Commodities, Financialization, and Heterogeneous Agents

Index Investment and the Financialization of Commodities

The authors found that, concurrent with the rapidly growing index investment in commodity markets since the early 2000s, prices of non-energy commodity futures in the United States have become increasingly correlated with oil prices; this trend has been significantly more pronounced for commodities in two popular commodity indices. This finding reflects the financialization of the commodity mar...

A Model of Financialization of Commodities

A sharp increase in the popularity of commodity investing in the past decade has triggered an unprecedented inflow of institutional funds into commodity futures markets. Such financialization of commodities coincided with significant booms and busts in commodity markets, raising concerns of policymakers. In this paper, we explore the effects of financialization in a model that features institut...

Financial Crisis and Financialization Acuity on the Diversification Benefits of Commodities: a Stochastic Asset Allocation Framework

This research investigates the portfolio diversification benefits of commodities in the backdrop of uncertainty caused by the financial crisis, increased Financialization and speculation in commodity markets. Portfolios are formed out of varied asset classes comprise of equity, bond, infra structure, commodity spot & futures indices and sectoral indices such as agri, metals and energy sectors o...

Markets with Many More Agents than Commodities: Aumann's "Hidden" Assumption

We address a question posed by J.-F. Mertens and show that, indeed, R. J. Aumann's classical existence and equivalence theorems depend on there being ``many more agents than commodities.'' We show that for an arbitrary atomless measure space of agents there is a fixed non-separable infinite dimensional commodity space in which one can construct an economy that satisfies all the standard assumpt...

Heterogeneous Agents Situated in Heterogeneous Spaces