Working Paper: NBER ID: w19670
Authors: Inghaw Cheng; Wei Xiong
Abstract: Futures positions of commercial hedgers in wheat, corn, soybeans and cotton fluctuate much more than expected output. Hedgers' short positions are positively correlated with price changes. Together, these observations raise doubt about the common practice of categorically classifying trading by hedgers as hedging while trading by speculators as speculation, as hedgers frequently change their futures positions over time for reasons unrelated to output fluctuations, arguably a form of speculation.
Keywords: Hedging; Speculation; Futures Markets; Commodity Prices
JEL Codes: G1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| output uncertainty (C67) | hedgers' trading behavior (G41) |
| price changes (P22) | hedgers' futures positions (G13) |
| price changes (P22) | short positions of hedgers (G13) |
| hedgers' trading behavior (G41) | output fluctuations (E39) |