Are speculative futures traders behind coffee price trends?

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dc.contributor Aalto University en
dc.contributor Aalto-yliopisto fi
dc.contributor.author Pakarinen, Teemu
dc.date.accessioned 2013-12-02T09:16:27Z
dc.date.available 2013-12-02T09:16:27Z
dc.date.issued 2013
dc.identifier.uri https://aaltodoc.aalto.fi/handle/123456789/11728
dc.description.abstract I study whether speculative futures traders' position changes lead coffee price changes by studying linkages between futures and spot prices, traders' positions in futures contracts as well as by utilizing novel time periods and perspectives through robustness testing. The data includes ICE Coffee "C" futures contracts, ICO spot price indices and CFTC trader position information. I utilize weekly data with sample period from January 2000 to June 2012. To find answers to my research questions, I utilize cointegration and Granger causality tests. For robustness, I study sub-samples, as well as sensitivity of cointegration results to frequency of observations and lag order. Moreover, I run Granger causality tests with commercial and non-reportable trader position information. I also provide findings about excess speculation by studying speculative positions beyond what is needed to balance commercial hedging needs. Finally, I provide new information to current research literature by studying the summer time period when sub-optimal weather conditions may lower harvesting yields and cause sudden coffee price fluctuations. I find that Coffee "C" futures and ICO spot prices are tied together in a sense that a long-run equilibrium exists. Moreover, speculative futures traders' position changes do not lead or precede Coffee "C" futures or ICO spot price changes. The results imply that speculative futures traders do not drive coffee price trends. On the contrary, unprecedented in current research, I find that commercial futures traders' position changes lead coffee prices through futures markets inside key harvesting period from June to August. In economic terms, the results imply that ICE Coffee "C" futures contracts could be utilized to hedge long-term coffee spot exposure that is equivalent to ICO Arabicas Mild average spot prices. The new findings inside harvesting period also provide novel information to current commodity speculation research and offer important future policy implications. Commercial traders' position changes lead coffee price changes inside fundamentally meaningful time period. Therefore, inside certain time periods, trader groups may bring about trends in commodities prices instead of being trend followers as mainly suggested by current research literature. Hence, regulatory bodies should concentrate to the speculative futures trades in total, regardless the trader groups behind them. en
dc.format.extent 78
dc.language.iso en en
dc.title Are speculative futures traders behind coffee price trends? en
dc.type G2 Pro gradu, diplomityö fi
dc.contributor.school Kauppakorkeakoulu fi
dc.contributor.school School of Business en
dc.contributor.department Department of Finance en
dc.contributor.department Rahoituksen laitos fi
dc.subject.keyword commodities
dc.subject.keyword speculation
dc.subject.keyword coffee
dc.subject.keyword cointegration
dc.subject.keyword Granger causality
dc.identifier.urn URN:NBN:fi:aalto-201312058045
dc.type.dcmitype text en
dc.programme.major Finance en
dc.programme.major Rahoitus fi
dc.type.ontasot Master's thesis en
dc.type.ontasot Pro gradu tutkielma fi
dc.subject.helecon rahoitus
dc.subject.helecon financing
dc.subject.helecon rahoitusinstrumentit
dc.subject.helecon financial instruments
dc.subject.helecon sijoittajat
dc.subject.helecon investors
dc.subject.helecon arvopaperimarkkinat
dc.subject.helecon stock exchange markets
dc.subject.helecon hinnat
dc.subject.helecon prices
dc.subject.helecon muutos
dc.subject.helecon change
dc.subject.helecon kahvi
dc.subject.helecon coffee
dc.ethesisid 13361
dc.date.dateaccepted 2013-09-19
dc.location P1 I


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