Is Financialization Killing Commodity Investments?

Posted: 5 Nov 2013 Last revised: 3 Jul 2015

See all articles by Adam Zaremba

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business; University of Cape Town

Date Written: July 1, 2015


The financialization of commodity markets has recently become a broadly discussed phenomenon, but its implications for commodity investors to a large extent remain unknown. This article focuses on whether the potential benefits of passive investment strategies in the commodity futures markets are expected to continue with increased financialization of the commodity futures markets. First, a regression analysis is conducted in order to examine the correlation between financialization and the disappearance of roll yields. Second, after finding such a correlation, we assume that this correlation is driven by increased financialization, which causes the decline in roll yields. Third, simulation-based methods are implemented to examine the revised efficient frontiers after accounting for the potential impact of financialization on roll yields. Our empirical research is based on returns on various asset classes and other related variables over the period 1990–2012. As noted, our computations indicate that market financialization may have resulted in a decline in roll returns. This decrease in roll yields, should it continue, is of a potential magnitude such that therationale for including commodity futures in traditional stock-and-bond portfolios would be seriously undermined.

Keywords: commodities, roll yields, financialization, mean-variance spanning, strategic asset allocation

JEL Classification: G10, G11, G12, G13

Suggested Citation

Zaremba, Adam, Is Financialization Killing Commodity Investments? (July 1, 2015). Journal of Alternative Investments, Vol. 18, No. 1, 2015, pp. 66-91, Available at SSRN: or

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000


Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875

University of Cape Town

Cape Town
South Africa

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