Speculators, Commodities and Cross-Market Linkages

Posted: 9 Jun 2014

See all articles by Bahattin Buyuksahin

Bahattin Buyuksahin

CoMeX Consulting and Advising

Michel A. Robe

University of Richmond - E. Claiborne Robins School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: November 2012

Abstract

We use a unique, non-public dataset of trader positions in 17 U.S. commodity futures markets to provide novel evidence on those markets' financialization in the past decade. We then show that the correlation between the rates of return on investible commodity and equity indices rises amid greater participation by speculators generally, hedge funds especially, and hedge funds that hold positions in both equity and commodity futures markets in particular. We find no such relationship for commodity swap dealers, including index traders (CITs). The predictive power of hedge fund positions is weaker in periods of generalized financial market stress. Our results support the notion that who trades helps predict the joint distribution of commodity and equity returns. We find qualitatively similar but statistically weaker results using a proxy for hedge fund activity based on publicly available data.

Suggested Citation

Buyuksahin, Bahattin and Robe, Michel A., Speculators, Commodities and Cross-Market Linkages (November 2012). Journal of International Money and Finance, Vol. 42, 2014, Available at SSRN: https://ssrn.com/abstract=2447285

Bahattin Buyuksahin

CoMeX Consulting and Advising ( email )

Washington, DC
United States
2022904253 (Phone)

Michel A. Robe (Contact Author)

University of Richmond - E. Claiborne Robins School of Business ( email )

Richmond, VA 23173
United States

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