TY  - JOUR
AU  - Cheng,Ing-Haw
AU  - Kirilenko,Andrei
AU  - Xiong,Wei
TI  - Convective Risk Flows in Commodity Futures Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17921
PY  - 2012
Y2  - March 2012
UR  - http://www.nber.org/papers/w17921
L1  - http://www.nber.org/papers/w17921.pdf
N1  - Author contact info:
Ing-Haw Cheng
701 Tappan St
Ross School of Business
University of Michigan
Ann Arbor, MI  48109
Tel: 6128503093
E-Mail: ingcheng@umich.edu

Andrei Kirilenko
MIT Sloan School of Management
100 Main Street E-62-642
Cambridge, MA 02142
E-Mail: ak67@mit.edu

Wei Xiong
Princeton University
Department of Economics
Bendheim Center for Finance
Princeton, NJ  08450
Tel: 609/258-0282
Fax: 609/258-0771
E-Mail: wxiong@princeton.edu
AB  - This paper analyzes the joint responses of commodity futures prices and traders’ futures positions to changes in the VIX before and after the recent financial crisis. We find that while financial traders accommodate the needs of commercial hedgers in normal times, in times of distress, financial traders reduce their net long positions in response to an increase in the VIX causing the risk to flow to commercial hedgers.  By exploiting a cross-section of traders, we provide micro-level evidence for a convective flow of risk from distressed financial traders to the ultimate producers of commodities in the real economy.
ER  -