Do Extreme CIT Position Changes Move Prices in Grain Futures Markets?

Jiarui Li, Scott H. Irwin and Xiaoli Etienne

Journal of Agricultural and Applied Economics, 2022, vol. 54, issue 4, 792-814

Abstract: Most previous studies reject the basic tenet of the Masters Hypothesis that the influx of financial index investments has pressured agricultural futures prices upwards substantially. However, the impact of index investment activities may be more complicated and nuanced than can be detected by the relatively simple linear Granger causality tests used in many previous studies. Our study applies a new cross-quantilogram (CQ) test to weekly index trader positions and returns in four agricultural futures markets. Overall, we find limited support for a significant relationship between extreme index trader position changes and returns, and even less support that increased index trading activities have pushed commodity prices higher.

Date: 2022
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