On the financialisation of commodity markets

Error on title page – year of award is 2022.As they progressively emerged out of organised forward markets in staple commodities, commodity futures markets came together to address the needs of expert professionals. They are the place where the interests of commercial participants with concerns related to underlying physical commodities meet those of expert speculation; in other words, their essence originally lives in enabling commodity specialists to actively serve their needs. In the early 2000s however, a different type of less informed participation substantially expanded: institutional money entered these markets en masse with abnormally large investments. Participants behind this influx were typically no experts in commodity matters and sought exposures in sharp contrast with those typically assumed by traditional legacy participants. This phenomenon, commonly referred to as “financialisation” had ontological consequences for the commodity futures markets and its impact has been at the centre of heated debates in the policy, legislative, and regulatory spheres as well as in the academic literature. In this collection of studies, we strive to shed new lights on this phenomenon. In the first chapter we explore the issue of co-movement in financialised commodities and our results show that the metals sector was particularly affected. These findings are confirmed in the second chapter where we study the impact of financialisation from a macro viewpoint and our results further put forth the corporate sector as a potential transmission channel to the real economy. The breakdown of the financial crisis of 2008 tempered the commodity investment momentum and was followed by a series of extraordinary accommodative monetary regimes implemented by the US Federal Reserve. In our third chapter we study the financialisation process in this context and our results suggest that the crisis and its unorthodox monetary aftermath seem to have originated a process of definancialisation in the commodity complex.As they progressively emerged out of organised forward markets in staple commodities, commodity futures markets came together to address the needs of expert professionals. They are the place where the interests of commercial participants with concerns related to underlying physical commodities meet those of expert speculation; in other words, their essence originally lives in enabling commodity specialists to actively serve their needs. In the early 2000s however, a different type of less informed participation substantially expanded: institutional money entered these markets en masse with abnormally large investments. Participants behind this influx were typically no experts in commodity matters and sought exposures in sharp contrast with those typically assumed by traditional legacy participants. This phenomenon, commonly referred to as “financialisation” had ontological consequences for the commodity futures markets and its impact has been at the centre of heated debates in the policy, legislative, and regulatory spheres as well as in the academic literature. In this collection of studies, we strive to shed new lights on this phenomenon. In the first chapter we explore the issue of co-movement in financialised commodities and our results show that the metals sector was particularly affected. These findings are confirmed in the second chapter where we study the impact of financialisation from a macro viewpoint and our results further put forth the corporate sector as a potential transmission channel to the real economy. The breakdown of the financial crisis of 2008 tempered the commodity investment momentum and was followed by a series of extraordinary accommodative monetary regimes implemented by the US Federal Reserve. In our third chapter we study the financialisation process in this context and our results suggest that the crisis and its unorthodox monetary aftermath seem to have originated a process of definancialisation in the commodity complex