Tracking speculative trading

Dominik Boos and Linus Grob

Journal of Financial Markets, 2023, vol. 64, issue C

Abstract: Managed futures funds are predominantly trend-followers. By analyzing positioning data, we provide novel evidence for this claim and estimate signals applied by these funds. We write trend-followers aggregate position as a weighted sum of past daily returns and use a generalized ridge regression for regularization and parameter estimation. This procedure prevents overfitting but remains flexible enough to capture various patterns. For the 23 commodities considered, trend-following can explain speculators’ position changes with an average R2 of more than 40%. Finally, we document that producers act as contrarians in a way that closely mirrors the behavior of momentum traders.

Keywords: Trend-following; Momentum; Commodity futures market; Commitments of traders; Hedge funds; Ridge regression (search for similar items in EconPapers)
JEL-codes: C14 C52 G11 Q02 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finmar:v:64:y:2023:i:c:s1386418122000635

DOI: 10.1016/j.finmar.2022.100774

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