Commodity Financialization across Commodity Price Cycles

The debate over the intensity and potential reversal of commodity market financialization remains unresolved. This paper argues that financialization is a state-dependent process driven by commodity price cycles and underlying macroeconomic structures. After identifying six commodity price cycles from 1999 to 2024 using a cycle-dating algorithm, model-free higher-order comoment tests are employed to test for shifts in linear and nonlinear linkages between returns of commodity futures and global equity markets across cycle phases. Financialization is dynamic, with structural breaks in market comoments—particularly joint tail risks—concentrated during contractionary cycle phases triggered by severe global crises. The probability of financialization shifts is primarily driven by structural economic transitions rather than absolute economic levels. Specifically, shifts in per capita GDP growth, declining manufacturing valueadded shares and increasing reliance on net oil imports. The findings reconcile conflicting evidence on de-financialization and provide critical insights for cross-asset portfolio hedging and macroeconomic stabilization policies.