✦ LIBER ✦

Investor Sentiment and Return Predictability in Agricultural Futures Markets

✍ Scribed by Changyun Wang

Publisher: John Wiley and Sons
Year: 2001
Tongue: English
Weight: 143 KB
Volume: 21
Category: Article
ISSN: 0270-7314
DOI: 10.1002/fut.2003

No coin nor oath required. For personal study only.

✦ Synopsis

Abstract

This study examines the usefulness of trader‐position‐based sentiment index for forecasting
future prices in six major agricultural futures markets. It has been found that large speculator sentiment
forecasts price continuations. In contrast, large hedger sentiment predicts price reversals. Small trader
sentiment hardly forecasts future market movements. An investigation was performed into various
sentiment‐based timing strategies, and it was found that the combination of extreme large trader
sentiments provides the strongest timing signal. These results are generally consistent with the
hedging‐pressure theory, suggesting that hedgers pay risk premiums to transfer nonmarketable risks in
futures markets. Moreover, it does not appear that large speculators in the futures markets possess any superior
forecasting ability. © 2001 John Wiley & Sons, Inc. Jrl Fut Mark 21:929–952, 2001

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