Has Crude Oil Become a Financial Asset? Evidence from Ten Years of Financialization

Zeno Adams () and Maria Kartsakli ()

No 1710, Working Papers on Finance from University of St. Gallen, School of Finance

Abstract: The financialization of crude oil markets over the last decade has changed the behavior of oil prices in fundamental ways. In this paper, we uncover the gradual transformation of crude oil from a physical to a financial asset. Although economic demand and supply factors continue to play an important role, recent indicators associated with financialization have emerged since 2008. We show that financial variables have become the main driving factors explaining the variation in crude oil returns and volatility today. Our findings have important implications for portfolio analysis and for the effectiveness of hedging in crude oil markets.

Keywords: Crude Ois; Financialization; R-squared Decomposition (search for similar items in EconPapers)
JEL-codes: G14 Q40 Q41 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2017-06
New Economics Papers: this item is included in nep-ene and nep-rmg
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Citations: View citations in EconPapers (12)

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Persistent link: https://EconPapers.repec.org/RePEc:usg:sfwpfi:2017:10

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