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van Huellen, Sophie (2018) 'How financial investment distorts food prices: Evidence from US grain markets.' Agricultural Economics, 49 (2). pp. 171-181.

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Convergence between commodity futures prices and the underlying physical assets at each contract’s expiration date is a pivotal condition for the market’s functioning. Between 2005 and 2010, convergence failed for several U.S. grain markets. This article presents a price pressure-augmented commodity storage model that links the scale of nonconvergence to financial investment channeled through indices, which are traded in commodity futures markets. The model is empirically tested, using Markov regime-switching regression analysis. Regression results strongly support the model’s predicted link between index investment and the extent of nonconvergence for three grains traded at the Chicago Board of Trade: wheat, corn, and soybeans. JEL classifications: G13, G14, Q14, Q18

Item Type: Journal Article
Keywords: Commodity futures; Convergence; Speculation; Grain
SOAS Departments & Centres: Departments and Subunits > Department of Economics
ISSN: 15740862
Copyright Statement: © 2017 The Authors. Agricultural Economics published by Wiley Periodicals, Inc. on behalf of International Association of Agricultural Economists This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and reproduction in any medium, provided the original work is properly cited.
DOI (Digital Object Identifier):
Date Deposited: 01 Nov 2017 13:08

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