Journal ArticleDOI
Does futures speculation stabilize spot prices? Evidence from metals markets
TLDR
In this paper, an attempt is made to test empirically the hypothesis that increased speculation in futures markets stabilizes spot price volatility in metals markets, which is confirmed by an ad hoc volatility ratio test but by generalizing the framework of Driskill et al.Abstract:
An attempt is made to test empirically the hypothesis that increased speculation in futures markets stabilizes spot price volatility in metals markets. This is confirmed not by an ad hoc volatility ratio test but by generalizing the framework of Driskill et al. (Driskill, R., McCafferty, S. and Sheffrin, S., 1991. Speculative intensity and spot futures price variability, Economic Inquiry, 29, 737-751) and Kawai (Kawai, M. 1983. Price volatility of storable commodities under rational expectations in spot and futures markets, International Economic Review, 24, 1313-1317). The hypothesis is tested using a critical condition generated by the model: the test is based on data from the copper, gold, silver and aluminium markets. The significance of the estimated coefficients is analysed by Monte Carlo methods. The empirical results, which are based on these four metals markets for the period 1980–1990, reject the hypothesis that an increase in the intensity of futures speculation tends to decrease the spot price...read more
Citations
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Journal ArticleDOI
Impact of macroeconomic news on metal futures
TL;DR: This article examined the impact of US macroeconomic news announcements on the return, volatility and trading volume of three important commodities (Gold, Silver and Copper) and found that the response of metal futures to economic news surprises is both swift and significant, with the 8:30 am set of announcements having the largest impact.
Journal ArticleDOI
Does Futures Speculation Destabilize Commodity Markets
TL;DR: In this paper, the authors examine how increased speculator participation in the commodity futures market affects market outcomes, including trades' price impacts, price volatility, and market quality, and find no evidence that speculators destabilize the commodity spot market.
The Impact of Derivatives on Cash Markets: What Have We Learned?
TL;DR: A wide array of theoretical approaches have been applied to the question of how speculative trading, the introduction of futures and options might affect the stability, liquidity and price informativeness of asset markets as mentioned in this paper.
Journal ArticleDOI
Return distributions and volatility forecasting in metal futures markets: Evidence from gold, silver, and copper
TL;DR: In this paper, the authors investigated the distributional properties of return distributions and forecast of asset price variability by applying recently developed jump detection procedures and by constructing financial-time return series, and the predictive ability of a GARCH forecasting model that uses various volatility measures is also examined.
Journal ArticleDOI
Econometric modelling of non‐ferrous metal prices
Clinton Watkins,Michael McAleer +1 more
TL;DR: In this article, the significance of the empirical models and the distributional properties of prices in nonferrous metal spots and futures markets published in leading refereed economics and finance journals between 1980 and 2002 was evaluated.
References
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ReportDOI
A simple, positive semi-definite, heteroskedasticity and autocorrelation consistent covariance matrix
Whitney K. Newey,Kenneth D. West +1 more
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
Journal ArticleDOI
Likelihood ratio statistics for autoregressive time series with a unit root
David A. Dickey,Wayne A. Fuller +1 more
Posted Content
A Simple, Positive Semi-Definite, Heteroskedasticity and Autocorrelationconsistent Covariance Matrix
TL;DR: In this article, a simple method of calculating a heteroskedasticity and autocorrelation consistent covariance matrix that is positive semi-definite by construction is described.
Journal ArticleDOI
Rational Expectations and the Theory of Price Movements
TL;DR: In this article, the Stockholm School hypothesis is used to explain how expectations are formed in the context of an isolated market with a fixed production lag, and commodity speculation is introduced into the system.
Journal ArticleDOI
Trends and random walks in macroeconmic time series: Some evidence and implications
TL;DR: In this paper, the authors investigate whether macroeconomic time series are better characterized as stationary fluctuations around a deterministic trend or as non-stationary processes that have no tendency to return to the deterministic path, and conclude that macroeconomic models that focus on monetary disturbances as a source of purely transitory fluctuations may not be successful in explaining a large fraction of output variation.