TY - ADVS
T1 - Index funds' financial speculation with agricultural commodities: Functioning. Effects.
AU - Glauben, T.
AU - Prehn, S.
AU - Pies, I.
AU - Will, M.G.
AU - Loy, J.P.
AU - Balmann, A.
AU - Brümmer, B.
AU - Heckelei, T.
AU - Hockmann, H.
AU - Kirschke, D.
AU - Koester, U.
AU - Langhammer, R.
AU - Salhofer, K.
AU - Schmitz, P.M.
AU - Tangermann, S.
AU - von Witzke, H.
AU - Wesseler, J.H.H.
PY - 2014
Y1 - 2014
N2 - For quite some time long-only index funds have been suspected of being responsible for price increases in agricultural futures markets. This suspicion has prompted demands to drastically limit long-only index funds' scope of activity. Such demands and their underlying diagnoses, however, contradict the current state of
scientific knowledge. To date, the empirically oriented literature has not provided conclusive evidence that long-only index funds with their futures transactions significantly have increased the level or volatility of agricultural commodity prices. Indeed, recent theoretical works suggest that long-only index funds, pursuant to
their investment strategy, rather stabilize agricultural commodity prices and fulfill an important collateralization and competition function in agricultural futures markets. The commitment to these funds reduces risk premiums and thus enables food producers to hedge against price fluctuations at lower costs. Mitigated risk premiums
motivate farmers to put larger parts of their harvests into storage, which counteracts seasonal price fluctuations. To safeguard sustainable global food supply, long-only index funds should not be subjected to stricter market entry regulations.
AB - For quite some time long-only index funds have been suspected of being responsible for price increases in agricultural futures markets. This suspicion has prompted demands to drastically limit long-only index funds' scope of activity. Such demands and their underlying diagnoses, however, contradict the current state of
scientific knowledge. To date, the empirically oriented literature has not provided conclusive evidence that long-only index funds with their futures transactions significantly have increased the level or volatility of agricultural commodity prices. Indeed, recent theoretical works suggest that long-only index funds, pursuant to
their investment strategy, rather stabilize agricultural commodity prices and fulfill an important collateralization and competition function in agricultural futures markets. The commitment to these funds reduces risk premiums and thus enables food producers to hedge against price fluctuations at lower costs. Mitigated risk premiums
motivate farmers to put larger parts of their harvests into storage, which counteracts seasonal price fluctuations. To safeguard sustainable global food supply, long-only index funds should not be subjected to stricter market entry regulations.
M3 - Web publication/site
PB - IAMO
CY - Halle (Saale)
ER -