Does foreign portfolio investment strengthen stock-commodity markets connection?

Soytaş, Uğur
The heavy influx of financial institutions into commodity markets is referred to as financialization of commodities and this phenomenon argues that financial institutions increase the connectedness between commodity and stock markets through simultaneous investing. In this paper, employing Treasury International Capital data by US Treasury to proxy for institutional investment, we investigate the role of foreign portfolio investors on increasing spillovers between commodity and stock markets. We include developed (G7) and emerging (top 10 emerging) countries in our analysis and results indicate that volatility spillover considerably increases during post-financialization episode. Moreover, the impact of foreign portfolio investment on the spillover is positive for 14 out of 16 countries, whilst controlling for business cycle, VIX and term spread. Therefore, supporting financialization phenomenon, we find that higher the foreign portfolio investment, higher the spillover between commodity and stock markets.


Is food financialized? Yes, but only when liquidity is abundant
ORDU, Beyza Mina; Oran, Adil; Soytaş, Uğur (2018-10-01)
In this paper, we investigate whether commodity index trader (CIT) positions help to explain the increase in the correlations between agricultural commodities and equities starting around 2008. Some argue institutional investors who invest both in stock and commodity markets demolish the borders between these two seemingly unrelated markets and increase correlations, a recent phenomenon known as financialization. Yet, some others argue recently correlations have decreased back to historical levels and the i...
How do political and economic news affect emerging markets? Evidence from Argentina and Turkey
Onder, Zeynep; Simga-Mugan, Can (Informa UK Limited, 2006-07-01)
High returns in emerging markets over the last decade have attracted international investors. This study investigates if and how economic or political news affects stock market activity in two emerging markets: Argentina and Turkey. Our analysis shows that political and economic news influences both the volatility of returns and trading volume in these markets to varying degrees. Results suggest that both economic and political factors, as well as specific market characteristics, should be taken into consid...
A quantitative analysis of cost-push shocks and optimal inflation volatility
Senay, Ozge; Sutherland, Alan (Informa UK Limited, 2008-01-01)
This article presents a quantitative analysis of optimal inflation volatility in a simple sticky-price general equilibrium model subject to both supply and cost-push shocks. It is found that optimal policy implies a relatively small degree of inflation volatility even when cost-push shocks are the dominant source of economic disturbance. In addition, it is found that optimal policy generates only a very small welfare gain when compared to strict inflation targeting.
Managing financial instability in emerging markets: A Keynesian perspective
Akyüz, Yılmaz (Orta Doğu Teknik Üniversitesi (Ankara, Turkey), 2008-6)
The Keynesian analysis of financial instability as developed by Hyman Minsky provides considerable insights into understanding the nature and dynamics of boom-bust cycles driven by international capital flows in emerging markets. Its main policy conclusion that financial control rather than macroeconomic policy holds the key to financial stability is equally valid. There is, however, need to develop a new approach to financial control and place greater emphasis on managing capital inflows than has hitherto ...
Essays on empirical testing of financialization of commodities
Ordu, Beyza Mina; Oran, Adil; Department of Business Administration (2017)
Over the last decade commodity derivatives market experienced a significant influx of financial institutions, which is a phenomenon referred to as financialization of commodities. The main purpose of this thesis is to investigate whether financialization bolstered the connectedness between US stock and commodity markets. Connectedness can occur in forms of either spillover or co-movement and hence we analyze each form in two essays. In the first essay, we investigate volatility spillover between 25 commodit...
Citation Formats
B. M. ORDU AKKAYA and U. Soytaş, “Does foreign portfolio investment strengthen stock-commodity markets connection?,” RESOURCES POLICY, pp. 0–0, 2020, Accessed: 00, 2020. [Online]. Available: