Please use this identifier to cite or link to this item: https://doi.org/10.1002/fut.10021
Title: The Effect of Net Positions by Type of Trader on Volatility in Foreign Currency Futures Markets
Authors: Wang, C. 
Issue Date: 2002
Source: Wang, C. (2002). The Effect of Net Positions by Type of Trader on Volatility in Foreign Currency Futures Markets. Journal of Futures Markets 22 (5) : 427-450. ScholarBank@NUS Repository. https://doi.org/10.1002/fut.10021
Abstract: 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. © 2002 Wiley Periodicals, Inc.
Source Title: Journal of Futures Markets
URI: http://scholarbank.nus.edu.sg/handle/10635/44481
ISSN: 02707314
DOI: 10.1002/fut.10021
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