Inflation, Business Cycles, and Commodity Investing in Financialized Markets

Business and Economics Research Journal Volume 6 Number 1 2015

18 Pages Posted: 2 Feb 2014 Last revised: 23 Feb 2015

See all articles by Adam Zaremba

Adam Zaremba

Montpellier Business School; Poznan University of Economics and Business

Date Written: October 21, 2014

Abstract

Financialization of commodity markets has been a broadly discussed topic in recent years. However, its implications for commodity investors have not yet been fully explored. This paper concentrates on the macroeconomic determinants of commodity returns in financialized and non-financialized markets and on their role for tactical asset allocation. The study aims to contribute to the academic literature in four ways. First, it provides fresh evidence on the interdependences between commodity returns, inflation and the business activity. Second, it documents increased correlation of the commodity returns with the business activity in the financialized markets. Third, it explores changes in the lead/lag relationship of commodity prices and the business cycle. Fourth, it proves that the commodities retained their inflation hedging abilities in the financialized markets. The computations are based on listings of various commodity indices, which are calculated by S&P-GSCI, JP Morgan, and Dow Jones-UBS, between 1970 and 2013.

Keywords: commodities, inflation hedging, macroeconomic determinants, business cycle, financialization

JEL Classification: G10, G11, G12, G13, E44, Q02

Suggested Citation

Zaremba, Adam, Inflation, Business Cycles, and Commodity Investing in Financialized Markets (October 21, 2014). Business and Economics Research Journal Volume 6 Number 1 2015, Available at SSRN: https://ssrn.com/abstract=2389297 or http://dx.doi.org/10.2139/ssrn.2389297

Adam Zaremba (Contact Author)

Montpellier Business School ( email )

2300 Avenue des Moulins
Montpellier, Occitanie 34000
France

Poznan University of Economics and Business ( email )

al. Niepodległości 10
Poznań, 61-875
Poland

HOME PAGE: http://adamzaremba.pl

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