Speculation and the Informational Efficiency of Commodity Futures Markets

Martin Bohl, Alexander Pütz and Christoph Sulewski

No 8919, CQE Working Papers from Center for Quantitative Economics (CQE), University of Muenster

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.

Keywords: Market efficiency; Variance ratio test; Commodity futures (search for similar items in EconPapers)
JEL-codes: C12 G14 G15 (search for similar items in EconPapers)
Pages: 38 pages
Date: 2019-10
New Economics Papers: this item is included in nep-agr
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:cqe:wpaper:8919

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