Can we still blame index funds for the price movements in the agricultural commodities market?

Rafael Baptista Palazzi, Antonio Carlos Figueiredo Pinto, Marcelo Klotzle and Erick Meira De Oliveira

International Review of Economics & Finance, 2020, vol. 65, issue C, 84-93

Abstract: The role of speculation in the commodities market is still controversial. While several studies use linear models of causality to explain the relationship between speculation and price movements, there is a gap regarding the application of these analyses to detect causality. We compare linear and nonlinear methodologies to analyze whether speculation affects commodities’ price or if speculators are trend-followers, not only in the bullish market but also in the bearish one. The results suggest that there is no pattern in the cause and effect relationship, so even more sophisticated models are not capable of capturing causal effects.

Keywords: Agricultural commodities; Speculation; Index funds; Nonlinear causality (search for similar items in EconPapers)
JEL-codes: G15 Q02 (search for similar items in EconPapers)
Date: 2020
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Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:65:y:2020:i:c:p:84-93

DOI: 10.1016/j.iref.2019.10.001

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