Speculation In Futures Research Articles

The “Necessity” of New Position Limits in Agricultural Futures Markets: The Verdict from Daily Firm‐level Position Data

AbstractRegulators are proposing new position limits in U.S. commodity futures markets while the actual impact of long‐only index funds on futures prices continues to be debated. Researchers have noted the data limitations—frequency and market breadth—associated with using data compiled by the U.S. Commodity Futures Trading Commission (CFTC). This research addresses these shortfalls by using daily position data for a specific long‐only index fund. The empirical analysis focuses on the firm‐level position data across 13 U.S. agricultural futures markets. The firm‐level data are shown to be representative of the overall index fund industry. Empirical tests fail to find any evidence linking the firm's trading with market returns. However, there does appear to be a consistent negative relationship between the firm's roll transactions and changes in calendar price spreads. Notably, the direction of this impact runs contrary to the price‐pressure hypothesis. The results of this study, and others, indicate that a clear verdict can be reached—new limits on speculation in agricultural futures markets are unnecessary.

Does Futures Speculation Destabilize Commodity Markets?

This paper examines how speculative futures trading affects commodity markets in terms of price impacts, volatility, and market quality. Contrary to the popular belief that speculators are responsible for the recent commodity price fluctuation, my analysis finds no evidence that speculators destabilize the spot market. Instead, speculators contribute to lower volatility and enhanced market quality. More importantly, the empirical results provide strong evidence that speculators either have no effect or dampen prices during periods of large price movement. My findings suggest speculators have had a significant, and in fact positive, influence on the commodity market during the recent financialization period, implying that restricting speculative trading in the futures market is not an efficient way to stabilize the commodity market.

Does Futures Speculation Destabilize Commodity Markets?

This paper examines how increased speculator participation in the commodity futures market affects market outcomes, including trades' price impacts, price volatility, and market quality. Contrary to the popular belief that speculators are responsible for the recent commodity price fluctuation, my analysis finds no evidence that speculators destabilize the commodity spot market. Instead, speculators contribute to lower price volatility, enhanced price efficiency, and better liquidity in the commodity markets. More importantly, I show that speculators either have no effect or stabilize prices during periods of large price movement. My findings suggest speculators have had a significant and in fact positive influence on the commodity market during the recent “financialization” period, implying that restricting speculative trading in the futures market is not an efficient way to stabilize the commodity market. © 2015 Wiley Periodicals, Inc. Jrl Fut Mark 35:696–714, 2015

Exploring the Hedging Effectiveness of European Wheat Futures Markets during the 2007-2012 Period

The hypothesis that speculative behaviour was the cause of the instability of commodity prices has brought renewed interest in futures markets. In this paper, the hedging effectiveness of European and US wheat futures markets were studied to test whether they were affected by the price instability observed after 2007. Indirectly, this could also be thought as a test of whether the increasing presence of speculators in futures markets have made them divorced from physical markets. A multivariate GARCH model was applied to compute optimal hedging ratios. No important evidence was found of a change in the hedging effectiveness after 2007.

Does Futures Speculation Destabilize Spot Prices? New Evidence for Commodity Markets

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the growing market shares of futures speculators destabilize commodity spot prices. We approximate conditional volatility and analyze how it is affected by speculative open interest. In this context, we split our sample into two equally long subperiods and document whether the speculative impact on conditional volatility increases. With respect to six heavily traded agricultural and energy commodities, we do not find robust evidence that this is the case. We thus conclude that the financialization of raw material markets does not make them more volatile.

The Ethics of Financial Speculation in Futures Markets

This article sketches an ethics of (financial) speculation in futures markets. (1) It identifies an intentionalistic fallacy prevalent in moral criticisms of speculation in general and of financial speculation in particular. (2) It scrutinizes the degree to which the recent debate on financial speculation with agricultural commodities follows the general pat-tern of moral criticism and its intentionalistic fallacy. (3) It then provides a theoretical and empirical in-depth analysis of long-only index funds engagement in futures markets and concludes that moral criticisms which put them in the pillory as hungermakers are unjust(ified). This proves that ethics, understood as a theory of morality, can criticize moral criticisms of financial speculation on moral grounds. (4) Finally, this article discusses the option of interdisciplinary cooperation between ethics and economics.

