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The Profitability of Speculators in Currency Futures Markets

Author

Listed:
  • Jonathan Kearns

    (Reserve Bank of Australia)

  • Phil Manners

    (Reserve Bank of Australia)

Abstract

Using weekly data on the positions of different types of participants in currency futures markets we present evidence that suggests speculators are profitable. Across six currencies, speculators’ gross profits are seemingly positive in 60 per cent of weeks. The profits are significant even after accounting for transactions costs. Our estimated speculator profits are consistent both with speculators being paid a risk premium and with speculators having superior forecasting ability.

Suggested Citation

  • Jonathan Kearns & Phil Manners, 2004. "The Profitability of Speculators in Currency Futures Markets," RBA Research Discussion Papers rdp2004-07, Reserve Bank of Australia.
    • Handle: RePEc:rba:rbardp:rdp2004-07
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    File URL: https://www.rba.gov.au/publications/rdp/2004/pdf/rdp2004-07.pdf
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    References listed on IDEAS

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    Cited by:

    1. Raushan Kumar, 2021. "Predicting Wheat Futures Prices in India," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 28(1), pages 121-140, March.
    2. Michael J. Sager & Mark P. Taylor, 2006. "Under the microscope: the structure of the foreign exchange market," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 11(1), pages 81-95.
    3. Aaron Tornell & Chunming Yuan, 2012. "Speculation and hedging in the currency futures markets: Are they informative to the spot exchange rates," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 32(2), pages 122-151, February.
    4. Konstantinidi, Eirini & Skiadopoulos, George, 2011. "Are VIX futures prices predictable? An empirical investigation," International Journal of Forecasting, Elsevier, vol. 27(2), pages 543-560.

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    More about this item

    Keywords

    exchange rates; futures markets; speculators;
    All these keywords.

    JEL classification:

    • F31 - International Economics - - International Finance - - - Foreign Exchange

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