On the predictive role of large futures trades for S&P500 index returns: An analysis of COT data as an informative trading signal

Information Flow, Trading Activity and Commodity Futures Volatility

“…In this paper, extant studies are extended by using the weekly reports from the Commodity Futures Trading Commission (CFTC) on the outstanding futures positions by type of trader . While the majority of studies using CFTC data focus on the contemporaneous explanatory power or predictive ability of the Commitment of Trader (COT) positions regarding futures or spot returns (e.g., Chen & Maher, ; Sanders, Boris, & Manfredo, ; Schwarz, ; Wang, ), the relationship between trader positions and volatility has been addressed from a number of different perspectives. Chang, Chou, and Nelling () examine the link between stock market volatility and the demand for hedging in S&P 500 stock index futures contracts.…”

Intraday information diffusion on nonsimultaneous trading

“…Chen (2013) found robust evidence in the Taiwan stock market, where the first 10-minute returns in spot index can serve as a directional signal for trading on the futures market. Chen and Maher (2013) found that the large trading positions in the S&P 500 futures can help predict the S&P 500 index performance. This information advantage is discovered in large-scale commercial firms and high-frequency hedge funds.…”

“…Given the presence of the pre-market futures predictive power, this chapter aims to design corresponding trading strategies. It has been studied that the information advantage in the market opening and the derivative market can lead to profitable trend-following strategies (Chen, 2013;Chen and Maher, 2013). This chapter uses information ratio and drawdown to measure strategy performance.…”