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Il Dipartimento di Politica Economica, Finanza e Sviluppo  (DEPFID) termina la sua attività il 31 ottobre 2012

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DEPFID Working Papers - 6 / 2011 - Abstract

Do financial investors affect commodity prices?
The case of Hard Red Winter Wheat

Daniele Girardi

The aim of this paper is to assess empirically whether speculative financial investments have affected wheat price dynamics in recent years. To address this issue we will (1) analyze recent agricultural price dynamics and their drivers (2) outline the process of ‘financialization’ of agricultural commodity markets, identifying the macroeconomic, monetary and legislative factors which favored it and (3) present an econometric analysis using Hard Red Winter (HRW) wheat as a case study. Since 2007 HRW wheat price fluctuations have been positively related to US stock market returns and oil price movements. These correlations appear to be determined by commodity index traders, a category of financial investors, since both these relationships proved to be spurious, with the most tracked commodity index as the confounding variable.

Keywords: Agricultural Commodity Prices, Global Commodity Crises, Financialization, Commodity Futures Markets, Commodity Index Trading, Agricultural Markets, Commodity Futures Pricing

JEL Classification: Q02, G13

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Acknowledgements: I wish to acknowledge my indebtedness to Professors Massimo Di Matteo and Pierpaolo Pierani of the University of Siena.