ARE HEDGERS INFORMED? AN EXAMINATION OF THE PRICE IMPACT OF LARGE TRADES IN ILLIQUID AGRICULTURAL FUTURES MARKETS

摘要

The "received" view in the finance literature is that hedgers are uninformed traders who use futures to fix future price movements and prevent losses from unexpected and unknown fluctuations in the purchase or sale price of a commodity. In this paper, we examine transactions executed by large traders in a relatively illiquid deliverable agricultural (grain) futures market where most transactions are executed by hedgers. We provide evidence that the price impact of large buyer-initiated transactions is permanent, consistent with the proposition that they are executed by traders perceived to be informed. We also provide evidence that the price impact of large buyer-initiated trades is greatest around announcements related to the underlying commodity corroborating our conclusion that they are executed by traders perceived to be informed. This evidence is contrary to the "received" view in the literature that hedgers are uninformed, and implies that large long hedgers in agricultural futures markets are informed. (C) 2016 Wiley Periodicals, Inc.