Are speculators informed?

✍ Scribed by Krista Schwarz

• Book ID: 102216711
• Publisher: John Wiley and Sons
• Year: 2011
• Tongue: English
• Weight: 318 KB
• Volume: 32
• Category: Article
• ISSN: 0270-7314
• DOI: 10.1002/fut.20509

✦ Synopsis

Abstract

The positions of hedgers and speculators are correlated with returns in a number of futures markets, but there is much debate as to the interpretation of such a relationship—whether it reflects private information, liquidity, or trend‐chasing behavior. This paper studies the relationship between positioning of hedgers and speculators and returns in equity futures markets. I propose a novel test of the private information hypothesis: analyzing the effect of public announcements about futures positions on prices, using high‐frequency data in short windows around the announcements. I find that the revelation of speculators' positions is informative to investors more broadly, supporting the private information view. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark