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Who influences the fundamental value of commodity futures in Japan?

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  • Iwatsubo, Kentaro
  • Watkins, Clinton

Abstract

We present evidence on the asymmetric information content of six investor groups' transactions in the gold, platinum, gasoline and rubber futures markets on the Tokyo Commodity Exchange. Microstructure theory suggests that traders with superior information regarding the efficient price should be more profitable in the long run. We find that foreign investors have the greatest influence over the efficient price in the gold market, domestic retail investors in the gasoline market and domestic investment funds in the platinum and rubber markets. Differences in the relative influence of investor groups over commodity futures are likely to reflect the degree of contract homogeneity and associated market liquidity. Foreign (domestic retail) investors have larger information shares for the homogeneous liquid (heterogeneous illiquid) contracts than for the heterogeneous illiquid (homogeneous liquid) contracts.

Suggested Citation

  • Iwatsubo, Kentaro & Watkins, Clinton, 2020. "Who influences the fundamental value of commodity futures in Japan?," International Review of Financial Analysis, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:finana:v:67:y:2020:i:c:s1057521919300584
    DOI: 10.1016/j.irfa.2019.101404
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    Cited by:

    1. Kumar, Ashish & Badhani, K.N. & Bouri, Elie & Saeed, Tareq, 2021. "Herding behavior in the commodity markets of the Asia-Pacific region," Finance Research Letters, Elsevier, vol. 41(C).

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    More about this item

    Keywords

    Asymmetric information; Commodities; Futures; Investor behaviour; Market microstructure;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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