Wang, Changyun (2001): The effect of net positions by type of trader on volatility in foreign currency futures markets. Published in: Journal of Futures Markets , Vol. 22, No. 5 (May 2002): pp. 427-450.
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We investigate the effect of net positions by type of trader on return volatility in six foreign currency futures markets using the weekly Commitments of Traders (COT) data. When net positions are decomposed into expected and unexpected components, we find that expected net positions by type of trader generally do not co-vary with volatility. However, volatility is positively associated with shocks (in either direction) in net positions of speculators and small traders, and negatively related to shocks (in either direction) in net positions of hedgers. This evidence suggests that changes in speculative positions destabilize the market. Consistent with dispersion of beliefs models and noise trading theories, hedgers appear to possess private information, whereas speculators and small traders are less informed in these markets.
|Item Type:||MPRA Paper|
|Original Title:||The effect of net positions by type of trader on volatility in foreign currency futures markets|
|English Title:||The effect of net positions by type of trader on volatility in foreign currency futures markets|
|Keywords:||Foreign currency exchange futures; return predictability|
|Subjects:||G - Financial Economics > G1 - General Financial Markets > G14 - Information and Market Efficiency; Event Studies|
|Depositing User:||changyun wang|
|Date Deposited:||06. Feb 2012 12:21|
|Last Modified:||13. Feb 2013 08:55|
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