The Interaction of Speculators and Index Investors in Agricultural Derivatives Markets

58 Pages Posted: 19 Apr 2013 Last revised: 30 Dec 2013

See all articles by Benoît Guilleminot

Benoît Guilleminot

SMILE Investment Solutions

Jean-Jacques Ohana

Université Paris Dauphine

Steve Ohana

ESCP Europe

Date Written: March 18, 2013


Through the analysis of the weekly CFTC reports on 12 US traded agricultural commodities, we revisit the heated debate on the impact of index flows on commodities prices. After introducing a novel stock-to-use proxy that may be used to represent inventory variations at the intra-month level, we show that speculators, contrary to index investors, are sensitive to commodity-specific fundamental information. Their endogeneity to commodities markets hinders the estimation of their market impact. Regarding the market impact of index flows, the endogeneity problem is alleviated in two ways: first, we restrict the scope to agricultural commodities, for which index flows are more exogenous to market prices; second, we introduce two novel instrumental variables that are computed from index flows outside the market under analysis. We find that index investment flows are offset by commercial players, not speculators. The serial correlation of index flows may explain the tendency of speculators to synchronize with index investors. There is strong evidence of an index flows’ impact in those commodities markets where speculative and index positions are the most correlated. The market impact of index flows is located in periods of liquidity stress, as is the correlation between speculative and index positions. Overall, our results demonstrate an impact of index investors on some agricultural prices and suggest that the synchronicity between speculative and index positions is an important determinant of this impact.

Keywords: index investors, hedge funds, agricultural markets, trend-following

JEL Classification: Q14

Suggested Citation

Guilleminot, Benoît and Ohana, Jean-Jacques and Ohana, Steve, The Interaction of Speculators and Index Investors in Agricultural Derivatives Markets (March 18, 2013). Available at SSRN: or

Benoît Guilleminot

SMILE Investment Solutions ( email )

91, Rue du Faubourg Saint Honoré
Paris, 75008

Jean-Jacques Ohana

Université Paris Dauphine ( email )

Place du Maréchal de Tassigny
Paris, Cedex 16 75775

Steve Ohana (Contact Author)

ESCP Europe ( email )

79 Avenue de la Republique
Paris, 75011

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics