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Smart Money: The Forecasting Ability of CFTC Large Traders in Agricultural Futures Markets

  • Sanders, Dwight R.
  • Irwin, Scott H.
  • Merrin, Robert P.

The forecasting content of the Commodity Futures Trading Commission’s Commitments of Traders (COT) report is investigated. Bivariate Granger causality tests show very little evidence that traders’ positions are useful in forecasting (leading) returns in 10 agricultural futures markets. However, there is substantial evidence that traders respond to price changes. In particular, noncommercial traders display a tendency for trend following. The other trader classifications display mixed styles, perhaps indicating those trader categories capture a variety of traders. The results generally do not support use of the COT data in predicting price movements in agricultural futures markets.

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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 34 (2009)
Issue (Month): 2 (August)

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Handle: RePEc:ags:jlaare:54547
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  1. Frans A. de Roon & Theo E. Nijman & Chris Veld, 2000. "Hedging Pressure Effects in Futures Markets," Journal of Finance, American Finance Association, vol. 55(3), pages 1437-1456, 06.
  2. Gary Gorton & Fumio Hayashi & K. Rouwenhorst, 2007. "The Fundamentals of Commodity Futures Returns," Yale School of Management Working Papers amz2605, Yale School of Management, revised 01 Oct 2008.
  3. Andreas Röthig & Carl Chiarella, 2007. "Investigating nonlinear speculation in cattle, corn, and hog futures markets using logistic smooth transition regression models," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 27(8), pages 719-737, 08.
  4. Wang, Changyun, 2000. "Investor sentiment and return predictability in agricultural futures markets," MPRA Paper 36425, University Library of Munich, Germany, revised Sep 2002.
  5. Jian Yang & David Bessler & Hung-Gay Fung, 2004. "The informational role of open interest in futures markets," Applied Economics Letters, Taylor & Francis Journals, vol. 11(9), pages 569-573.
  6. Dale, Charles & Zyren, John, 1996. "Noncommercial Trading in the Energy Futures Market," MPRA Paper 47463, University Library of Munich, Germany.
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