Index funds' financial speculation with agricultural commodities: Functioning. Effects
Thomas Glauben,
Sören Prehn,
Ingo Pies,
Matthias Georg Will,
Jens-Peter Loy,
Alfons Balmann (),
Bernhard Brümmer,
Thomas Heckelei,
Heinrich Hockmann,
Dieter Kirschke,
Ulrich Koester,
Rolf Langhammer,
Klaus Salhofer,
Peter Michael Schmitz,
Stefan Tangermann,
Harald von Witzke and
Justus Wesseler
No 12e, IAMO Policy Briefs from Leibniz Institute of Agricultural Development in Transition Economies (IAMO)
Abstract:
For quite some time long-only index funds have been suspected of being responsible for price increases in agricultural futures markets. This suspicion has prompted demands to drastically limit long-only index funds' scope of activity. Such demands and their underlying diagnoses, however, contradict the current state of scientific knowledge. To date, the empirically oriented literature has not provided conclusive evidence that long-only index funds with their futures transactions significantly have increased the level or volatility of agricultural commodity prices. Indeed, recent theoretical works suggest that long-only index funds, pursuant to their investment strategy, rather stabilize agricultural commodity prices and fulfill an important collateralization and competition function in agricultural futures markets. The commitment to these funds reduces risk premiums and thus enables food producers to hedge against price fluctuations at lower costs. Mitigated risk premiums motivate farmers to put larger parts of their harvests into storage, which counteracts seasonal price fluctuations. To safeguard sustainable global food supply, long-only index funds should not be subjected to stricter market entry regulations.
Date: 2014
New Economics Papers: this item is included in nep-agr
References: Add references at CitEc
Citations:
Downloads: (external link)
https://www.econstor.eu/bitstream/10419/100093/1/792623495.pdf (application/pdf)
Related works:
Working Paper: Index funds' financial speculation with agricultural commodities: Functioning. Effects (2014) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:zbw:iamopb:12e
Access Statistics for this paper
More papers in IAMO Policy Briefs from Leibniz Institute of Agricultural Development in Transition Economies (IAMO) Contact information at EDIRC.
Bibliographic data for series maintained by ZBW - Leibniz Information Centre for Economics ().