Most institutional investors gain access to commodities through diversified index funds, even though mean-reverting prices and low correlation among commodities returns indicate that two-fund separation does not hold for commodities. In contrast to demand for stocks and bonds, we find that, on...

I develop and test a model to study the interaction between the commodity and stock markets. This study attempts to clarify the debate about the effect of financialization on commodity markets. Theoretically, the futures risk premium is determined by hedging pressure, stock market returns, and...