Financialization in commodity markets: A passing trend or the new normal?

Zeno Adams and Thorsten Glück

Journal of Banking & Finance, 2015, vol. 60, issue C, 93-111

Abstract: In this paper, we show that large inflows into commodity investments, a recent phenomenon known as financialization, has changed the behavior and dependence structure between commodities and the general stock market. The common perception is that the increase in comovements is the result of distressed investors selling both assets during the 2007–2009 financial crisis. We show that financial distress alone cannot explain the size and persistence of comovements. Instead, we argue that commodities have become an investment style for institutional investors. Given that institutional investors continue to target funds into commodities, we predict spillovers between commodities and the stock market to remain high in the future.

Keywords: Financialization; Commodities; Risk spillovers; Style investing; State-dependent sensitivity VaR (search for similar items in EconPapers)
JEL-codes: G01 G13 Q02 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (214)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:60:y:2015:i:c:p:93-111

DOI: 10.1016/j.jbankfin.2015.07.008

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