Futures Trading and the Excess Co-movement of Commodity Prices
Research by Yannick Le Pen, Ph.D., Université Paris-Dauphine, Université PSL, France and Benoît Sévi, Ph.D., Université de Nantes, France
The authors empirically reinvestigate the issue of the excess co-movement of commodity prices. Excess co-movement appears when commodity prices remain correlated even after adjusting for the impact of fundamentals. They show that speculative intensity is a driver of the estimated excess co-movement, as speculative trading is both correlated across commodity futures markets and correlated with futures prices.
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