The Impact of Speculation on Commodity Prices: A Meta-Granger Analysis

Wimmer, Thomas; Geyer‐Klingeberg, Jerome; Hütter, Marie; Schmid, Florian; Rathgeber, Andreas W.

doi:10.2139/ssrn.3517263

Cited by 5 publications

(6 citation statements)

References 87 publications

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“…The majority of the empirical literature on speculation in the commodity markets discusses the impact of financialization as well as the role of speculators without considering a specific trader group. As a result, the largest part of the empirical literature also comes to the same conclusion (see Often and Wisen (2013), Manera et al (2013), Kim (2015), Mayer et al (2017), Boyd et al (2018), Fishe and Smith (2019), Wimmer et al (2021)). In the context of the increasing world population, this political and ethical discussion about the world's most essential resources remains vivid and primarily concentrates on index-tracking market players to our suprise.…”

Section: Introductionmentioning

confidence: 79%

“…They clearly conclude that speculators provide liquidity to hedgers while finding no evidence of destabilization as well as price distortion in commodity markets initiated by speculators. Wimmer et al (2021) analyze more than 50 research articles that study the relationship between commodity prices and speculative behavior using Granger causality tests.…”

Section: Review Of the Literaturementioning

confidence: 99%

See 1 more Smart Citation

Long‐short speculator sentiment in agricultural commodity markets

Borgards

Czudaj

2022

Int. J Fin Econ

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This paper tests the hypothesis that long-short speculators are able to generate short-term investment returns based on their sentiment for twelve agricultural commodity futures. For this purpose, we dynamically model the equidirectional trading of long and short commodity futures of long-short speculators as a proxy for their market sentiment. We find evidence that the sentiment period returns are considerably positive and differ significantly from neutral sentiment periods for all commodities which underlines the sentiment's relevance. In line with the empirical literature, we can reject the argument of price manipulation as the price continues to develop into the direction of the sentiment period although long-short speculators trade non-directionally in the following. We rather indicate the existence of a short-term time-series momentum effect, which can be robustly identified without the requirement to define an external model parameter. From the superior sentiment-based momentum returns, we conclude that long-short speculators have valuable, exclusive information, which cannot be replicated by observing their trading activity with a time lag of eight trading days. We also find that a sentiment-based momentum strategy generates significantly higher returns than the long-short speculators have realized in the fifteen-year sample period which we attribute to the complexity of the long-short speculators' investment strategies.

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Section: Introductionmentioning

confidence: 79%

Section: Review Of the Literaturementioning

confidence: 99%

Long‐short speculator sentiment in agricultural commodity markets

Borgards

Czudaj

2022

Int. J Fin Econ

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“…First, it provides a yardstick for treating all the variables endogenously (Wang et al, 2020; Benk & Gillman, 2020; Ghysels et al, ; Kin et al, 2020). Second, it helps to decompose the factors into short and long run perspectives, providing information on their dynamic interaction (Mazzarisi et al, 2020; Shao et al, 2020; Wimmer et al, 2020). Third, it provides an avenue to assess the variable's convergence speed to equilibrium and the associated mechanism (Liu et al, 2020; Massa & Rosellón, 2020; Zhao et al, 2020).…”

Section: Methodsmentioning

confidence: 99%

Has knowledge improved economic growth? Evidence from Nigeria and South Africa

Shobande

Asongu

2021

Journal of Public Affairs

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This study examines whether knowledge causes economic growth in Africa's two leading economies: Nigeria and South Africa. Using the Vector Autoregressive and Vector Error Correction approach, the findings show cointegration among the variables. The speed of convergence of the variables to their long-term mean values is relatively higher for South Africa than for Nigeria. In the short run, it is observed that knowledge unidirectionally Granger causes growth for Nigeria, whereas bidirectional causality is observed for South Africa. The higher correlation between knowledge and growth in South Africa reflects the success of greater investment in education. Nigeria must increase investment in education and modern infrastructure to converge to South Africa's growth trajectory. Moreover, for Nigeria, (i) knowledge unidirectionally Granger cause growth, (ii) evidence of bidirectional causality flow is apparent between trade, the economic incentive and growth and (iii) health unidirectionally Granger cause knowledge. As for South Africa: (i) there is bidirectional causality between knowledge, trade openness and growth, whereas investment and economic incentive, unidirectionally Granger causes growth, (ii) investment, trade openness and health unidirectionally Granger cause knowledge and (iii) economic incentive unidirectionally Granger cause trade openness. In conclusion, this paper argues that a transformed education system can provide the knowledge base essential for promoting and sustaining economic growth.

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“…Throughout our analysis, we investigate whether a certain group of traders impacted inventory levels or the price and volatility of CLK20. The analysis is implemented after accounting for various oil market-specific and macroeconomic factors that have been shown in the literature to explain inventory levels and/or price commodity futures contracts (e.g., Singleton, 2014;Algieri and Leccadito, 2019;Wimmer et al, 2021). The factors that we consider as control variables are: i) the futures-spot spread of Erb and Harvey (2006) and Gorton and Rouwenhorst (2006) defined as 𝐹𝐹 𝑡𝑡,𝑇𝑇 2 − 𝑆𝑆 𝑡𝑡 = 𝐹𝐹 𝑡𝑡,𝑇𝑇 2 − 𝐹𝐹 𝑡𝑡,𝑇𝑇 1 , with 𝑇𝑇 1 < 𝑇𝑇 2 and 𝑇𝑇 1 (𝑇𝑇 2 ) the maturity of the front-end (second-end) futures contract; ii) the momentum signal of Miffre and Rallis (2007) measured as the 50-day averaged returns of front-end contracts; iii) the basis-momentum signal of Boons and Prado (2019) defined as the difference between the 50-day averaged returns of the front-and second-nearest contracts; iv) the relative basis signal of Gu et al…”

Section: Control Variablesmentioning

confidence: 99%

The Negative Pricing of the May 2020 WTI Contract

Fernández-Pérez¹,

Fuertes²,

Miffre³

2023

The Energy Journal

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This paper sheds light on the negative pricing of the May 2020 WTI futures contract (CLK20) on April 20, 2020. The super contango of early 2020, triggered by COVID-19 lockdowns and geopolitical tensions, incentivized cash and carry (C&C) traders to be long CLK20 and short distant contracts, while simultaneously booking storage at Cushing. Our investigation reveals that C&C arbitrage largely contributed to the lack of storage capacity at Cushing in April 2020 and the price crash relates to the reversing trades of many long CLK20 traders without prebooked storage. Additional aggravating factors included a liquidity crush, staggering margin calls and potential price distortions due to the trade-at-settlement mechanism. The analysis suggests that claims from experts that hold index trackers responsible for the crash are unwarranted: Index trackers did not trigger the negative pricing, nor widen the futures-spot spread by rolling their positions to more distant contracts ahead of maturity.

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The Impact of Speculation on Commodity Prices: A Meta-Granger Analysis

Cited by 5 publications

References 87 publications

Long‐short speculator sentiment in agricultural commodity markets

Long‐short speculator sentiment in agricultural commodity markets

Has knowledge improved economic growth? Evidence from Nigeria and South Africa

The Negative Pricing of the May 2020 WTI Contract

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