NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

The Financialization of Commodity Markets

Ing-Haw Cheng, Wei Xiong

NBER Working Paper No. 19642
Issued in November 2013
NBER Program(s):   AP   EEE   IFM   ME

The large inflow of investment capital to commodity futures markets in the last decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows either did or did not cause a price bubble, we critically review academic studies through the perspective of how financial investors affect risk sharing and information discovery in commodity markets. We argue that financialization has substantially changed commodity markets through these mechanisms.

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Document Object Identifier (DOI): 10.3386/w19642

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