The Impact of Indexing in the Equity and Commodity Markets
11 Pages Posted: 7 Jun 2015
Date Written: March 20, 2001
The impact of indexing is exceptionally well documented in the equity markets. The same has not yet been the case for the commodity markets. Our empirical results suggest that one should see increased price-pressure effects in the commodity markets with any increase in the popularity of index-based commodity investments. Our results also suggest one additional subtle point: when comparing price-pressure results across commodities, it is not just the amount of passive investment that matters; how risky the opportunity is for market professionals to take advantage appears to also be a very important factor.
Keywords: commodity futures, index effect
JEL Classification: G1, G11
Suggested Citation: Suggested Citation