Speculation By Commodity Index Funds: The Impact on Food and Energy Prices

Cover
Speculation by Commodity Index Funds
Dedication
Copyright
Contents
About the Authors
1 Intersections
2 Devil or Angel? The Role of Speculation in the Recent Commodity Price Boom (and Bust)1
	New Author Foreword
	Abstract
	2.1  Introduction
	2.2  Conceptual Errors
	2.3  Inconsistent Facts
	2.4  Empirical Tests
	2.5  Lessons from History
	2.6  Conclusions
	Acknowledgments
	References
3 New Evidence on the Impact of Index Funds in US Grain Futures Markets1
	New Author Foreword
	Abstract
	3.1  Introduction
	3.2  Review of Debate
		3.2.1  The bubble story
		3.2.2  Arguments against the bubble
	3.3  Data
	3.4  Tests for Price Impacts
	3.5  Conclusions
	Acknowledgments
	References
4 The Impact of Index and Swap Funds in Commodity Futures Markets1
	New Author Foreword
	Abstract
	4.1  Introduction
	4.2  It Was a Bubble
	4.3  It Was Not a Bubble
	4.4  Evidence to Date
	4.5  New Evidence
	4.6  Conclusions
	References
5 Testing the Masters Hypothesis in Commodity Futures Markets1
	New Author Foreword
	Abstract
	5.1  Introduction
	5.2  Measures of Commodity Index Fund Investment
		5.2.1  Commitments of Traders (COT) reports
		5.2.2  Disaggregated Commitments of Traders (DCOT) report
		5.2.3  Supplemental Commitments of Traders (SCOT) report
		5.2.4  Index Investment Data (IID) report
	5.3  Data and Descriptive Statistics
		5.3.1  Comparison of IID, DCOT, and SCOT data
		5.3.2  Comparison of mapping algorithm to IID
	5.4  Cross-sectional Regression Tests
	5.5  Time-series Tests
		5.5.1  Granger causality tests
		5.5.2  Long-horizon regression tests
	5.6  Conclusions
	Acknowledgments
	References
6 Financialization and Structural Change in Commodity Futures Markets1
	New Author Foreword
	Abstract
	6.1  Introduction
	6.2  Trends in Open Interest and Volume
	6.3  Structural Changes
		6.3.1  Electronic trading
		6.3.2  Market access
		6.3.3  Passive investment
	6.4  Trends in Market Composition
	6.5  Market Impacts
	6.6  Summary and Conclusions
	Acknowledgments
	References
7 A Reappraisal of Investing in Commodity Futures Markets1
	New Author Foreword
	Abstract
	7.1  Introduction
	7.2  Returns to Individual Commodity Futures Markets
	7.3  Returns to Portfolios of Commodity Futures Markets
	7.4  Recent Performance of Commodity Investments
	7.5  Summary and Conclusions
	Acknowledgments
	References
8 The ‘Necessity’ of New Position Limits in Agricultural Futures Markets: the Verdict from Daily Firm-level Position Data1
	New Author Foreword
	Abstract
	8.1  Introduction
	8.2  Position Data
	8.3  Position Trends and Characteristics
	8.4  Empirical Methods and Results
		8.4.1  Correlation coefficients
		8.4.2  Difference-in-means test
		8.4.3  Granger causality tests
		8.4.4  Long-horizon tests
	8.5  Summary and Conclusions
	Acknowledgments
	References
9 Bubbles, Froth, and Facts: Another Look at the Masters Hypothesis in Commodity Futures Markets1
	New Author Foreword
	Abstract
	9.1  Introduction
	9.2  Time-series Analysis
		9.2.1  Time-series data
		9.2.2  Rank order tests
		9.2.3  Time-series correlations
		9.2.4  Extreme moves
		9.2.5  Consistency
	9.3  Cross-sectional Analysis
		9.3.1  Cross-sectional data
		9.3.2  Cross-sectional regressions
	9.4  Summary and Conclusions
	Acknowledgments
	References
10 Mapping Algorithms, Agricultural Futures, and the Relationship between Commodity Investment Flows and Crude Oil Futures Prices1
	New Author Foreword
	Abstract
	10.1  Introduction
	10.2  Literature Review
	10.3  Impact of Index Investment on Crude Oil Prices
		10.3.1  Impact of index positions from the Masters algorithm
		10.3.2  Impact of index positions from alternative sources
	10.4  Mapping Algorithms
		10.4.1  Replication of commodity indices
		10.4.2  The Masters algorithm
		10.4.3  Testing fixed-ratio relations
		10.4.4  Decomposition of the mapping algorithm results
	10.5  Summary and Conclusions
	Appendix A. Derivation of Equation (10.3)
		Case 1. Non-roll days
		Case 2. Non-January roll days
		Case 3. January roll days
	Appendix B. Supplementary data
	Acknowledgments
	References
11 Sunshine versus Predatory Trading Effects in Commodity Futures Markets: New Evidence from Index Rebalancing1
	New Author Foreword
	Abstract
	11.1  Introduction
	11.2  S&P GSCI Construction and Rebalancing
		11.2.1  The S&P GSCI
		11.2.2  S&P GSCI rebalancing
		11.2.3  Economic significance of the S&P GSCI rebalancing
	11.3  Methods
	11.4  Results
		11.4.1  CARs following the announcement date
		11.4.2  CARs around the rebalancing period
			Rebalancing versus roll effects
		11.4.3  Regressions
			Baseline model
			Rebalancing effects over time
			Rebalancing effects along the futures curve
			Rebalancing and the Great Recession
			Rebalancing and large commodity markets
			Rebalancing and the Bloomberg Commodity Index
	11.5  Conclusions
	Appendix A. Supplementary Data
	Appendix B. Mathematical Derivation of Eqn 11.5
	Appendix C. Data Appendix
	Credit Author Statement
	References
12 The Order Flow Cost of Index Rolling in Commodity Futures Markets1
	New Author Foreword
	Abstract
	12.1  Introduction
	12.2  The S&P GSCI Roll
	12.3  Index Rolling and the Event Window
	12.4  Growth of Order Flow Demand
	12.5  Estimated Spread Impacts
	12.6  Order Flow Cost Estimates
	12.7  Conclusions
	Acknowledgments
	References
13 Lessons Learned
	13.1  First Lesson: the Masters Hypothesis Is False
	13.2  Second Lesson: There Is Plenty Left to Do
	13.3  Third Lesson: Attacks on Speculation Will Not End Anytime Soon
	13.4  Closing Thoughts
	References
Index
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