Do speculators drive futures prices? : evidence from the futures prices of precious metals

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Do speculators drive futures prices? : evidence from the futures prices of precious metals

 

Author: Fan, Stephanie Winnie
Title: Do speculators drive futures prices? : evidence from the futures prices of precious metals
Degree: D.B.A.
Year: 2013
Subject: Metals as an investment.
Precious metals.
Futures market.
Speculation.
Hong Kong Polytechnic University -- Dissertations
Department: Faculty of Business
Pages: vii, 119 leaves : color illustrations ; 30 cm
Language: English
InnoPac Record: http://library.polyu.edu.hk/record=b2825627
URI: http://theses.lib.polyu.edu.hk/handle/200/7971
Abstract: This study examines the effect of the trading activities of speculators and other major traders on the prices and volatility of the precious metals futures markets. I consider the new Disaggregated Commitments of Traders (DCOT) report released by the Commodity Futures Trading Commission (CFTC). The evidence shows that managed money speculators do not drive the futures prices of gold, silver, palladium and platinum. Instead, regression results show strong evidence that the returns of precious metals affect the managed money speculators' positions in every precious metals market. Consistent with positive feedback trading, traders buy when prices increase and sell prices decrease. In addition, there is a strong contemporaneous relationship between the net positions of all types of traders and returns. Finally, I find that gold and silver volatility began to increase after the commodity index funds began to actively participate in the futures markets. This finding could help regulators better understand the roles of speculators in the futures markets and whether the position limits rule should be imposed.

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