The Adequacy of Speculation in Agricultural Futures Markets:Too Much of a Good Thing?
AbstractLong-only commodity index funds have been blamed by other futures market participants for inflating commodity prices, increasing market volatility, and distorting historical price relationships. Much of this criticism is leveled without any formal empirical support or even cursory data analyses. The Commodity Futures Trading Commission makes available the positions held by index funds and other large traders in their Commitment’s of Traders report. In this research, we make an initial assessment of the size and activity of index funds in traditional agricultural futures markets. The results suggest that after an initial surge from early 2004 through mid-2005, index fund positions have stabilized as a percent of total open interest. Speculative measures—such as Working’s T—suggest that long-only funds may provide a benefit in markets traditionally dominated by short hedging.
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Bibliographic InfoPaper provided by NCCC-134 Conference on Applied Commodity Price Analysis, Forecasting, and Market Risk Management in its series 2008 Conference, April 21-22, 2008, St. Louis, Missouri with number 37615.
Date of creation: 2008
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Commitment’s of Traders; index funds; commodity futures markets; Agricultural Finance;
Other versions of this item:
- Dwight R. Sanders & Scott H. Irwin & Robert P. Merrin, 2010. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 32(1), pages 77-94.
- Sanders, Dwight R. & Irwin, Scott H. & Merrin, Robert P., 2008. "The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?," Marketing and Outlook Research Reports 37512, University of Illinois at Urbana-Champaign, Department of Agricultural and Consumer Economics.
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