Speculative Cotton Pricing in the 1920s: A Nonlinear Tale of Noise Traders and Fundamentalists

The paper investigates the role of speculation in the Liverpool cotton futures market between 1921 and 1929. The analysis is based on historical descriptions of the working of speculation in commodity markets and is related to the tenets of behavioural finance. The model posits the existence of two categories of speculators, noise traders and fundamentalists, who react (differently) to deviations of market prices from their fundamental value. The empirical analysis is based on original data drawn from the online archives of The Times. The empirical findings allow us to conclude that whereas noise traders tend to herd, fundamentalists are more affected by risk aversion and react asymmetrically more to underpricing than to overpricing of the cotton contracts. As expected, the presence of fundamentalists stabilizes the market. Interestingly our results seem to be consistent with the observations of expert witnesses of those markets.

A Bitter Brew? Futures Speculation and Commodity Prices

We introduce a new approach to measuring the possible impact of futures speculation on spot commodity prices. We advocate the use of a non-parametric, highly flexible empirical model for measuring this impact, in order to account for possible non-linearity in the transmission from futures to spot market. Empirical results for the coffee market show that most of the changes in spot prices can be attributed to shifts in demand and - in particular - supply. Nevertheless, speculation is an impor- tant part of the coffee price generation process. The effect of speculation on the price of coffee is indeed spiky, which explains why traditional, mean-variance based methods have failed to identify this. However, it is also significant, both statistically and economically. An extensive robustness analysis confirms the validity of our results, and - within the limitations posed by the data - we have been able to establish causality.

Origins of robust control: Early history and future speculations

A revolution in control theory thought happened in the early 1970s when the dominant focus of research shifted from optimality to robustness in response to unexpected failures of optimal control theory to produce feedback control designs capable of tolerating normal differences between design models and reality. The robustness concept has since become such an integral part of present day control theory that it is difficult to imagine that time long ago when the concept lacked a clear mathematical representation and the tools of multivariable robustness analysis were yet to be identified. We shall revisit that time to examine the events that facilitated, and necessitated, this remarkable paradigm shift. Next, looking to the future, we will consider how failures of robust control designs to cope with incorrect uncertainty estimates are beginning to spur control theorists to consider data-driven problem formulations for estimation and control that tacitly question the roles of basic concepts like true model and uncertainty bounds, stochastic noise models and even Bayesian probability. We will discuss how and why Karl Popper’s scientific logic of unfalsification seems to be emerging as a central concept in these data-driven problem formulations, and how the unfalsification concept might again shift the focus of mathematical research in the areas of estimation and control.

Does Futures Speculation Destabilize Spot Prices? New Evidence for Commodity Markets

Motivated by repeated price spikes and crashes over the last decade, we investigate whether the rapidly growing market shares of futures speculators have destabilized commodity spot prices. We approximate conditional volatility and regress it on expected and unexpected speculative open interest. In this context, we split our sample into two equally long sub-periods, and document whether the speculative impact on conditional volatility has increased. However, with respect to six heavily traded agricultural and energy commodities, we find no evidence that this is the case. We thus conclude that the increasing financialization of raw material markets has not made them more volatile.

Origins of Robust Control: Early History and Future Speculations

A revolution in control theory thought happened in the early 1970s when the dominant focus of research shifted from optimality to robustness in response to unexpected failures of optimal control theory to produce feedback control designs capable of tolerating normal differences between design models and reality. The robustness concept has since become such an integral part of present day control theory that it is difficult to imagine that time long ago when the concept lacked a clear mathematical representation and the tools of multivariable robustness analysis were yet to be identified. We shall revisit that time to examine the events that facilitated, and necessitated, this remarkable paradigm shift. Next, looking to the future, we will consider how failures of robust control designs to cope with incorrect uncertainty estimates are beginning to spur control theorists to consider data-driven problem formulations for estimation and control that tacitly question the roles of basic concepts like true model and uncertainty bounds, stochastic noise models and even Bayesian probability. We will discuss how and why Karl Popper's scientific logic of unfalsification seems to be emerging as a central concept in these data-driven problem formulations, and how the unfalsification concept might again shift the focus of mathematical research in the areas of estimation and control.

