The impact of long-only index funds on price discovery and market performance in agricultural futures markets
For a considerable time, long-only index funds have been suspected of being responsible for price increases on agricultural futures markets, particularly those for grain. Utilizing partial equilibrium concepts, we analyze the market impacts of long-only index funds. Our analysis reveals that long-only index funds stabilize the market. The market entry of long-only index funds lowers risk premiums, so farmers can hedge at lower costs. This gives incentives for storage and dampens seasonal price fluctuations on spot markets, which is also in favor of consumers. However, the entry of long-only index funds reduces the profitability of speculation. Thus, there is no need for political action in this particular field.
Alternative title: | Der Einfluss von Long-only-Indexfonds auf die Preisfindung und das Marktergebnis an landwirtschaftlichen Warenterminmärkten |
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Year of publication: |
2014
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Authors: | Prehn, Sören ; Glauben, Thomas ; Loy, Jens-Peter ; Pies, Ingo ; Will, Matthias Georg |
Publisher: |
Halle (Saale) : Leibniz Institute of Agricultural Development in Transition Economies (IAMO) |
Subject: | agricultural futures markets | price discovery | long-only index funds | Landwirtschaftliche Warenterminmärkte | Preisbildung | Long-only-Indexfonds |
Saved in:
freely available
Series: | Discussion Paper ; 147 |
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Type of publication: | Book / Working Paper |
Type of publication (narrower categories): | Working Paper |
Language: | English |
Other identifiers: | 786370378 [GVK] hdl:10419/97151 [Handle] RePEc:zbw:iamodp:147 [RePEc] |
Classification: | G1 - General Financial Markets ; G13 - Contingent Pricing; Futures Pricing ; q02 ; Q14 - Agricultural Finance |
Source: |
Persistent link: https://www.econbiz.de/10010352781