Price Discovery in Agricultural Commodity Markets: Do Speculators Contribute?

Martin T. Bohl, Pierre Siklos, Martin Stefan and Claudia Wellenreuther

No 7518, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

Abstract: Previous literature on price discovery in commodity markets is mainly focused on the question whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question 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. The results indicate that speculative activity generally reduces the level of noise in the futures market, while increasing the relative contribution of the futures market to the price discovery process.

Keywords: Commodity Markets; Futures Speculation; Price Discovery (search for similar items in EconPapers)
Pages: 32 pages
Date: 2018-10
New Economics Papers: this item is included in nep-agr
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Related works:
Journal Article: Price discovery in agricultural commodity markets: Do speculators contribute? (2020)
Working Paper: Price discovery in agricultural commodity markets: Do speculators contribute? (2019)
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