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Speculation and informational efficiency in commodity futures markets

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  • Jean-Baptiste Bonnier

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes)

Abstract

We use recent data of the CFTC to re-assess the effects of financial traders on informational efficiency in commodity futures markets. To do so, we focus on excessive volatility as a means to reflect noise in the price discovery process. We show that the role of financial traders on volatility is more complex than often assumed in the literature. Researchers should distinguish between the trading motives of market actors, as well as between increases and decreases in open interest. Several findings stand out. In particular, we find that short-term fluctuations in open interest might primarily be driven by speculators' demand for liquidity, and that traditional speculators, as identified by the MM category of the CFTC, may be responsible for increasing volatility in several markets.

Suggested Citation

  • Jean-Baptiste Bonnier, 2021. "Speculation and informational efficiency in commodity futures markets," Post-Print hal-04299220, HAL.
    • Handle: RePEc:hal:journl:hal-04299220
    DOI: 10.1016/j.jimonfin.2021.102457
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    Cited by:

    1. Lajos Horváth & Zhenya Liu & Curtis Miller & Weiqing Tang, 2024. "Breaks in term structures: Evidence from the oil futures markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 29(2), pages 2317-2341, April.

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