If commercial producers or financial investors use futures contracts to hedge against commodity price risk, the arbitrageurs who take the other side of the contracts may receive compensation for their assumption of nondiversifiable risk in the form of positive expected returns from their...

Crude oil production in the United States increased by nearly 80 percent between 2008 and 2016, mostly in areas that were far from existing refining and pipeline infrastructure. The production increase led to substantial discounts for oil producers to reflect the high cost of alternative...

We conduct a comprehensive analysis of unspanned stochastic volatility in commodity markets in general and the crude-oil market in particular. We present model-free results that strongly suggest the presence of unspanned stochastic volatility in the crude-oil market. We then develop a tractable...

From 1997 through early 2003, the United Nations Oil for Food Program allowed Iraq to export oil in exchange for humanitarian supplies. We measure the extent to which this program was corrupted by Iraq's attempts to deliberately set the price of its oil below market prices in an effort to...

The existence of a natural resource curse has been a longstanding theme in the economic literature and in policy discussions. We propose an alternative mechanism and study its policy implications. The mechanism is based on the interaction between two building blocks: specialization in...

This paper analyzes whether commodity futures prices traded in the United States reveal information relevant to stock prices of East Asian economies including China, Japan, Hong Kong, South Korea, and Taiwan. We find significant and positive predictive powers of overnight futures returns of...

The large inflow of investment capital to commodity futures markets in the last decade has generated a heated debate about whether financialization distorts commodity prices. Rather than focusing on the opposing views concerning whether investment flows either did or did not cause a price...

The last decade brought substantial increased participation in commodity markets by index funds that maintain long positions in the near futures contracts. Policy makers and academic studies have reached sharply different conclusions about the effects of these funds on commodity futures prices....

Recent experience has given rise to the financialization view: increased trading in commodity fu­tures markets leads to an increase in the level and volatility of spot prices. We construct a large panel data set which includes commodities with and without futures markets. The data do not...