The Role of Speculation in Oil Markets: What Have We Learned So Far?

Fattouh, Bassam; Kilian, Lutz; Mahadeva, Łavan

doi:10.5547/01956574.34.3.2

Cited by 394 publications

(234 citation statements)

References 79 publications

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“…2 We do not consider speculative oil demand shocks, as discussed in Alquist and Kilian (2010), Fattouh andothers, 2012 andKilian andMurphy (2010) because there is no empirical evidence that speculation mattered for the fluctuations in the real price of oil between 2003 and 2010 and because including speculation would considerably complicate the model. When nominal rigidities are absent, these gaps never open up.…”

mentioning

confidence: 99%

Monetary Policy Responses to Oil Price Fluctuations

Bodenstein¹,

Guerrieri²,

Kilian³

2012

IMF Econ Rev

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170

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mentioning

confidence: 99%

Monetary Policy Responses to Oil Price Fluctuations

Bodenstein¹,

Guerrieri²,

Kilian³

2012

IMF Econ Rev

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170

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“…Fattouh et al (2013) find that the existing evidence is not supportive of an important role of speculation in driving the spot price of oil after 2003. Instead, they find strong evidence that the co-movement between spot and futures prices reflects common economy fundamentals.…”

Section: Introductionmentioning

confidence: 47%

What Drives Long-term Oil Market Volatility? Fundamentals versus Speculation

Yin

Zhou

2016

Economics

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This paper explores the role of speculation and economy fundamentals in the oil market using a two-component GARCH-MIDAS model. Specifically, the authors highlight the different roles played by the changing oil shocks with respect to the short-term and long-term components regarding oil market volatility. The results indicate that a global demand shock is the only factor found not only to be positive but to also significantly increase long-and short-term oil volatility in the full sample. This is consistent with a classic host of research that advocates that global demand dominates the oil market. However, since 2004, impacts of other oil shocks have been significantly weakened or even reversed. For example, the speculative demand shock has helped to stabilize long-term oil volatility during the post-2004 period. The results also suggest the existence of asymmetric impacts on short-term oil volatility, particularly for shocks from oil supply, oil-specific demand and oil speculative demand. JEL Q43

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“…Examples for this view are the papers by Stoll and Whaley (2010), Pirrong (2011), Plante and Yücel (2011a,b), Irwin (2011), Fattouh, Kilian, andMahadeva (2013), and Kilian and Murphy (2013).…”

Section: Introductionmentioning

confidence: 99%

Commodities, Financialization, and Heterogeneous Agents

Branger¹,

Grüning

Schlag

2016

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in EconStor may www.econstor.euElectronic copy available at: http://ssrn.com/abstract=2759314Electronic copy available at: http://ssrn.com/abstract=2759314 Non-Technical SummarySince the seminal work of Keynes (1930) economists and researchers in finance have studied the theory and empirics of commodity futures markets and their fundamentals extensively. Over the past decade these markets have been the focus of an intense public debate and in academia. The reason is that commodity spot and futures prices, especially those for various food commodities as well as oil and gas, had increased to all-time highs. This pronounced price increase had occurred together with an equally sharp increase in long positions in these contracts held by financial speculators, which often trade in index products written on a basket of commodities. The volume of index-linked commodity investing went up dramatically from the beginning of 2006 until the end of 2007. At around the same time futures and spot prices had risen to all-time highs.Given this coincidence of large index-linked and financially motivated commodity positions on the one hand and increasing commodity prices on the other, the activities by financial speculators on commodity markets were perceived as harmful from a welfare perspective, especially in the context of food commodities. The poorer parts of the population, in particular in emerging countries, have to spend a large share of their income on these basic commodities. Consequently, it was suggested that futures markets should be regulated tightly via, for example, position limits.Nevertheless, despite the seemingly clear evidence presented above, the debate about a potential causality going from commodity investing to excessive price increases is still ongoing, with evidence both for and against the hypothesis. One reason for this difference of opinion is probably that the empirical analyses are still plagued by a number of problems. First, the financialization phenomenon in the sense of strongly increasing position sizes held by financial investors can only be observed from 2004 onwards, that is, over a relatively short sample. Second, the data do not usually exhibit the quality needed to study potential causal effects reliably. For example, it is often hard to distinguish financial speculators from other types of investors and to obtain their exact trading positions, since one can only obtain aggregate net positions.Overall, as t...

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The Role of Speculation in Oil Markets: What Have We Learned So Far?

Cited by 394 publications

References 79 publications

Monetary Policy Responses to Oil Price Fluctuations

Monetary Policy Responses to Oil Price Fluctuations

What Drives Long-term Oil Market Volatility? Fundamentals versus Speculation

Commodities, Financialization, and Heterogeneous Agents

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