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Does Trading Behaviour Converge across Commodity Markets? Evidence from the Perspective of Hedgers’ Sentiment

Author

Listed:
  • Qiang Ji

    (Center for Energy and Environmental Policy research, Institutes of Science and Development, Chinese Academy of Sciences, Beijing 100190, China and School of Public Policy and Management, University of Chinese Academy of Sciences, Beijing 100049, China)

  • Walid Bahloul

    (Governance, Finance and Accounting Laboratory, Faculty of Business and Economics, University of Sfax, Sfax 3018, Tunisia)

  • Jiang-bo Geng

    (School of Finance, Zhongnan University of Economics and Law, Wuhan 430073, China)

  • Rangan Gupta

    (Department of Economics, University of Pretoria, Pretoria, South Africa)

Abstract

We analyse the connectedness network for commercial traders’ sentiment across different futures markets. Using weekly data over the period of 2 September 2008 to 27 December 2016 on 21 commodity covering agriculture, energy, metals and livestock, we find that: (a) producer/merchant/processor/user (PMPU) in agricultural and energy markets are mainly engaged in cross-hedging in the futures market, and most of them would avoid risks in these markets by operating in the metal markets, which can be considered safe for PMPU traders, and that the cross-hedging strategies may play the role of PMPU sentiment spillover across futures markets; (b) as index traders, the swap dealers operate more in two markets, namely between the agricultural and metal markets, or between the agricultural and energy markets; (c) the influence of geopolitical risks in some countries can affect the stability of energy markets, which in turn can cause PMPU system-wide connectedness.

Suggested Citation

  • Qiang Ji & Walid Bahloul & Jiang-bo Geng & Rangan Gupta, 2019. "Does Trading Behaviour Converge across Commodity Markets? Evidence from the Perspective of Hedgers’ Sentiment," Working Papers 201930, University of Pretoria, Department of Economics.
    • Handle: RePEc:pre:wpaper:201930
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    References listed on IDEAS

    as
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