Are Popular Narratives Regarding Recent Commodity Price Spikes Accurate?

18 Pages Posted: 28 May 2015

See all articles by Hilary Till

Hilary Till

Premia Research LLC; EDHEC-Risk Institute; J.P. Morgan Center for Commodities, University of Colorado Denver Business School; Global Commodities Applied Research Digest

Date Written: July 3, 2012

Abstract

This paper reviews both the theory and empirical evidence regarding how commodity futures market work, including the role of the speculator. The paper also discusses how difficult it is to apportion causality for commodity price spikes when inventories-relative-to-consumption become sufficiently low and therefore to be skeptical about popular narratives regarding commodity price spikes. The paper concludes that modern commodity futures markets are the result of 160 years of trial-and-error efforts. Before performing surgery on these institutions, we suggest that “speculative” regulatory proposals should not adopted whose ultimate effects are unknown.

Keywords: commodity futures, speculation, hedging, price volatility, policy

JEL Classification: G1, G18

Suggested Citation

Till, Hilary, Are Popular Narratives Regarding Recent Commodity Price Spikes Accurate? (July 3, 2012). Available at SSRN: https://ssrn.com/abstract=2610982 or http://dx.doi.org/10.2139/ssrn.2610982

Hilary Till (Contact Author)

Premia Research LLC ( email )

United States
312-583-1137 (Phone)
312-873-3914 (Fax)

HOME PAGE: http://customindices.spindices.com/custom-index-calculations/premia/all

EDHEC-Risk Institute

Nice
France

HOME PAGE: http://risk.edhec.edu/

J.P. Morgan Center for Commodities, University of Colorado Denver Business School ( email )

1475 Lawrence St.
Denver, CO 80202
United States

HOME PAGE: http://www.business.ucdenver.edu/commodities

Global Commodities Applied Research Digest ( email )

J.P. Morgan Center for Commodities
1475 Lawrence Street
Denver, CO 80202
United States

HOME PAGE: http://www.jpmcc-gcard.com/hilary-till

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