Abstract

http://ssrn.com/abstract=2353218
 


 



Why Do Hedgers Trade So Much?


Ing-Haw Cheng


Dartmouth College - Tuck School of Business

Wei Xiong


Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

January 7, 2014


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.

Number of Pages in PDF File: 22

Keywords: commodity speculation, hedging, financialization

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Date posted: November 13, 2013 ; Last revised: January 25, 2014

Suggested Citation

Cheng, Ing-Haw and Xiong, Wei, Why Do Hedgers Trade So Much? (January 7, 2014). Available at SSRN: http://ssrn.com/abstract=2353218 or http://dx.doi.org/10.2139/ssrn.2353218

Contact Information

Ing-Haw Cheng (Contact Author)
Dartmouth College - Tuck School of Business ( email )
Hanover, NH 03755
United States
Wei Xiong
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States

National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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