Paper Title :Investor Sentiment, Traders' Behavior and Price Efficiency in Crude Oil Futures Markets

Author :Yu-Lun Chen

Article Citation :Yu-Lun Chen , (2017 ) " Investor Sentiment, Traders' Behavior and Price Efficiency in Crude Oil Futures Markets " , International Journal of Management and Applied Science (IJMAS) , pp. 51-56, Volume-3,Issue-5

Abstract : This article examines the trading behavior and performance of hedgers (i.e., producers, merchants, processors, or users of the commodity) and speculators (i.e., commodity pool operators, trading advisors, or hedge funds) in crude oil futures markets during 2006-2012. Using weekly Disaggregated Commitments of Traders (DCOT) reports from U.S. Commodity Futures Trading Commission, we could classify the trading positions of producers, swap dealers, money managers, and other reportable traders in crude oil futures markets. To find the impact of these four types of traders’ positions on price efficiency, we adopt the pricing error approach of Hasbrouck (1993) to evaluate price efficiency, in accordance with the works of Boehmer and Kelley (2009) and Kurov (2008). This paper finds that speculators in oil futures markets belong to positive feedback traders—they buy when prices rise and sell when prices fall; speculators’ trading behavior is related with market sentiment. However, speculators’ positions have positive impacts on price efficiency, because speculators correct pricing errors. These findings in this study highlight the role of different type of traders on price formation processes in oil futures—information that is beneficial to academics, practitioners, and regulators. Keywords: Crude oil futures, Hedge fund, Swap dealers.

Type : Research paper

Published : Volume-3,Issue-5

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