Unconventional Monetary Policy and Financialization of Commodities

The North American Journal of Economics and Finance, Forthcoming

54 Pages Posted: 28 Aug 2019

See all articles by Beyza Mina Ordu-Akkaya

Beyza Mina Ordu-Akkaya

Social Sciences University of Ankara

Ugur Soytas

DTU Management

Date Written: March 28, 2018

Abstract

We examine whether volatility spillover between US equity and commodity markets has significantly changed with the heavy influx of index traders in commodity derivatives markets, which is a phenomenon referred to as financialization. Previous findings show that institutional traders enter commodity markets at high liquidity episodes. Given that quantitative easing episode was highly criticized for providing excessive liquidity to the market, we investigate the impact of US quantitative easing policy on spillover between commodity and US stocks. Our results indicate that during post-financialization period, spillover from stocks to commodities have significantly increased for almost all commodities. More importantly, we show that quantitative easing is one of the underlying reasons for increasing volatility spillover between markets. Including interest rate, currency factors or default spread does not diminish the explicit role of quantitative easing on spillovers.

Keywords: institutional traders, volatility spillover, financialization, stock markets, quantitative easing

JEL Classification: G01, G10, G12, G23

Suggested Citation

Ordu-Akkaya, Beyza Mina and Soytas, Ugur, Unconventional Monetary Policy and Financialization of Commodities (March 28, 2018). The North American Journal of Economics and Finance, Forthcoming , Available at SSRN: https://ssrn.com/abstract=3441666

Beyza Mina Ordu-Akkaya (Contact Author)

Social Sciences University of Ankara ( email )

Turkey

Ugur Soytas

DTU Management ( email )

Produktionstorvet 424
Room 020
Kgs. Lyngby, 2800
Denmark

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