Journal of Futures Markets, Forthcoming
39 Pages Posted: 2 Dec 2018 Last revised: 2 Dec 2019
Date Written: November 27, 2019
The paper investigates the information content of speculative pressure across futures classes. Long-short portfolios of futures contracts sorted by speculative pressure capture a significant premium in commodity, currency and equity markets but not in fixed income markets. Exposure to commodity, currency and equity index futures’ speculative pressure is priced in the broad cross-section after controlling for momentum, carry, global liquidity and volatility risks. The findings are confirmed by robustness tests using alternative speculative pressure signals, portfolio construction techniques and sub-periods inter alia. We argue that there is an efficient hedgers-speculators risk transfer in commodity, currency and equity index futures markets.
Keywords: Speculative Pressure, Futures Markets, Risk Premium, Pricing
JEL Classification: G13, G14
Suggested Citation: Suggested Citation