The Information Content of Fundamental News vs. Traders’ Positions in Grain Futures Markets: Evidence from WASDE and COT Reports

Abstract

To compare the impact of fundamental news with the publication of traders’ positions in an event study framework, a generalized autoregressive conditional heteroscedasticity (GARCH) model with t-distributed error terms is applied to corn, soybean, and wheat futures returns from January 1996 to June 2014. While fundamental news remain an important source of information for market partici-pants in grain futures markets, the results of this analysis reveal that the information content of traders’ positions from the Commitments of Traders (COT) report has gained importance in the corn and wheat futures market. The impact of traders’ positions seems to be more pronounced in grain futures markets, where the presence of commodity index traders is higher and those of professional speculators (money managers) lower.

Keywords: Event Study, Fundamental Information, Hedging, Speculation, Index Trader

JEL Classification: Q02, Q11, G13, G14