INVITATION
The WU Gutmann Center cordially invites you to the forthcoming
WU GUTMANN CENTER PUBLIC LECTURE
(apologies for duplicated mails!)
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Date: OCTOBER 29 (Tuesday), 2013, 4:00 pm
Location: WU Campus, AD.0.144 (Sitzungssaal 1), Welthandelsplatz 1, 1020 Wien
Speaker: Prof. Suleyman BASAK, London Business School and CEPR
http://faculty.london.edu/sbasak/
Title: "THE FINANCIALIZATION OF COMMODITIES"
ABSTRACT:
A sharp increase in the popularity of commodity investing in the past decade has triggered
an unprecedented inflow of institutional funds into commodity futures markets. Such
financialization of commodities coincided with significant booms and busts in commodity
markets, raising concerns of policymakers. In this talk, I explore the effects of
financialization in a model that features institutional investors alongside traditional
futures markets participants. The institutional investors care about their performance
relative to a commodity index. We find that if a commodity futures is included in the
index, supply and demand shocks specific to that commodity spill over to all other
commodity futures markets. In contrast, supply and demand shocks to a nonindex commodity
affect just that commodity market alone. Moreover, prices and volatilities of all
commodity futures go up, but more so for the index futures than for nonindex ones.
Furthermore, financialization - the presence of institutional investors - leads to an
increase in correlations amongst commodity futures as well as in equity-commodity
correlations. Consistent with empirical evidence, the increases in the correlations
between index commodities exceed those for nonindex ones. We perform a simple calibration
and find that financialization accounts for 11% to 17% of commodity futures prices and the
rest is attributable to fundamentals.
About Suleyman Basak:
Dr. Basak is Professor of Finance at London Business School and a Research Fellow to the
Center of Economic Policy Research. He was an Assistant Professor of Finance at the
Wharton School of the University of Pennsylvania, was a visitor at the Graduate School of
Business at the University of Chicago, and acted as a consultant to Goldman, Sachs &
Co. He received his Ph.D. in Financial Economics from Carnegie Mellon University. Dr.
Basak's research focuses on asset pricing, asset allocation, risk management, market
imperfections, international finance and financial innovation. His work has addressed
issues related to portfolio insurance, VaR-based risk management, benchmarking, credit
risk, tax arbitrage, incentive problems plaguing institutional asset management, and
mispricing, arbitrageurs and monopoly power in financial markets. His research is the
recipient of several awards including the American Association of Individual Investors
Award for the Best Paper on Investments, and the Alexander Henderson Award for Excellence
in Economic Theory.
**Please REGISTER**:
Mail: gutmann-center(a)wu.ac.at
Phone: +43-1-31336-5238
CONTACT AND FURTHER INFORMATION:
WU Gutmann Center for Portfolio Management
WU (Wirtschaftsuniversität Wien)
Department of Finance, Accounting and Statistics
Sabina Krickl
www.gutmann-center.at