Measuring Financial Investors Presence in Commodities
No doubt, the financialization in commodities was a significant breakpoint in markets and research as well. Many commodity strategies in Quantpedia´s screener are linked to financialization. It would be naive to think that the speculation in the commodity futures which has emerged did not influence the dynamics of the market. The novel research paper of Adams, Collot and Rossi (2021) shows how to measure the influence using the term structure of commodity prices, focusing on crude oil. The authors suggest that during normal times, the term structure of crude oil futures should be smooth. The key finding is that when they estimate the missing futures based on the other prices using the smooth spline interpolation, this estimated term structure curve can be compared to the realized one. The deviation from the predicted (estimated) curve can be interpreted as the degree of speculation in commodity futures markets.