Speculation by Commodity Index Funds : The Impact on Food and Energy Prices (eBook)

The Impact on Food and Energy Prices

USA) Irwin Professor Scott H. (University of Illinois at Urbana-Champaign, USA) Sanders Professor Dwight R. (Southern Illinois University Carbondale (Autoren)

eBook Download: EPUB

2023
288 Seiten
CABI (Verlag)
978-1-80062-210-4 (ISBN)

Infos

This book documents a curated selection of papers on the impact of index investment on commodity futures prices. The 10 papers follow the evolving speculation debate with new author forewords highlighting the contribution and impact. Essential reading for scholars and researchers interested in futures markets, commodity prices, and speculation.

---

Commodity futures prices exploded in 2007-2008 and concerns about a new type of speculative participant in commodity futures markets began to emerge. The main argument was that unprecedented buying pressure from new "commodity index" investors created massive bubbles that resulted in prices substantially exceeding fundamental value. At the time, it was not uncommon to link concerns about speculation and high prices to world hunger, food crises, and civil unrest. Naturally, this outcry resulted in numerous regulatory proposals to restrict speculation in commodity futures markets. At the core, these assertions raised major economic questions about the efficiency of price discovery in commodity futures markets. Moreover, these so-called remedies did not come without a potential cost. Burdensome regulations would increase compliance and risk sharing costs across the global food system, lowering prices for producers and increasing costs to consumers. This book presents important research on the impact of index investment on commodity futures prices that the authors conducted over the last fifteen years. The eleven articles presented in the book follow the timeline of our involvement in the world-wide debate about index funds as it evolved after 2007. We also include an introductory chapter, new author forewords for each article chapter, and a lessons learned chapter to round out the book. Policy-makers, researchers, and market participants will find the book not only functions as useful documentation of the debate; but, also as a natural starting point when high commodity prices inevitably create the next speculation backlash.

Autor

Scott H. Irwin (Author) Scott H. Irwin holds the Laurence J. Norton Chair of Agricultural Marketing in the Department of Agricultural and Consumer Economics at the University of Illinois at Urbana-Champaign. He is a national and international leader in the field of agricultural economics. His research on commodity markets is widely cited by other academic researchers and is in high demand among market participants, policymakers, and the media.Dwight R. Sanders (Author) Dwight R. Sanders is a professor in Agribusiness Economics at Southern Illinois University Carbondale (SIUC). He received his Ph.D. in Agricultural Economics and M.S. in Finance from University of Illinois in 1995. After positions with The Pillsbury Company and Darden Resaurants, he joined the faculty at SIUC where his research interests are in futures markets, forecasting, and risk management.

Rezensionen

Professors Irwin and Sanders analyze and discuss in a rigorous and clear way the role of speculation in commodity and energy markets and the impact on food and energy prices. They show a balanced review of various - sometimes conflicting - opinions about the role of speculators in commodity futures markets. They are not afraid to ask difficult questions: challenging the work done in this domain by others and themselves and subsequently synthesizing and improving on that work. A book that will help better understand the structure of markets, their characteristics (volatilities) and their participants. A timely, must-read book for readers interested in commodity markets and the role of financial institutions.

This collection of papers by Irwin and Sanders, spanning their decade plus of collaboration on commodity futures markets and the impacts of index fund investing on those markets, is greater than the sim of its parts.

The authors have included additional insights and backstories in new forewords to each of the eleven papers collected here. These alone are worth the price of admission. If you study, invest in, or regulate commodity futures markets, this book is essential reading.

When food prices began spiking around the world in late 2007 - and multiple times since then - observers offered a range of competing explanations. One popular explanation was the 'financialization' of agricultural commodity markets.

One popular explanation was the 'financialization' of agricultural commodity markets. The idea that financial speculators were diversifying from more traditional financial securities into commodity futures, including through new commodity index fund structures, and that this innovation was enriching a few while immiserating millions captured popular and policymakers' imaginations. The correlational evidence indeed seemed consistent with that hypothesis. Two experts in agricultural finance, Scott Irwin and Dwight Sanders, took those concerns seriously. Using the best available theory, methods and data they rigorously tested a range of hypotheses around the central claim: financial speculation increasingly drives food prices globally. Their findings are the most convincing evidence available on the topic, largely showing the correlation is largely spurious, not causal.

This book pulls together various papers they wrote on the topic into a coherent, compelling narrative. It is a must read for anyone interested in this topic at a serious level.

Many observers and policy makers are convinced that participation in commodity markets by speculators and financial investors contributed to the volatility in commodity prices over the last two decades. Irwin and Sanders have been at the forefront of careful academic investigation of the evidence that could support this conclusion. The studies in this book use data on the positions of index fund traders in commodity futures markets, roll yields and rollover effects, and order-flow costs together with the economic theory and practical understanding of how futures markets function. This evidence is must reading for anyone who has concluded that we need to tighten limits on participation in these markets.

Produkt-Details

• Erscheint lt. Verlag: 25.4.2023
• Verlagsort: Oxford
• Sprache: englisch
• Themenwelt: Recht / Steuern ► Wirtschaftsrecht
• Themenwelt: Technik
• Themenwelt: Wirtschaft ► Betriebswirtschaft / Management ► Finanzierung
• Themenwelt: Weitere Fachgebiete ► Land- / Forstwirtschaft / Fischerei
• Schlagworte: Agricultural Economics • commodities markets • Commodity prices • financial index investment • Food Prices • food security • Futures Markets • grain futures • Index Funds • Speculation • swap funds
• ISBN-10: 1-80062-210-4 / 1800622104
• ISBN-13: 978-1-80062-210-4 / 9781800622104