NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Informational Frictions and Commodity Markets

Michael Sockin, Wei Xiong

NBER Working Paper No. 18906
Issued in March 2013
NBER Program(s):   AP   IFM   ME

This paper develops a model to analyze information aggregation in commodity markets. Through centralized trading, commodity prices aggregate dispersed information about the strength of the global economy among goods producers whose production has complementarity, and serve as price signals to guide producers' production decisions and commodity demand. Our analysis highlights important feedback effects of informational noise originating from supply shocks and futures market trading on commodity demand and spot prices, which are ignored by existing empirical studies and policy discussions.

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This paper was revised on December 2, 2013

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Document Object Identifier (DOI): 10.3386/w18906

Published: MICHAEL SOCKIN & WEI XIONG, 2015. "Informational Frictions and Commodity Markets," The Journal of Finance, vol 70(5), pages 2063-2098.

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