Measuring Financial Investor Presence Through Term Structure Deflection

Item Type Monograph (Working Paper)
Abstract We estimate the presence of financial investors in commodity futures markets from deflections in the term structure. We argue that large-scale inflows from financial investors cause systematic deviations in nearby futures contracts that reflect excessive buying pressure in commodities. We compare this new speculation indicator to popular existing measures including reported CFTC data and the Hamilton and Wu (2014) risk premium. We find substantial financial investor presence in commodity markets from 2004 to 2014. We show that our new speculation measure is better at explaining the variation in crude oil volatility than other existing measures.
Authors Adams, Zeno; Collot, Solène Marine Sophie & Kirilenko, Andrei
Language English
Keywords Termstructure; deflection; financialization; spline interpolation
Subjects business studies
economics
finance
HSG Classification contribution to scientific community
HSG Profile Area SOF - System-wide Risk in the Financial System
Date 2021
Publisher SoF-HSG
Place of Publication St.Gallen
Series Name School of Finance Working Paper Series
Volume 2021/08
Number 08
Number of Pages 35
Contact Email Address zeno.adams@unisg.ch
Depositing User Beatrix Kobelt-Glock
Date Deposited 06 May 2021 13:12
Last Modified 20 Jul 2022 17:45
URI: https://www.alexandria.unisg.ch/publications/263131

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Adams, Zeno; Collot, Solène Marine Sophie & Kirilenko, Andrei: Measuring Financial Investor Presence Through Term Structure Deflection. School of Finance Working Paper Series, 2021, 08.

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https://www.alexandria.unisg.ch/id/eprint/263131
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