The commodity market
initially grew due to producers desiring a hedging vehicle. Recently
institutions like pension plans and hedge funds have looked to commodities as a
way to diversify and grow, respectively.
Which of the following least describes the impact this institutional money has had?
- Contango has become less extensive
- Rolls have become more expensive
- Potential for bubbles has increased
All of the above have been a
part of the change in commodities except contango becoming less extensive. In fact, the opposite is true. Backwardation used to be
the norm, since producers had to pay a premium in order to hedge. As investors
and speculators have increased, that situation has become less prevalent.
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