Does the Impact of Exchange-Traded Funds Flows on Commodities Prices Involve Stockpiling as a Signature? An Empirical Investigation

24 Pages Posted: 12 Jun 2018

See all articles by Steve Ohana

Steve Ohana

ESCP Europe

Xiaoying Huang

affiliation not provided to SSRN

Date Written: May 23, 2018

Abstract

A number of prominent authors have recently argued that any abnormal impact of speculators on commodities prices should involve stockpiling as a signature. Others contend, by contrast, that due to the price inelasticity of supply and demand in commodity markets, speculation could distort commodity prices without any change in inventories. Motivated by this debate, this paper examines the relation between the investment flows into the three main commodity index exchange-traded funds (ETFs) and the prices, inventory and term structure of four US-traded energy commodities. Using weekly inventory data from the Energy Information Agency and futures prices from NYMEX energy contracts, we do not find any significant relation between commodity index flows and inventory or term structure. By contrast, we retrieve the short-term impacts of index flows on energy commodities’ futures prices that have already been evidenced in the literature. An extension of our framework of analysis to twelve US-traded agricultural contracts confirms these conclusions. Hence, our results suggest that stockpiling is not necessarily a “signature” of an abnormal impact of speculators on commodities prices.

Keywords: exchange-traded funds (ETFs), energy commodities, agricultural commodities, commodity index funds, inventory, term structure

Suggested Citation

Ohana, Steve and Huang, Xiaoying, Does the Impact of Exchange-Traded Funds Flows on Commodities Prices Involve Stockpiling as a Signature? An Empirical Investigation (May 23, 2018). Journal of Energy Markets, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3186551

Steve Ohana (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011
France

Xiaoying Huang

affiliation not provided to SSRN

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