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Keywords:

  • index speculation;
  • commodity prices;
  • intraday data;
  • G13;
  • G14

Abstract

Using intraday data, we find unidirectional causality from commodity index-linked futures to nonindex-linked commodity futures for up to one hour which disappears when using daily data. Also, the economic significance of index-linked to nonindex commodity transmission declines to zero within about an hour. Finally, we find that the magnitude of index-linked to nonindex return transmission is positively related to the amount of speculation, both long and short, in S&P GSCI commodity index futures.  We conclude that speculative pressures exerted by commodity index futures can impact nonindex commodities, mainly through the activity of uninformed, positive feedback traders.