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Hedging or speculation in derivative markets: the case of energy futures contracts

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  • Cetin Ciner

Abstract

This study examines whether hedging or speculation is the principal motive behind trading in energy futures markets. This question is important since facilitating risk allocation is considered to be one of the main benefits of the futures markets, while excess speculation in futures markets could destabilize the underlying spot market. Studying the linkage between volume and subsequent price movements leads to the conclusion that hedgers dominate speculators in all of the markets examined.

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  • Cetin Ciner, 2006. "Hedging or speculation in derivative markets: the case of energy futures contracts," Applied Financial Economics Letters, Taylor & Francis Journals, vol. 2(3), pages 189-192.
    • Handle: RePEc:taf:raflxx:v:2:y:2006:i:3:p:189-192
    DOI: 10.1080/17446540500461729
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