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Commodity Index Investing: Speculation or Diversification?

27 Pages Posted: 5 Jul 2010  

Hans R. Stoll

Vanderbilt University - Finance

Robert E. Whaley

Vanderbilt University - Finance

Date Written: July 2, 2010

Abstract

A number of seemingly unrelated commodities experienced simultaneous price spikes recently. Congress investigated the increase in prices and concluded that the price increases were not attributable to fundamentals but rather to commodity index investing. The purpose of this study is to evaluate whether commodity index investing is a disruptive force in commodity futures market. We conclude that: (a) due to its passive, long-only nature, commodity index investing is not speculation and (b) commodity index flows, whether due to rolling over existing futures positions or establishing new ones, have little impact on futures prices.

Keywords: commodity index investing, speculation, futures prices

Suggested Citation

Stoll, Hans R. and Whaley, Robert E., Commodity Index Investing: Speculation or Diversification? (July 2, 2010). Available at SSRN: https://ssrn.com/abstract=1633908 or http://dx.doi.org/10.2139/ssrn.1633908

Hans R. Stoll

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-322-3671 (Phone)
615-343-7177 (Fax)

Robert E. Whaley (Contact Author)

Vanderbilt University - Finance ( email )

401 21st Avenue South
Nashville, TN 37203
United States
615-343-7747 (Phone)
615-376-8879 (Fax)

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