Speculation and hedging in the currency futures markets: Are they informative to the spot exchange rates

AbstractThis study presents an empirical analysis investigating the relationship between the futures trading activities of speculators and hedgers and the potential movements of major spot exchange rates. A set of trader position measures are employed as regression predictors, including the level and change of net positions, an investor sentiment index, extremely bullish/bearish sentiments, and the peak/trough indicators. We find that the peaks and troughs of net positions are generally useful predictors to the evolution of spot exchange rates, but other trader position measures are less correlated with future market movements. In addition, speculative position measures usually forecast price‐continuations in spot rates while hedging position measures forecast price‐reversals in these markets. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark

The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?

AbstractThis paper revisits the “adequacy of speculation” debate in agricultural futures markets using the positions held by index funds in the Commitment of Traders reports. Index fund positions were a relatively stable percentage of total open interest from 2006–2008. Traditional speculative measures do not show any material shifts over the sample period. Even after adjusting speculative indices for commodity index fund positions, values are within the historical ranges reported in prior research. One implication is that long‐only index funds may be beneficial in markets traditionally dominated by short hedging.

Power as Knowing Participation in Change

The theory of power as knowing participation in change was derived from Rogers' science of unitary human beings. Following testing and research of the theory and measurement instrument, a practice methodology was developed and the health patterning practice model was initiated. Further developments of the theory are presented and future speculations are proposed.

Implications of futures trading volume: Hedgers versus speculators

The high trading volume in securities markets has puzzled researchers for years. Recently, overconfidence models have offered testable implications to address the puzzle. In this study, we proved empirically that investors have different degrees of overconfidence in trading securities. Using information in the Commitments of Traders reports of the Commodity Futures Trading Commission to differentiate between hedgers and speculators, we find relatively strong and consistent evidence of overconfident trading among futures speculators only. There are four major findings in our results. First, speculators trade more (less) aggressively following gains (losses) in futures markets. Second, speculators trade more (less) aggressively following gains (losses) of related stocks in the stock market. Third, gains (losses) of less-related stocks, however, do not affect the trading of futures speculators. Finally, it is found that overconfident futures speculators assume more (less) risk following market gains (losses). Given that overconfident investors tend to overestimate investment returns, our findings may have important implications for investors in zero-sum financial markets.

Measuring risk for large hedgers and large speculators in major US futures markets

Using the Commodity Futures Trading Commission's Commitments of Traders data, considering both the generalized autoregressive conditional heteroskedasticity (GARCH) and the power ARCH volatility-based models, it has been found that the lagged volatility and the news about volatility from the previous month are significant in explaining large hedger and speculator volatilities. A greater reliance on the ARCH term by speculators suggests their greater reliance on past information for making their current decisions. Furthermore, the hedger volatility in treasury bonds and coffee and the speculator volatility in gold and Standard & Poor's 500 futures have experienced increasing volatility persistence to shocks during the 1990s. In all remaining markets, hedger and speculator volatilities have shown a tendency to decay over time in response to shocks, supporting the belief that both players are informed and react well to news volatility. The PARCH model explains the volatility of both players more accurately by exhibiting a greater number of negative components of volatility than theGARCH model. Both models, under the normal and t-distributions, support the fact that most futures returns in the 29 US markets were leptokurtic. The PARCH model, under a normal distribution, was ranked first in explaining actual returns and forecasting the one-month futures return for both players. The PARCH model, under the t-distribution, was ranked last due to its high sensitivity for the standard deviation of returns. Idiosyncratic volatility was found to be a poor proxy of volatility in forecasting the onemonth futures return.

Learner-Centered Teaching and the Use of Technology

This article explores the use of various learning technologies as tools for facilitating learner-centered teaching. The article offers another perspective on the scholarship of teaching with technology—through discussion of various theoretical models of learner-centered teaching, the role of technology on the student/instructor relationships, the impact on technology in different educational settings and contexts, and learners’ cultural differences. The article concludes with a brief discussion of future trends, cautions, and speculations related to technology use in learner-centered teaching.

