NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Why Do Hedgers Trade So Much?

Ing-Haw Cheng, Wei Xiong

NBER Working Paper No. 19670
Issued in November 2013
NBER Program(s):   AP   CF

Futures positions of commercial hedgers in wheat, corn, soybeans and cotton fluctuate much more than expected output. Hedgers' short positions are positively correlated with price changes. Together, these observations raise doubt about the common practice of categorically classifying trading by hedgers as hedging while trading by speculators as speculation, as hedgers frequently change their futures positions over time for reasons unrelated to output fluctuations, arguably a form of speculation.

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This paper was revised on January 10, 2014

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w19670

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