Search results for "Futures market"
showing 7 items of 7 documents
Do Carbon Traders Behave as a Herd?
2017
Abstract This paper shows the existence of herding behavior in the European Carbon Futures Market and studies its possible causes and consequences. This market is characterized by leading the carbon price discovery process and by being highly dominated by professional traders. Both features make it an appropriate environment for the existence of herding. A patterns analysis indicates that the herding level increases in speculative periods, on those days on which the price and size clustering effect is stronger, and with the arrival of carbon-related news. Regarding possible market drivers, we find that herding behavior is positively related with the number of trades, the intraday volatility…
Is the leadership of the Brent-WTI threatened by China's new crude oil futures market?
2020
Abstract The recent listing of a new crude oil futures contract on the Shanghai International Energy Exchange (INE) has reopened the debate over whether crude oil produced in different countries or locations constitutes a unified world oil market. The aim of this paper is to study the information flows among Brent, West Texas Intermediate (WTI) and the new Medium Sour Crude Oil (SC) futures contract listed on INE futures markets to assess whether the trading of this new futures contract has altered the dominant role of the most traded oil benchmarks in the world. A multiple regression model identifies the Brent futures market as the most influential market in the oil price discovery process…
On measuring speculative and hedging activities in futures markets from volume and open interest data
2010
This paper provides a critical assessment of the line of research that measures speculative and hedging activities in futures markets from volume and open interest data. It makes several contributions. First, a detailed theoretical analysis of the measures proposed in the previous literature as proxies for speculative activity clarifies the circumstances in which they fail, as well as the assumptions that have to be made, when they are used as intended. Second, we propose a new way of combining the volume and the open interest figures, which provides additional information regarding the type of trading activity that takes place in the market on a given date. Finally, we analyse empirically …
A Study of Seasonality on the SAFEX Wheat Market
2015
This paper examines seasonality in returns and volatilities in the South African Futures Exchange (SAFEX) wheat futures contract in order to seek market inefficiencies that can be exploited for financial gain. Non-parametric and parametric-based techniques are used to study sample regimes before and after the peak in wheat prices that occurred during the global economic crisis in 2008. Findings of the study indicate that wheat returns on Mondays and Kansas City Board of Trade (KCBT) holidays are significant and positive while Tuesday returns are negative and significant. These seasonal patterns occur largely in the second sample of the wheat dataset. Furthermore, it is observed that volatil…
Size Clustering in European Carbon Markets
2012
This paper documents empirical evidence of size clustering behavior in the European Carbon Futures Market and analyzes the circumstances under which it happens. Our findings show that carbon trades are concentrated in sizes of one to five contracts and in multiples of five. We have observed the existence of price clustering of prices ending in digits 0 or 5, and we have also proved that more clustered prices have more clustered sizes. Finally, the analysis of the key factors of the size clustering reveals that carbon traders use a reduced number of different trade sizes to simplify their trading process when uncertainty is high, market liquidity is poor, and the desire for opening new posit…
What makes carbon traders cluster their orders?
2014
Abstract The ability to trade large amounts of assets at low costs could be hindered when the size of the orders is concentrated at specific trade sizes. This paper documents evidence of size clustering behavior in the European Carbon Futures Market and analyzes the circumstances under which it happens. Our findings show that carbon trades are concentrated in sizes of one to five contracts and in multiples of five. We have also demonstrated that more clustered prices have more clustered sizes, suggesting that price and size resolution in the European Carbon Market are complementary and that carbon traders round both the price and the size of their orders. Finally, the analysis of the key de…
Theory of storage implications in the European natural gas market
2023
The theory of storage stands that futures prices should be equal to the spot price plus the interest forgone in storing the commodity and the warehousing costs minus the convenience yield on the inventory. In this paper, we test several implications of the theory of storage on the pricing of United Kingdom natural gas futures. We obtain partial evidence for the theory of storage as a complete explanation of the pricing of this futures contract. Explicitly, (i) we obtain evidence to explain convenience yield seasonality with spot price volatility, unexpected demand shocks when supply is tight, inventory variations, and trading activity in the futures markets; (ii) we obtain indirect evidence…