Does speculation Granger cause return in Chinese commodity markets?

Hu, Weigang; Feng, Yun

doi:10.1080/13504851.2015.1071463

Cited by 2 publications

(1 citation statement)

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“…Manera et al (2013) found short term speculation increases noise in the information formation process thereby positively affecting volatility. Hu and Feng (2016) identified that higher speculation leads to higher return volatility. Wellenreuther and Voelzke (2019) studied the relationship between speculation and volatility for metals and agricommodity futures in China and identified that volatility unidirectionally Granger causes speculation.…”

Section: Causal Relationship Between Speculation and Volatility In The Futures Marketmentioning

confidence: 99%

Wavelet-based analysis of guar futures in India: did we kill the golden goose?

Bandyopadhyay

Bhowmik

Rajib

2020

JADEE

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PurposeGuar Gum (GG) is used in Shale oil exploration. Excessive price increase in the Guar futures market had a spillover impact on Guar spot prices and affected Guar export from India as Shale oil producers started exploring alternate sources. In this paper, the role of excessive speculation in the futures market, and its adverse impact on the guar-based agri-business ecosystem have been empirically explored.Design/methodology/approachVolatility spillover dynamics between WTI crude oil and Guar futures have been explored using bivariate-Granger Causality, BEKK–GARCH models with Wavelet multi-resolution analysis. The wavelet-based models capture the multi-scale features of mean and volatility spillover to identify the effect of heterogenous investment behavior in the time and frequency domain.FindingsThe results provide evidence that excessive speculation in futures markets increases spot market volatility. The results also suggest that the excess presence of short-term investors can destabilize the futures market.Research limitations/implicationsThe purpose of the commodity futures market is to support price discovery and risk management. However, speculative practices can destabilize these purposes leading to the failure of the business ecosystem.Originality/valueThe novelty of this paper is twofold. First, it explores the economic linkages between the spot and futures market and tests whether the presence of heterogeneous traders affects the economic linkages. Second, it models the impact of short-term speculative investment on the destabilization of the spot market.

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Section: Causal Relationship Between Speculation and Volatility In The Futures Marketmentioning

confidence: 99%