The Financialization and Maturation of Commodities Markets

Abstract: In this paper I examine the fi nancialization of commodities since the financial crisis by looking at oil price correlation for a set of 24 non-energy commodities. I focus on the impact of index investing by classifying all commodities as either on-index or off -index, depending on their inclusion in a large commodity index. I find that oil price correlation is higher for on-index commodities for 2008 and 2009 but not for 2010 to 2013. This shift coincides perfectly with the relative equalization of trading volumes for on-index and o ff-index commodities. I argue that this signals the maturation of commodities markets and a widening of commodity investing.