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Causality In Futures Markets


  • Bryant, Henry L.
  • Bessler, David A.
  • Haigh, Michael S.


This research investigates various unresolved issues regarding futures markets, using formal methods appropriate for inferring causal relationships from observational data when some relevant quantities are hidden. We find no evidence supporting the generalized version of Keynes's theory of normal backwardation. We find no evidence supporting theories that predict that the level of activity of speculators or uninformed traders affects the level of price volatility, either positively or negatively. Our evidence strongly supports the mixture of distribution hypothesis (MDH) that trading volume and price volatility have one or more latent common causes, resulting in their positive correlation.

Suggested Citation

  • Bryant, Henry L. & Bessler, David A. & Haigh, Michael S., 2003. "Causality In Futures Markets," Working Papers 28574, University of Maryland, Department of Agricultural and Resource Economics.
  • Handle: RePEc:ags:umdrwp:28574

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    References listed on IDEAS

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    1. repec:eee:jrpoli:v:53:y:2017:i:c:p:300-316 is not listed on IDEAS
    2. Antonakakis, Nikolaos & Floros, Christos & Kizys, Renatas, 2016. "Dynamic spillover effects in futures markets: UK and US evidence," International Review of Financial Analysis, Elsevier, vol. 48(C), pages 406-418.
    3. Dwight R. Sanders and Scott H. Irwin, 2013. "Measuring Index Investment in Commodity Futures Markets," The Energy Journal, International Association for Energy Economics, vol. 0(Number 3).
    4. Sung Je Byun, 2017. "Speculation in Commodity Futures Markets, Inventories and the Price of Crude Oil," The Energy Journal, International Association for Energy Economics, vol. 0(Number 5).
    5. 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.
    6. Dwight R. Sanders & Scott H. Irwin, 2010. "A speculative bubble in commodity futures prices? Cross-sectional evidence," Agricultural Economics, International Association of Agricultural Economists, vol. 41(1), pages 25-32, January.
    7. Jabir Ali & Kriti Bardhan Gupta, 2011. "Efficiency in agricultural commodity futures markets in India: Evidence from cointegration and causality tests," Agricultural Finance Review, Emerald Group Publishing, vol. 71(2), pages 162-178, August.
    8. repec:nea:journl:y:2017:i:36:p:12-30 is not listed on IDEAS
    9. Georg Lehecka, 2015. "Do hedging and speculative pressures drive commodity prices, or the other way round?," Empirical Economics, Springer, vol. 49(2), pages 575-603, September.
    10. Scott H. Irwin & Dwight R. Sanders, 2011. "Index Funds, Financialization, and Commodity Futures Markets," Applied Economic Perspectives and Policy, Agricultural and Applied Economics Association, vol. 33(1), pages 1-31.

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