Predictive abilities of speculators in energy markets
Journal of Futures Markets, 2020, vol. 40, issue 5, 804-815
Using nonparametric methodology, I find that speculators are successful in taking profitable positions in energy futures markets, although the magnitude of this effect is lower than that found previously for agricultural markets. A plausible explanation for this difference is that price forecasting is more difficult for energy commodities. Moreover, I find that the energy speculators’ returns are due to the existence of the risk premiums rather than to speculators’ forecasting abilities. Futures risk premium is highly time‐variant; notably, energy investors’ profits have been very limited in the GFC and post‐GFC period, which coincided with the financialization of commodity markets.
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