57 Pages Posted: 13 Nov 2010 Last revised: 14 Nov 2012
Date Written: November 8, 2012
We use a unique, non-public dataset of individual 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 commodities and equities rises amid greater participation by speculators generally, hedge funds especially, and funds that trade in both equity and commodity markets in particular. We find no such relationship for other kinds of commodity futures traders. The predictive power of hedge fund positions is weaker in periods of generalized financial market stress. Our results indicate that who trades helps predict the joint distribution of commodity and equity returns.
Keywords: Financialization, Cross-Market Linkages, Commodities, Equities, Hedge funds, Index funds, Dynamic conditional correlations (DCC)
JEL Classification: G10, G12, G13, G23
Suggested Citation: Suggested Citation
Buyuksahin, Bahattin and Robe, Michel A., Speculators, Commodities and Cross-Market Linkages (November 8, 2012). Available at SSRN: https://ssrn.com/abstract=1707103 or http://dx.doi.org/10.2139/ssrn.1707103