INVITATION
The WU Gutmann Center cordially invites you to the forthcoming WU GUTMANN CENTER PUBLIC LECTURE (apologies for duplicated mails!)
************************************************************************* Date: OCTOBER 29 (Tuesday), 2013, 4:00 pm Location: NOTE! Other than stated in an earlier invitation the public lecture takes place at Bank Gutmann, Schwarzenbergplatz 16, A-1010 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@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