Trading activities and price discovery in foreign currency futures markets

Yu-Lun Chen (), Yin-Feng Gau and Wen-Ju Liao ()
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Yu-Lun Chen: Chung Yuan Christian University
Wen-Ju Liao: National Central University

Review of Quantitative Finance and Accounting, 2016, vol. 46, issue 4, No 4, 793-818

Abstract: Abstract This study investigates the relation between trading activities and the price discovery efficacy of the futures markets for EUR–USD and JPY–USD. According to data pertaining to weekly positions, collected from the Commitments of Traders reports distributed by the Commodity Futures Trading Commission, the information share of currency futures markets declines with hedgers’ positions but increases with speculators’ positions. In addition, both hedgers’ expected and unexpected positions have negative impacts on the contribution of the futures market; the futures market’s information share relates positively to speculators’ expected positions but is uncorrelated with speculators’ unexpected positions.

Keywords: Price discovery; Currency futures; Speculation; Hedging; Commitments of Traders (COT) (search for similar items in EconPapers)
JEL-codes: F31 G14 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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DOI: 10.1007/s11156-014-0486-9

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