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Price discovery in agricultural commodity markets: Do speculators contribute?

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  • Bohl, Martin T.
  • Siklos, Pierre L.
  • Stefan, Martin
  • Wellenreuther, Claudia

Abstract

Previous literature on price discovery in commodity markets is mainly focused on the question of whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question of how the price discovery process is affected by futures speculation. Using different measures for speculation and hedging and a new price discovery metric, the present study analyzes this relationship for various agricultural commodities. On the whole, the results suggest that speculative activity reduces the level of noise in the futures markets under analysis, while increasing their relative contribution to the price discovery process.

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  • Bohl, Martin T. & Siklos, Pierre L. & Stefan, Martin & Wellenreuther, Claudia, 2020. "Price discovery in agricultural commodity markets: Do speculators contribute?," Journal of Commodity Markets, Elsevier, vol. 18(C).
    • Handle: RePEc:eee:jocoma:v:18:y:2020:i:c:s2405851318300941
    DOI: 10.1016/j.jcomm.2019.05.001
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    More about this item

    Keywords

    Commodity markets; Futures speculation; Price discovery;
    All these keywords.

    JEL classification:

    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • Q02 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - General - - - Commodity Market

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