Do Commodity Index Traders Destabilize Agricultural Futures Prices?

Posted: 20 Jun 2012 Last revised: 30 Jun 2013

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Farrukh Javed

Lund University

Patrick M. Stephan

University of Münster

Date Written: June 1, 2012


Motivated by repeated price spikes and crashes over the last decade, we investigate whether the intensive investment activities of commodity index traders (CITs) has destabilized agricultural futures markets. Using a stochastic volatility model, we treat conditional volatility as an unobserved component, and analyze whether it has been affected by the expected and unexpected open interest of CITs. However, with respect to twelve increasingly financialized grain, livestock, and soft commodities, we do not find robust evidence that this is the case. We thus conclude that justifying a tighter regulation of CITs by blaming them for more volatile agricultural futures markets appears to be unwarranted.

Keywords: Commodity Index Traders, Futures Prices, Agricultural Markets, Stochastic Volatility Model, Kalman Filter

JEL Classification: G10, G18, Q14

Suggested Citation

Bohl, Martin T. and Javed, Farrukh and Stephan, Patrick M., Do Commodity Index Traders Destabilize Agricultural Futures Prices? (June 1, 2012). Available at SSRN: or

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149

Farrukh Javed

Lund University ( email )

Lund, Skåne 220 07

Patrick M. Stephan (Contact Author)

University of Münster ( email )

Universitätsstr. 14-16
48143 Muenster, NRW 48143


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