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Speculation and the Informational Efficiency of Commodity Futures Markets

Author

Listed:
  • Martin Bohl
  • Alexander Pütz
  • Christoph Sulewski

Abstract

The recent financialization in commodity futures markets has prompted many calls for restricting speculative activity due to its diametrical effect on market quality. One aspect of market quality is that new information is instantanously reflected in the price. This article studies how speculative activity affects informational efficiency of commodity futures markets. We document significant temporal and cross-sectional variation in market efficiency in 20 commodity futures markets based on a sample of weekly closing prices from 1986 to 2019. The fixed effects panel regression finds no evidence for a significant relation between speculative activity and the degree of informational efficiency after controlling for volatility and liqudity. The results are robust across different window sizes, sampling frequencies and levels of trader aggregation.

Suggested Citation

  • Martin Bohl & Alexander Pütz & Christoph Sulewski, 2019. "Speculation and the Informational Efficiency of Commodity Futures Markets," CQE Working Papers 8919, Center for Quantitative Economics (CQE), University of Muenster.
    • Handle: RePEc:cqe:wpaper:8919
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    References listed on IDEAS

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    Cited by:

    1. Pierluigi Vellucci, 2021. "A critique of financial neoliberalism: a perspective combining multidisciplinary methods and commodity markets," SN Business & Economics, Springer, vol. 1(3), pages 1-11, March.

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    More about this item

    Keywords

    Market efficiency; Variance ratio test; Commodity futures;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General

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