Predictive abilities of speculators in energy markets |
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Authors: | Yulia Merkoulova |
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Affiliation: | Department of Banking and Finance, Monash University, Caulfield East, Victoria, Australia |
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Abstract: | Using nonparametric methodology, I find that speculators are successful in taking profitable positions in energy futures markets, although the magnitude of this effect is lower than that found previously for agricultural markets. A plausible explanation for this difference is that price forecasting is more difficult for energy commodities. Moreover, I find that the energy speculators’ returns are due to the existence of the risk premiums rather than to speculators’ forecasting abilities. Futures risk premium is highly time-variant; notably, energy investors’ profits have been very limited in the GFC and post-GFC period, which coincided with the financialization of commodity markets. |
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Keywords: | commitments of traders commodity investors energy futures forecasting skills futures risk premium predictability of futures prices |
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