Speculative Pressure

43 Pages Posted: 2 Dec 2018 Last revised: 28 Feb 2019

See all articles by John Hua Fan

John Hua Fan

Griffith University - Department of Accounting, Finance and Economics

Adrian Fernandez-Perez

Auckland University of Technology

Ana-Maria Fuertes

Cass Business School, City University of London

Joëlle Miffre

Audencia Nantes School of Management; Audencia Business School

Date Written: February 13, 2019

Abstract

The article establishes that speculative pressure, or the net positions of speculators, contains relevant information on futures prices pervasively in commodity, currency and equity index markets. Systematically buying backwardated futures with net long speculative pressure and shorting contangoed futures with net short speculative pressure affords Sharpe ratios which are at least as attractive as those stemming from momentum, value or carry strategies. These results are robust to the consideration of transaction costs, liquidity concerns, alternative speculative pressure signals, several portfolio construction techniques, different ranking and holding periods and various subsamples. The speculative pressure premia are also found to explain the cross section of futures returns after accounting for momentum, value and carry or macroeconomic risks, global liquidity and volatility shocks. The findings however do not extend to fixed income futures markets where it is optimal for investors to be long only.

Keywords: Speculative pressure, Futures markets, Risk premium, Pricing

JEL Classification: G13, G14

Suggested Citation

Fan, John Hua and Fernandez-Perez, Adrian and Fuertes, Ana-Maria and Miffre, Joelle, Speculative Pressure (February 13, 2019). Available at SSRN: https://ssrn.com/abstract=3279425 or http://dx.doi.org/10.2139/ssrn.3279425

John Hua Fan

Griffith University - Department of Accounting, Finance and Economics ( email )

Brisbane, Queensland 4111
Australia
+61 (0)7 3735 3948 (Phone)
+61 (0)7 373 57760 (Fax)

Adrian Fernandez-Perez

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand
+64 9 921 9999 (Phone)
+64 9 921 9940 (Fax)

Ana-Maria Fuertes

Cass Business School, City University of London ( email )

Faculty of Finance
106 Bunhill Row
London, EC1Y 8TZ
United Kingdom
+44 207 477 0186 (Phone)
+44 207 477 8881 (Fax)

HOME PAGE: http://www.city.ac.uk/people/academics/ana-maria-fuertes

Joelle Miffre (Contact Author)

Audencia Nantes School of Management ( email )

8 route de la Jonelière, BP 31222
Nantes Cedex 3, Cedex 3 44312
France

Audencia Business School ( email )

8 Road Joneliere
BP 31222
Nantes Cedex 3, 44312
France

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