The behavior and performance of major types of futures traders
AbstractThis article examines the behavior and performance of speculators and hedgers in 15 U.S. futures markets. We find that after controlling for market risk factors, speculators are contrarians, but respond positively to market sentiment. In contrast, hedgers engage in positive feedback trading and trade against market sentiment. We also find that trades of speculators (hedgers) are positively (negatively) correlated with subsequent abnormal returns; however, it does not appear that speculators possess superior forecasting power. Therefore, hedging pressure effects likely explain the negative relation between the performance of speculators and hedgers. The positive feedback trading by hedgers together with their negative performance suggests that hedgers have a destabilizing impact on futures prices.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 36426.
Date of creation: Dec 2001
Date of revision: Jul 2002
Publication status: Published in Journal of Futures Markets 1.23(2003): pp. 1-31
Trader behavior; perfromance; hedgers; speculators;
Find related papers by JEL classification:
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
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