"Evil" Speculators? Evidence from Grain Futures Trading in Chicago During the Interwar Period

57 Pages Posted: 5 Jan 2022 Last revised: 20 Jul 2022

See all articles by Elissa Ana Maria Iorgulescu

Elissa Ana Maria Iorgulescu

University of Münster - Chair of Monetary Economics

Alexander Pütz

University of Münster - Chair of Monetary Economics

Pierre L. Siklos

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

Date Written: January 10, 2022

Abstract

This paper retraces the origins of modern futures trading and provides new evidence to an open question in economic history, whether the assumed negative impact of speculation, which generated several regulatory and institutional changes, is reflected in interwar futures trading. To this end, we assemble a new dataset consisting of daily information on grain futures contracts traded at the most dominant futures exchange in the 20th century, the Chicago Board of Trade. We first devote attention to the function and regulation of the early futures markets since these continue to influence market activities today. We then analyse econometrically the drivers of interwar speculative behaviour and the impact of speculators’ position changes on the volatility of grain prices. Our findings reveal that speculators significantly adjust their trading positions according to past price and returns movements, but follow different trading strategies before and after the onset of Great Depression. Nevertheless, we do not find any evidence of "evil" speculators amplifying the volatility of interwar grain futures prices.

Keywords: Interwar Period, Regulation, Speculation, Grain Futures Markets, Returns Volatility

JEL Classification: G15, N22, N42, Q02, Q14,

Suggested Citation

Iorgulescu, Elissa Ana Maria and Pütz, Alexander and Siklos, Pierre L., "Evil" Speculators? Evidence from Grain Futures Trading in Chicago During the Interwar Period (January 10, 2022). Available at SSRN: https://ssrn.com/abstract=4000689 or http://dx.doi.org/10.2139/ssrn.4000689

Elissa Ana Maria Iorgulescu (Contact Author)

University of Münster - Chair of Monetary Economics ( email )

Am Stadtgraben 9
Münster, 48143
Germany

HOME PAGE: http://https://www.wiwi.uni-muenster.de/me/en/chair/persons/iorgulescu-elissa-ana-maria-1

Alexander Pütz

University of Münster - Chair of Monetary Economics ( email )

Am Stadtgraben 9
Münster, 48143
Germany

Pierre L. Siklos

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

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