The boom-and-bust that characterized the commodity market and resulted in the 2008 crash highlighted the effect of the financialization as one of the drivers of increased comovement of commodities returns. Building on the work of Barberis et al. (J. Financ. Econ. 75 (2005)), we borrow the concept of 'index inclusion' as the driver of the financialization process. We find that for index commodities the beta with the commodity index increases. This result holds also for some non-index commodities, although the increase in beta is less prominent, but not for Energy commodities. Thus, financialization affected all (non Energy) commodities while Oil and other Energy commodities remained unaffected. The financialization process for this class might have started earlier. We extend our analysis and account for high-frequency dynamics by means of the so called realized betas and obtain similar results. The fundamental-based view which considers the commodity price bubble and crash as solely driven by fundamentals contrast with our findings. Therefore, we provide new evidence supporting the arguments of the friction- or sentiment based views.
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