Futures Trading Activity and Commodity Cash Price Volatility
University of Colorado at Denver - Business School
R. Brian Balyeat
Xavier University - Department of Finance
David J. Leatham
Texas A&M University - Department of Agricultural Economics
Journal of Business Finance & Accounting, Vol. 32, No. 1-2, pp. 297-323, January 2005
This paper examines the lead-lag relationship between futures trading activity (volume and open interest) and cash price volatility for major agricultural commodities. Granger causality tests and generalized forecast error variance decompositions show that an unexpected increase in futures trading volume unidirectionally causes an increase in cash price volatility for most commodities. Likewise, there is a weak causal feedback between open interest and cash price volatility. These findings are generally consistent with the destabilizing effect of futures trading on agricultural commodity markets.
Number of Pages in PDF File: 27Accepted Paper Series
Date posted: February 6, 2005
© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.
This page was processed by apollo7 in 0.343 seconds