Why Do Hedgers Trade So Much?

Ing-Haw Cheng and Wei Xiong

No 19670, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Futures positions of commercial hedgers in wheat, corn, soybeans and cotton fluctuate much more than expected output. Hedgers' short positions are positively correlated with price changes. Together, these observations raise doubt about the common practice of categorically classifying trading by hedgers as hedging while trading by speculators as speculation, as hedgers frequently change their futures positions over time for reasons unrelated to output fluctuations, arguably a form of speculation.

JEL-codes: G1 (search for similar items in EconPapers)
Date: 2013-11
New Economics Papers: this item is included in nep-agr
Note: AP CF
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Citations: View citations in EconPapers (4)

Published as Ing-Haw Cheng & Wei Xiong, 2014. "Why Do Hedgers Trade So Much?," The Journal of Legal Studies, University of Chicago Press, vol. 43(S2), pages S183 - S207.

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