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A1079
Title: Speculation and the informational efficiency of commodity futures markets Authors:  Alexander Puetz - Westfälische Wilhelms-Universität Münster (Germany) [presenting]
Christoph Sulewski - WWU Münster (Germany)
Martin T Bohl - University of Muenster (Germany)
Abstract: The recent financialization in commodity futures markets has prompted many calls for restricting speculative activity due to its diametrical effect on market quality. One aspect of market quality is that new information is instantaneously reflected in the price.This article studies how speculative activity affects informational efficiency of commodity futures markets. We document significant temporal and cross-sectional variation in market efficiency in 20 commodity futures markets based on a sample of weekly closing prices from 1986 to 2019. The fixed effects panel regression finds no evidence for a significant relation between speculative activity and the degree of informational efficiency after controlling for volatility and liquidity. The results are robust across different window sizes, sampling frequencies and levels of trader aggregation.