How index investment impacts commodities: A story about the financialization of agricultural commodities

Camille Aït-Youcef ()
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Camille Aït-Youcef: BETA - Bureau d'Économie Théorique et Appliquée - INRA - Institut National de la Recherche Agronomique - UNISTRA - Université de Strasbourg - UL - Université de Lorraine - CNRS - Centre National de la Recherche Scientifique

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Abstract: This paper focuses on the impact of financial investors on agricultural prices, a phenomenon known as the financialization. In this aim, we check whether financial mechanisms drive extreme values and the mean of agricultural returns in the same way. Relying on the Threshold AutoRegressive Quantile (TQAR) methodology, we find evidence of reinforcement linkages between equity and agricultural markets since 2004, corresponding to the rise in inflows of institutional investors in commodity markets. These results show that agents impact more deeply commodity markets when the commodity index value is high. In addition, in extreme quantiles (0.75 and 0.90) of agricultural returns, the relationship between agricultural and stock returns is always significant when the commodity index return is in the higher regime. This finding suggests that, stock markets had a greater impact on agricultural price dynamics during the extreme movements which occurred during the 2007-2008 financial crisis, highlighting a potential influence of financial markets on the financialization of commodities.

Keywords: Agricultural commodities; Stock markets; Financialization; TQAR (search for similar items in EconPapers)
Date: 2019-08-31
Note: View the original document on HAL open archive server: https://hal.science/hal-03484371v1
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Published in Economic Modelling, 2019, 80, pp.23 - 33. ⟨10.1016/j.econmod.2018.04.007⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-03484371

DOI: 10.1016/j.econmod.2018.04.007

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