of Munich, Germany

Abstract: The sharp raise of the price of agricultural commodities between 2006 and 2008 seems to have a rationalization that goes beyond the mere interaction between supply and demand. Data evidence suggests that financial factors, rather than real determinants, played an important role in determining the dynamics of agricultural commodity prices. In particular, there seems to be a common source underlying food price changes and the financial markets dynamics. Evidence based on principal components supports the view that large fluctuations of food commodity prices can be related to portfolios adjustments of financial agents. We find robust evidence of a strong inverse correlation between financial markets’ returns and the movements of food commodity prices. Moreover, such an inverse relationship has clearly emerged during the recent financial crisis.

Keywords: International Financial Markets; Commodity Prices; Portfolio Diversification (search for similar items in EconPapers)
JEL-codes: C10 E31 G11 G15 (search for similar items in EconPapers)
Date: 2011-07-30, Revised 2011-09-30
New Economics Papers: this item is included in nep-agr and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
https://mpra.ub.uni-muenchen.de/36416/1/MPRA_paper_36416.pdf original version (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:36416

Access Statistics for this paper

More papers in MPRA Paper from University Library of Munich, Germany Ludwigstraße 33, D-80539 Munich, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Joachim Winter (winter@lmu.de).