Do Long-Short Speculators Destabilize Commodity Futures Markets?

30 Pages Posted: 4 Apr 2013 Last revised: 10 Nov 2015

See all articles by Joëlle Miffre

Joëlle Miffre

Audencia Nantes School of Management; Audencia Business School

Chris Brooks

University of Reading - ICMA Centre

Date Written: September 1, 2013

Abstract

This paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long-short commodity portfolios and their conditional correlations with traditional assets (stocks and bonds). Using several groups of trading strategies that hedge fund managers are known to implement, we show that long-short speculators do not cause changes in the volatilities of the portfolios they hold or changes in the conditional correlations between these portfolios and traditional assets. Thus calls for increased regulation of commodity money managers are, at this stage, premature. Additionally, long-short speculators can take comfort in knowing that their trades do not alter the risk and diversification properties of their portfolios.

Keywords: Financialization, Commodity markets, Speculators, Volatility, Correlation

JEL Classification: G11, G13

Suggested Citation

Miffre, Joelle and Brooks, Chris, Do Long-Short Speculators Destabilize Commodity Futures Markets? (September 1, 2013). International Review of Financial Analysis, Vol. 30, 2013. Available at SSRN: https://ssrn.com/abstract=2244526 or http://dx.doi.org/10.2139/ssrn.2244526

Joelle Miffre

Audencia Nantes School of Management ( email )

8 route de la Jonelière, BP 31222
Nantes Cedex 3, Cedex 3 44312
France

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

Chris Brooks (Contact Author)

University of Reading - ICMA Centre ( email )

Whiteknights Park
P.O. Box 242
Reading RG6 6BA
United Kingdom
+44 118 931 82 39 (Phone)
+44 118 931 47 41 (Fax)

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