Returns to Speculators in Commodity Futures Markets: A Comprehensive Revisit

37 Pages Posted: 3 Apr 2008 Last revised: 16 Apr 2008

See all articles by Christof Sigl-Grüb

Christof Sigl-Grüb

EBS Universität für Wirtschaft und Recht - EBS Business School

Dirk Schiereck

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Governance & Economics

Date Written: April 9, 2008

Abstract

This study investigates the performance of large speculators in 22 commodity markets over the last 15 years. We find that large speculators were profitable in many markets. Two possible sources of returns are analyzed for their relevance in these gains: The ability to forecast and the flow of risk premia. In contrast to earlier studies we use direct test procedures for both assessments. We find very little evidence of market timing ability. However, employing the theory of storage and using a volatility measure to proxy for convenience yield, we observe consistent risk premium earnings. Furthermore, momentum may be seen as a third source of returns to speculative activity.

Keywords: Commodities, Returns to Speculators, Forecasting Ability, Risk Premium, Theory of Storage, Term Structure of Futures Prices

JEL Classification: G13, G14

Suggested Citation

Sigl-Grüb, Christof and Schiereck, Dirk, Returns to Speculators in Commodity Futures Markets: A Comprehensive Revisit (April 9, 2008). Available at SSRN: https://ssrn.com/abstract=1115802 or http://dx.doi.org/10.2139/ssrn.1115802

Christof Sigl-Grüb (Contact Author)

EBS Universität für Wirtschaft und Recht - EBS Business School ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

Dirk Schiereck

EBS Universität für Wirtschaft und Recht - EBS Business School - Department of Governance & Economics ( email )

Gustav-Stresemann-Ring 3
65189 Wiesbaden, Hessen
Germany

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