Research On The Impact Of Commodity Index Investors On Crude Oil Futures Price Fluctuations

The impressive price volatility happening on commodity future markets has always been heatedly discussed,and reasons behind this have drawn everyone's attention and lure them to take a deep look at it.This paper takes crude oil future market as an aspect of investigating the commodity future market's price volatility puzzles,which has little cooperation with fundamental factors like demand and supply recently.Taking the financial factor of commodity into account,we need a brand new perspective of analyzing price change puzzle considering commodity as a new class of financial asset,and the term 'financialization' fits in perfectly.In 2008,during which the global financial crisis spread around all markets,and late 2014,the mass oil price change stopped everyone's breath.We found that the price change pattern had little to do with upward nor downward of figures of supply and demand.Instead,the commodity index investors' position tend to show strong relations with the price change pattern of crude oil.Hence we intend to take the respective of the term'financialization' and try to analyze how crude oil price is effected by financial behavior like commodity index investors.We would like to shed some light on the new aspect of describing how crude oil price booms.In order to investigate,this paper takes the excess return of the one week front crude oil future contract as an indicator of crude oil price,and commodity index investor's net long position as an indicator of financial behavior,together with S&P 500 index and 'volatility index' carried out by CBOE,we establish a four-variable Markov-Switching structure VAR model,in which S&P 500 index plays an exogenous variable role.We add some economical restrictions to make the model over-indentified,and then we are allowed to generate impulse response to figure out the inter relationship between each single variable and use data to test against the model.By doing so,we can draw the conclusion that whether index investor exert any effect on the price volatility of crude oil market.