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Speculation and volatility—A time‐varying approach applied on Chinese commodity futures markets
Author(s) -
Wellenreuther Claudia,
Voelzke Jan
Publication year - 2019
Publication title -
journal of futures markets
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.88
H-Index - 55
eISSN - 1096-9934
pISSN - 0270-7314
DOI - 10.1002/fut.21984
Subject(s) - speculation , futures contract , volatility (finance) , economics , financial economics , stochastic volatility , futures market , volatility swap , vector autoregression , monetary economics , econometrics , implied volatility , macroeconomics
Experts have long discussed and empirically investigated whether speculative activity increases volatility on commodity futures markets. Little empirical research, however, analyzes the role of speculators on commodity futures markets in China. Using time‐varying vector autoregression models with stochastic volatility, this paper investigates for four heavily traded metal and agricultural contracts, how the relationship between returns volatility and speculation evolves over time. Our findings indicate that speculative activity has little to no impact on volatility. On the contrary, for all commodities examined, returns volatility seems to amplify speculation.