Too much of a good thing? Speculative effects on commodity futures curves

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The increasing inflow of index traders into commodity futures markets has been linked to anomalies in futures curves. At the same time, these investors have been welcomed as liquidity providers. In this paper, I reconcile the apparent dissent. Using factor decomposition, I show (a) that index and hedging positions have offsetting effects on futures curves, and (b) index positions are associated with upward sloping, peaked futures curves, and occasionally wave-like shapes linked to roll effects. These findings suggest that index traders are liquidity providers but can become too much of a good thing if exceeding hedgers' demand for a counterparty.

Original languageEnglish
Article number100480
JournalJournal of Financial Markets
Publication statusPublished - 1 Jan 2020


  • Financialization
  • Futures curve
  • Soft commodities
  • Speculation
  • Term structure

Research Beacons, Institutes and Platforms

  • Global Development Institute


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