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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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File URL: http://purl.umn.edu/54547
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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)
Pages:

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Handle: RePEc:ags:jlaare:54547
Contact details of provider: Web page: http://waeaonline.org/

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  1. Röthig, Andreas & Chiarella, Carl, 2006. "Investigating nonlinear speculation in cattle, corn, and hog futures markets using logistic smooth transition regression models," Darmstadt Discussion Papers in Economics 36774, Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute of Economics (VWL).
  2. 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.
  3. Dale, Charles & Zyren, John, 1996. "Noncommercial Trading in the Energy Futures Market," MPRA Paper 47463, University Library of Munich, Germany.
  4. Gary B. Gorton & Fumio Hayashi & K. Geert Rouwenhorst, 2013. "The Fundamentals of Commodity Futures Returns," Review of Finance, European Finance Association, vol. 17(1), pages 35-105.
  5. de Roon, F.A. & Nijman, T.E. & Veld, C.H., 2000. "Hedging pressure effects in futures markets," Other publications TiSEM 3dfe2c9f-3194-4751-9b34-1, Tilburg University, School of Economics and Management.
  6. Wang, Changyun, 2000. "Investor sentiment and return predictability in agricultural futures markets," MPRA Paper 36425, University Library of Munich, Germany, revised Sep 2002.
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