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Did Long-Short Investors Destabilize Commodity Markets?

This paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long-short commodity portfolios and their conditional correlation with traditional assets (stocks and bonds). Using several groups of trading strategies that hedge fund managers are known to implement, we show that long-short speculators do not cause changes in the volatilities of the portfolios they hold or changes in the conditional correlations between these portfolios and traditional assets. Thus calls for increased regulation of commodity money managers might at this stage be premature.

Published on 4th April 2013
Authors Joëlle Miffre and Chris Brooks
Series Reference 2013-03
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