21.10.2015 - Why are commodity markets behaving like stock markets?
Ten years ago, a course on commodity markets would teach students that commodity returns are uncorrelated with the returns of other financial assets. Commodities were praised as excellent portfolio diversifiers, providing financial protection when it is needed most. Since the early 2000s, however, the behaviour of commodity prices has changed in fundamental ways. Popular investment commodities such as crude oil or gold have shown large price swings that are difficult to explain by economic fundamentals alone. Commodity returns started to co-move with the general stock market. More generally, commodities started to behave no longer like physical assets but more like financial assets. This phenomenon is actively debated in the academic literature as the “financialisation of commodity markets”...............................................Full Article: Source
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