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Article

Commodity Index Investing: Speculation or Diversification?

Hans R. Stoll and Robert E. Whaley
The Journal of Alternative Investments Summer 2011, 14 (1) 50-60; DOI: https://doi.org/10.3905/jai.2011.14.1.050
Hans R. Stoll
is Anne Marie and Thomas B. Walker, Jr., Professor of Finance and the director of the Financial Markets Research Center at the Owen Graduate School of Management at Vanderbilt University in Nashville, TN.
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  • For correspondence: hans.stoll@owen.vanderbilt.edu
Robert E. Whaley
is Valere Blair Potter Professor of Management and the co-director of the Financial Markets Research Center at the Owen Graduate School of Management at Vanderbilt University in Nashville, TN.
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  • For correspondence: whaley@vanderbilt.edu
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Abstract

A number of seemingly unrelated commodities experienced simultaneous price spikes in 2007 and 2008. Congress investigated the increase in prices and concluded that the price increases were attributable not to supply and demand fundamentals but rather excessive speculation from commodity index investing. In this article, the authors evaluate whether commodity index investing is a disruptive force in commodity futures markets. Using the U.S. Commodity Futures Trading Commission’s Commitments of Traders reports, the authors conclude that because of its passive, long-only nature, commodity index investing is not speculation. In addition, the authors conclude that commodity index flows, whether due to rolling over existing futures positions or establishing new ones, have little impact on futures prices.

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The Journal of Alternative Investments: 14 (1)
The Journal of Alternative Investments
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Summer 2011
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Commodity Index Investing: Speculation or Diversification?
Hans R. Stoll, Robert E. Whaley
The Journal of Alternative Investments Jun 2011, 14 (1) 50-60; DOI: 10.3905/jai.2011.14.1.050

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Commodity Index Investing: Speculation or Diversification?
Hans R. Stoll, Robert E. Whaley
The Journal of Alternative Investments Jun 2011, 14 (1) 50-60; DOI: 10.3905/jai.2011.14.1.050
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  • Article
    • Abstract
    • COMMODITY INDEX INVESTING
    • RELATION BETWEEN COMMODITY INDEX INVESTING AND FUTURES PRICES
    • SUMMARY AND CONCLUSIONS
    • ENDNOTES
    • REFERENCES
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