Why Do Hedgers Trade So Much?
Dartmouth College - Tuck School of Business
Princeton University - Department of Economics; National Bureau of Economic Research (NBER)
January 7, 2014
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, financializationworking papers series
Date posted: November 13, 2013 ; Last revised: January 25, 2014
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