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Does Index Speculation Impact Commodity Prices? An Intraday Analysis
Author(s) -
Tse Yiuman,
Williams Michael R.
Publication year - 2013
Publication title -
financial review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.621
H-Index - 47
eISSN - 1540-6288
pISSN - 0732-8516
DOI - 10.1111/fire.12007
Subject(s) - speculation , futures contract , commodity , index (typography) , economics , contango , commodity swap , financial economics , commodity pool , monetary economics , econometrics , granger causality , macroeconomics , finance , market liquidity , passive management , fund of funds , world wide web , computer science
Using intraday data, we find unidirectional causality from commodity index‐linked futures to nonindex‐linked commodity futures for up to one hour which disappears when using daily data. Also, the economic significance of index‐linked to nonindex commodity transmission declines to zero within about an hour. Finally, we find that the magnitude of index‐linked to nonindex return transmission is positively related to the amount of speculation, both long and short, in S&P GSCI commodity index futures. We conclude that speculative pressures exerted by commodity index futures can impact nonindex commodities, mainly through the activity of uninformed, positive feedback traders.