[PDF] Do Long Short Speculators Destabilize Commodity Futures Markets eBook

Author : Joëlle Miffre
Publisher :
Page : 30 pages
File Size : 30,32 MB
Release : 2015
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This paper contributes to the debate on the effects of the financialization of commodity futures markets by studying the conditional volatility of long-short commodity portfolios and their conditional correlations with traditional assets (stocks and bonds). Using several groups of trading strategies that hedge fund managers are known to implement, we show that long-short speculators do not cause changes in the volatilities of the portfolios they hold or changes in the conditional correlations between these portfolios and traditional assets. Thus calls for increased regulation of commodity money managers are, at this stage, premature. Additionally, long-short speculators can take comfort in knowing that their trades do not alter the risk and diversification properties of their portfolios.

Author : Abby Kim
Publisher :
Page : 68 pages
File Size : 39,27 MB
Release : 2016
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This paper examines how speculative futures trading affects commodity markets in terms of price impacts, volatility, and market quality. Contrary to the popular belief that speculators are responsible for the recent commodity price fluctuation, my analysis finds no evidence that speculators destabilize the spot market. Instead, speculators contribute to lower volatility and enhanced market quality. More importantly, the empirical results provide strong evidence that speculators either have no effect or dampen prices during periods of large price movement. My findings suggest speculators have had a significant, and in fact positive, influence on the commodity market during the recent "financialization" period, implying that restricting speculative trading in the futures market is not an efficient way to stabilize the commodity market.

Author : Raffael Waldmeier
Publisher :
Page : pages
File Size : 44,2 MB
Release : 2017
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This master thesis analyses the impact of speculation on the stability of the commodity futures market. The study differentiates between three types of speculation, namely index speculation, non-commercial speculation and excess speculation. In a Vector AutoRegression (VAR) framework I use Granger causality analyses and impulse response functions (IRF) in order to analyse, whether speculation activities have a significant impact on the commodity futures price volatility or not. In particular, the scope of the analysis includes two energy commodities, crude oil and natural gas, an agricultural commodity, corn, and two metals, copper and gold. Applying a relatively new dataset for index investment trading, it shows that index investment had not significantly affected price volatility in the commodity market between 2007 and 2015. In exchange, the results suggest that index speculation rather reduced volatility than the other way around. The same is true for non-commercial or traditional speculation, which neither has destabilized commodity markets during the analysed period between 1993 and 2016. Moreover, the sample is split into two sub-periods in order to analyse possible changes in the dynamics of the commodity markets due to the financialization. Finally, contrasting the findings of the other analyses, it shows that excess speculation had indeed caused an increase in commodity futures prices. The findings suggest that excess speculation had a significant detrimental effect on the stability of the crude oil market. The diversity in the findings emphasizes the importance of distinguishing between the different types of speculation. Altogether, it shows that speculation does, in general, not increase futures price volatility.

Author : Aditya Kaul
Publisher :
Page : 37 pages
File Size : 14,41 MB
Release : 2013
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We examine weekly trading imbalances for speculators and small investors in the commodity futures market and their price and volatility effects over the period 1986-2012. First, speculators behave like short term momentum traders and long-term contrarians. Their imbalances are positively autocorrelated and positively cross-autocorrelated with small investor imbalances, consistent with their 'riding the wave' caused by small traders. Speculators sell (buy) to a greater extent after their long (short) positions have become larger, especially when volatility is elevated: this is consistent with their being risk averse. Small trader imbalances also follow speculator imbalances of a given sign, and display mean reversion and volatility aversion, but both are weaker than for speculators. Second, imbalances have positive and significant permanent price effects, which are larger for speculators. Further analysis suggests that the price impact of speculator imbalances is smaller when they act as suppliers of liquidity to hedgers. Finally, price volatility is related positively to lagged small trader imbalances, supportive of noise trader effects, and negatively to the lagged variability of speculator imbalances, which is inconsistent with speculator activity promoting futures market volatility. Our results are broadly similar in extreme market conditions. The picture that emerges from our analysis is that speculators are risk averse, short-term oriented, liquidity providers with trades that are, in general, not destabilizing. Our work contributes to the debate on the effects of trading, especially by speculators, and the need for new regulatory initiatives.

Author : Wenjin Kang
Publisher :
Page : 61 pages
File Size : 49,95 MB
Release : 2019
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This paper studies the dynamic interaction between the net positions of traders and risk premiums in commodity futures markets. Short-term position changes are mainly driven by the liquidity demands of non-commercial traders, while long-term variation is primarily driven by the hedging demands of commercial traders. These two components influence expected futures returns with opposite signs. The gains from providing liquidity by commercials largely offset the premium they pay for obtaining price insurance.

Author : Lucy F. Ackert
Publisher : South Western Educational Publishing
Page : 0 pages
File Size : 45,54 MB
Release : 2010
Category : Investments
ISBN : 9780538752862

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The book begins by building upon the established, conventional principles of finance that you've have already learned in your principles course. The authors then move into psychological principles of behavioral finance, including heuristics and biases, overconfidence, emotion and social forces. You immediately see how human behavior influences the decisions of individual investors and professional finance practitioners, managers, and markets. You also gain a strong understanding of how social forces impact individuals' choices. The book clearly explains what behavioral finance indicates about observed market outcomes as well as how psychological biases potentially impact the behavior of managers. The book's solid academic approach provides opportunities for you to utilize theory and complete applications in every chapter as you learn the implications of behavioral finance on retirement, pensions, education, debiasing, and client management. The book spends a significant amount of time examining how today's practitioners can use behavioral finance to further their professional success.

Author : Matthias Kalkuhl
Publisher : Springer
Page : 620 pages
File Size : 16,63 MB
Release : 2016-04-12
Category : Business & Economics
ISBN : 3319282018

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This book provides fresh insights into concepts, methods and new research findings on the causes of excessive food price volatility. It also discusses the implications for food security and policy responses to mitigate excessive volatility. The approaches applied by the contributors range from on-the-ground surveys, to panel econometrics and innovative high-frequency time series analysis as well as computational economics methods. It offers policy analysts and decision-makers guidance on dealing with extreme volatility.

Author : Craig Pirrong
Publisher : Cambridge University Press
Page : 238 pages
File Size : 19,46 MB
Release : 2011-10-31
Category : Business & Economics
ISBN : 1139501976

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Commodities have become an important component of many investors' portfolios and the focus of much political controversy over the past decade. This book utilizes structural models to provide a better understanding of how commodities' prices behave and what drives them. It exploits differences across commodities and examines a variety of predictions of the models to identify where they work and where they fail. The findings of the analysis are useful to scholars, traders and policy makers who want to better understand often puzzling - and extreme - movements in the prices of commodities from aluminium to oil to soybeans to zinc.

Author : Jordi Galí
Publisher : University of Chicago Press
Page : 663 pages
File Size : 18,28 MB
Release : 2010-03-15
Category : Business & Economics
ISBN : 0226278875

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United States monetary policy has traditionally been modeled under the assumption that the domestic economy is immune to international factors and exogenous shocks. Such an assumption is increasingly unrealistic in the age of integrated capital markets, tightened links between national economies, and reduced trading costs. International Dimensions of Monetary Policy brings together fresh research to address the repercussions of the continuing evolution toward globalization for the conduct of monetary policy. In this comprehensive book, the authors examine the real and potential effects of increased openness and exposure to international economic dynamics from a variety of perspectives. Their findings reveal that central banks continue to influence decisively domestic economic outcomes—even inflation—suggesting that international factors may have a limited role in national performance. International Dimensions of Monetary Policy will lead the way in analyzing monetary policy measures in complex economies.