The behavior and performance of major types of futures traders

Changyun Wang

MPRA Paper from University Library of Munich, Germany

Abstract: This article examines the behavior and performance of speculators and hedgers in 15 U.S. futures markets. We find that after controlling for market risk factors, speculators are contrarians, but respond positively to market sentiment. In contrast, hedgers engage in positive feedback trading and trade against market sentiment. We also find that trades of speculators (hedgers) are positively (negatively) correlated with subsequent abnormal returns; however, it does not appear that speculators possess superior forecasting power. Therefore, hedging pressure effects likely explain the negative relation between the performance of speculators and hedgers. The positive feedback trading by hedgers together with their negative performance suggests that hedgers have a destabilizing impact on futures prices.

Keywords: Trader behavior; perfromance; hedgers; speculators (search for similar items in EconPapers)
JEL-codes: G14 (search for similar items in EconPapers)
Date: 2001-12, Revised 2002-07
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (13)

Published in Journal of Futures Markets 1.23(2003): pp. 1-31

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