he increased price volatility exhibited by commodity futures prices during the T past decade has restored academic interest in the risk-bearing function of speculators in the futures markets. Although earlier studies seem to conclude that large speculators in futures markets were not rewarded for bearing price risks,' recent studies by Carter, Rausser, and Schmitz (1983) and Chang (1985) find that the classic theory of normal backwardation was well supported by recent data in grain futures markets. In particular, Chang concludes that the presence of risk premiums to large speculators tends to be more prominent in the last decade than in earlier years.
The performance of small traders in the futures markets has not attracted equivalent attention. The conventional wisdom is that speculators trading a small number of contracts do not make profits. In fact, a study by Rockwell (1967) indicates that small traders consistently incur substantial losses after commissions. It is generally alleged that most of the traders not having to report their positions are speculators rather than hedgers. * Thus, the evidence seems to indicate that both large hedgers and small speculators are consistent losers in futures trading.
The purpose of this article is to report the trading performances of small traders for corn, wheat and soybean futures contracts in three subperiods for the 1951-1980 period. In particular, we investigate whether or not small traders' trading performances changed over time as insurance premiums became more prominent 'In general, early empirical studies agree that large speculators did earn large positive profits in futures markets.
However, the profits were generally viewed as rewards for their superior forecasting ability and not for risk bearing. For example, see Rockwell (1967). *For discussions of allocating nonreported futures commitments between speculators and hedgers, see Larson (1961), Rutledge (1978). and Ward and Behr (1983).