Economics, Econometrics and Finance
4 years ago

Futures markets don't stabilize commodity prices as previously thought, study finds.

Staff Report
Financialization in Commodity Markets
V. V. Chari, Lawrence J. Christiano

Paper Summary

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The study looked at how trading in commodity futures markets affects commodity prices. Contrary to popular belief, the researchers found no direct link between increased futures trading and changes in price behavior. They suggest that futures markets work as a mutual insurance system where all participants help each other, rather than just outsiders insuring insiders. This new perspective is supported by their data analysis.