The “necessary evil” in Chinese commodity markets
John Hua Fan,
Di Mo and
Journal of Commodity Markets, 2022, vol. 25, issue C
Enormous capital inflows into the emerging commodity futures markets in China raised concerns about the impact of speculation. Using a broad sample of 30 commodities across sectors, this paper investigates whether the increased presence of speculators in recent years destabilizes the commodities market in China. In a portfolio framework, we find that increased speculation does not give rise to higher volatilities, elevate the cross-market correlations, nor distort the market’s association with economic fundamentals. Consistent with the literature, long-short speculators contribute positively to the price discovery by reducing the broad market volatility and cross-correlation with stocks. Overall, the cross-speculative pressure remains relatively low, and the increased speculation does not cause seemingly unrelated commodities to become correlated.
Keywords: China; Commodity; Financialization; Volatility; Co-movement; Correlation (search for similar items in EconPapers)
JEL-codes: G13 G14 G41 N25 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocoma:v:25:y:2022:i:c:s2405851321000209
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