Volatility Spillovers Arising from the Financialization of Commodities
AbstractThis paper examines whether the proliferation of new index products, such as commodity-tracking exchange-traded funds (ETFs), amplified the volatility transmission channel introduced by financialization. This paper focuses on the volatility spillover effects among crude oil, metals, agriculture, and non-energy commodity markets. The results show financialization has an impact on the volatility of commodity prices, predominantly for non-energy commodities. However, the impact on volatility is not symmetric across all commodities. The analysis of index investment and investors’ positions in futures markets shows that, when a relationship exists, it is generally negatively correlated with the realized volatility of non-energy commodities. Using realized volatility in the difference-in-difference model provides estimates that are inconsistent with other findings that non-energy commodities, traded as a part of indices, have experienced higher volatility. The results are similar to the index investment and futures market analysis, where increased participation by investors through new investment products has put download pressure on realized volatility. View Full-Text
Share & Cite This Article
Chan, W.H.; Shelton, B.; Wu, Y.W. Volatility Spillovers Arising from the Financialization of Commodities. J. Risk Financial Manag. 2018, 11, 72.
Chan WH, Shelton B, Wu YW. Volatility Spillovers Arising from the Financialization of Commodities. Journal of Risk and Financial Management. 2018; 11(4):72.Chicago/Turabian Style
Chan, Wing H.; Shelton, Bryce; Wu, Yan W. 2018. "Volatility Spillovers Arising from the Financialization of Commodities." J. Risk Financial Manag. 11, no. 4: 72.
Note that from the first issue of 2016, MDPI journals use article numbers instead of page numbers. See further details here.