CAUSALITY IN FUTURES MARKETS

This research investigates various unresolved issues regarding futures markets, using formal methods appropriate for inferring causal relationships from observational data when some relevant quantities are hidden. We find no evidence supporting the generalized version of Keynes's theory of normal backwardation. We find no evidence supporting theories that predict that the level of activity of speculators or uninformed traders affects the level of price volatility, either positively or negatively. Our evidence strongly supports the mixture of distribution hypothesis (MDH) that trading volume and price volatility have one or more latent common causes, resulting in their positive correlation.


Subject(s):
Issue Date:
2003
Publication Type:
Working or Discussion Paper
PURL Identifier:
http://purl.umn.edu/28574
Total Pages:
42
Series Statement:
Working Paper WP 03-07




 Record created 2017-04-01, last modified 2017-08-24

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