Price Discovery in Agricultural Commodity Markets: Do Speculators Contribute?

42 Pages Posted: 22 Jun 2019

See all articles by Martin T. Bohl

Martin T. Bohl

University of Muenster

Pierre L. Siklos

Wilfrid Laurier University - School of Business & Economics; Balsillie school of international affairs

Martin Stefan

Department of Economics, Westfälische Wilhelms-Universität Münster

Claudia Wellenreuther

Universität Münster

Date Written: June 21, 2019

Abstract

Previous literature on price discovery in commodity markets is mainly focused on the question of whether the spot or the futures market dominates the price discovery process. Little attention, however, has been paid to the question of how the price discovery process is affected by futures speculation. Using different measures for speculation and hedging and a new price discovery metric, the present study analyzes this relationship for various agricultural commodities. On the whole, the results suggest that speculative activity reduces the level of noise in the futures markets under analysis, while increasing their relative contribution to the price discovery process.

Keywords: Commodity Markets, Futures Speculation, Price Discovery

JEL Classification: G13, G14, Q02

Suggested Citation

Bohl, Martin T. and Siklos, Pierre L. and Stefan, Martin and Wellenreuther, Claudia, Price Discovery in Agricultural Commodity Markets: Do Speculators Contribute? (June 21, 2019). CAMA Working Paper No. 42/2019. Available at SSRN: https://ssrn.com/abstract=3407686 or http://dx.doi.org/10.2139/ssrn.3407686

Martin T. Bohl

University of Muenster ( email )

Schlossplatz 2
D-48149 Muenster, D-48149
Germany

Pierre L. Siklos (Contact Author)

Wilfrid Laurier University - School of Business & Economics ( email )

Department of Economics
75 University Avenue W.
Waterloo, Ontario N2L 3C5
Canada
519-884-0710 Ext.. 3491 (Phone)

HOME PAGE: http://pierrelsiklos.com

Balsillie school of international affairs ( email )

67 Erb Street West
Waterloo, ON N2L 6C2
Canada

Martin Stefan

Department of Economics, Westfälische Wilhelms-Universität Münster ( email )

Claudia Wellenreuther

Universität Münster ( email )

Schlossplatz 2
Muenster, D-48149
Germany

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