Financialization in Commodity Markets: Disentangling the Crisis from the Style Effect

Zeno Adams and Thorsten Glück

VfS Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order from Verein für Socialpolitik / German Economic Association

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.

JEL-codes: G01 G13 Q02 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:vfsc13:79949

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