Financialization of Commodity Markets

Posted: 25 Nov 2014

See all articles by Ing-Haw Cheng

Ing-Haw Cheng

Dartmouth College - Tuck School of Business

Wei Xiong

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Date Written: December 2014

Abstract

The large inflow of investment capital to commodity futures markets in the past decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows caused a price bubble, we critically review academic studies through the perspective of how financial investors affect risk sharing and information discovery in commodity markets. We argue that financialization has substantially changed commodity markets through these mechanisms.

Suggested Citation

Cheng, Ing-Haw and Xiong, Wei, Financialization of Commodity Markets (December 2014). Annual Review of Financial Economics, Vol. 6, pp. 419-441, 2014, Available at SSRN: https://ssrn.com/abstract=2530469 or http://dx.doi.org/10.1146/annurev-financial-110613-034432

Ing-Haw Cheng (Contact Author)

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

Wei Xiong

Princeton University - Department of Economics ( email )

Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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