The Impact of Speculation on Commodity Prices: A Meta-Granger Analysis

Journal of Commodity Markets, 100148, https://doi.org/10.1016/j.jcomm.2020.100148

42 Pages Posted: 3 Feb 2020 Last revised: 4 Aug 2020

See all articles by Thomas Wimmer

Thomas Wimmer

University of Augsburg - Institute of Materials Resource Management

Jerome Geyer-Klingeberg

University of Augsburg - Institute of Materials Resource Management

Marie Hütter

affiliation not provided to SSRN

Florian Schmid

affiliation not provided to SSRN

Andreas Rathgeber

University of Augsburg - Institute of Materials Resource Management

Date Written: August 4, 2020

Abstract

This paper uses Meta-Granger analysis to explain and summarize the mixed results in the literature on the impact of financial speculation on commodity prices. The sample covers 2,106 manually collected p-values from Granger causality (GC) tests reported in 54 prior studies. Our results show that the heterogeneity in previous findings can be largely explained by the commodity type under examination, sample period of the data, the measurement of the focus variables (return, volatility or spread), and the inclusion of control variables in the GC model. Even after accounting for 23 observable differences in study and test design, our results indicate that studies published in higher ranked journals present significantly less evidence for speculation to drive commodity prices. Moreover, we use the Meta-Granger results to predict ‘best choice’ models considering preferred model setups. The results reveal that the hypothesis of Granger non-causality between speculation and commodity prices cannot be rejected at standard significance levels when assuming a best choice study design and various variations of it. We conclude that either there is no genuine overall speculation effect in agricultural, energy and metal markets, or the research design of the frequently applied GC testing is not powerful enough to detect those effects.

Keywords: speculation, commodity prices, non-commercial trader, meta-analysis, Granger causality

JEL Classification: G13, Q02, C58, C83

Suggested Citation

Wimmer, Thomas and Geyer-Klingeberg, Jerome and Hütter, Marie and Schmid, Florian and Rathgeber, Andreas, The Impact of Speculation on Commodity Prices: A Meta-Granger Analysis (August 4, 2020). Journal of Commodity Markets, 100148, https://doi.org/10.1016/j.jcomm.2020.100148, Available at SSRN: https://ssrn.com/abstract=3517263 or http://dx.doi.org/10.2139/ssrn.3517263

Thomas Wimmer

University of Augsburg - Institute of Materials Resource Management ( email )

Augsburg, 86159
Germany

Jerome Geyer-Klingeberg (Contact Author)

University of Augsburg - Institute of Materials Resource Management ( email )

University of Augsburg
Universitätsstr. 2
Augsburg, 86159
Germany
(+49) 821 598-3046 (Phone)

Marie Hütter

affiliation not provided to SSRN

Florian Schmid

affiliation not provided to SSRN

Andreas Rathgeber

University of Augsburg - Institute of Materials Resource Management ( email )

Augsburg, 86159
Germany

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