Abstract
We examine the price impact of traders on commodity futures markets. Following the framework of De Long et al. (1990), we empirically identify the existence of positive feedback traders, passive investors, and rational speculators in major global commodity futures markets. Our results show that index trader demand is negatively related to past commodity returns and is positively related to future commodity returns, as De Long et al. (1990) model predicts for passive investors. Furthermore, “non-reportable traders,” who are not obligated to report their positions to the regulators, behave like positive feedback traders, and interact significantly with commodity futures returns as well.
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