The impact of financialization on the WTI market

In this paper, I investigate the impact of three classes of investors – money managers, swap providers and commercial operators – on the level and volatility of WTI prices over the period 2006-2010. I find a significant volatility-reducing impact of money manager activity. This is true of both implied and conditional volatility measures. There is no evidence that swap providers affected the level of WTI prices. They appear to have reduced implied WTI volatility but increased conditional volatility.