Skunked on the New York Cotton Exchange: What Really Happens to Jason Compson in The Sound and the Fury

New York Cotton Exchange takes a large chunk out of Compson's day on April 6, 1928 in William Faulkner's Sound and the Fury. Speculation in cotton futures is just one thing more that addles and brings to ruin his nickel-and-dime schemes. For one who craves a profit on every deal, Compson gets a good drubbing in his cotton market trade. By the end of the day, he suffers a staggering loss from the short sale of one cotton futures contract, the total amount of which no one has yet put a specific dollar figure on. Nor is it clear that Faulkner himself did the math and realized how much actually lost in this trade. first commentator to understand that sold a contract of cotton short on the New York Cotton Exchange was William W. Cobau in Jason Compson and the Costs of Speculation. Cobau does not establish just how much the speculation cost him, however: How much money does lose? We do not know (258). essential fact is that sold short, something that had escaped critics such as Dorothy Tuck and Edmund L. Volpe, who, as Cobau notes, erroneously argued that he bought a futures contract. More recently, Rick Wallach, in The Compson Family Finances and the Economics of Tragic Farce, gets it wrong when he says that purchased a call option (80), a financial instrument not in existence in 1928 and that would not be available to commodity traders on the New York Cotton Exchange for another 56 years. (1) Wallach not only mixes up call option with a futures contract but also puts on the long rather than the short side of the market. Buying and selling of actual cotton on the New York Cotton Exchange is called the market, also known as the market because transactions take place right away, or on the spot. Spot cotton prices are determined by the price that buyers and sellers agree to in the cotton trading ring by means of an open outcry transaction. Cotton futures, however, also listed on the Exchange, are the opposite of the cash market. Futures are contracts that traders are willing to buy at a current price expecting that the contracts will rise in value at a certain time in the future. Compson sells short a futures contract, expecting that the contract will decline in value at a specific time in the months ahead when he can buy it back and pocket the difference between the greater proceeds from the short sale and the lesser cost of covering, or buying the contract back. Instead, suffers a loss when he has to buy back the contract at a higher price than what he sold it short for. Futures bring a high degree of risk because traders must assess a multitude of ever-changing variables and act on what they think may happen on or before a certain date in the future. New York Cotton Exchange Year Book 1927-1928 explains that the prices of futures are based on factors that affect the cotton crop such as acreage planted, rainfall and other weather conditions, boll weevil infestation or crop condition, ginning, probable production, the movement of the cotton crop, and a multiplicity of other data, all of which is available to the cotton trade and forms the basis for an appraisal of cotton at any time, as well as the future trend of prices (6). Buyers of cotton futures fall into one of two categories. first group consists of growers, producers, merchants, and processors who, in the months between planting and harvest, can assume a speculative hedge to reduce their price risk in the cash market against the possibility of an unsuccessful crop. Bad news for crops is bullish for futures prices. Futures allow this group to make up losses resulting from a poor crop with capital gains in the cotton market. On the other hand, good news for crops is bearish for futures prices. If the value of the crop rises, those in this group can eliminate the hedge book to gain full exposure to higher cotton prices. Hedgers, therefore, have an interest in the underlying commodity and seek to offset the risk of lower cash or spot prices for cotton at time of harvest by buying short-duration contracts in May or longer-duration contracts in October, November, or December, as conditions and their needs warrant. …

What Makes A Good School Now?

Introduction Chapter 1 Leading for Success Chapter 2 Reviewing for Success Chapter 3 Organising and Delivering Success Chapter 4 Learning, Teaching and Assessment Chapter 5 The Learning Environment Chapter 6 Continuous Professional Development Chapter 7 Players & Stakeholders Chapter 8 What now and future speculation - from good to great. Every Child Matters Agenda Use of Data ICT Workforce Reform Internationalism Building Schools for the Future Personalisation Curriculum Reform.

The Adequacy of Speculation in Agricultural Futures Markets: Too Much of a Good Thing?

The objective of this report is to re-visit the adequacy speculation debate in agricultural futures markets. The Commodity Futures Trading Commission makes available the positions held by index funds and other large traders in their Commitment of Traders reports. The results suggest that after an initial surge from early 2004 through mid-2005, index fund positions have stabilized as a percent of total open interest. Traditional speculative measures do not show any material changes or shifts over the sample period. In most markets, the increase in long speculative positions was equaled or surpassed by an increase in short hedging. So, even after adjusting speculative indices for index fund positions, values are within the historical ranges reported in prior research. One implication is that long-only index funds may be beneficial in markets traditionally dominated by short hedging. Attempts to curb speculation through regulatory means should be weighed carefully against the potential benefits provided by this class of speculators.