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2006•Applied Financial Economics LettersRequires access

Hedging or speculation in derivative markets: the case of energy futures contracts

Cetin Ciner

Open publisher page 14 citations

Abstract

This study examines whether hedging or speculation is the principal motive behind trading in energy futures markets. This question is important since facilitating risk allocation is considered to be one of the main benefits of the futures markets, while excess speculation in futures markets could destabilize the underlying spot market. Studying the linkage between volume and subsequent price movements leads to the conclusion that hedgers dominate speculators in all of the markets examined.

About this research paper

What this paper is about

This study examines whether hedging or speculation is the principal motive behind trading in energy futures markets. This question is important since facilitating risk allocation is considered to be one of the main benefits of the futures markets, while excess speculation in futures markets could destabilize the underlying spot market. Studying the linkage between volume and subsequent price movements leads to the conclusion that hedgers dominate speculators in all of the markets examined.

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OpenAlex reports 14 citations for this work. Citation counts describe recorded attention and do not establish research quality.

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Available abstract

This study examines whether hedging or speculation is the principal motive behind trading in energy futures markets. This question is important since facilitating risk allocation is considered to be one of the main benefits of the futures markets, while excess speculation in futures markets could destabilize the underlying spot market. Studying the linkage between volume and subsequent price movements leads to the conclusion that hedgers dominate speculators in all of the markets examined.

Key concepts: Speculation, Futures contract, Economics, Financial economics, Forward market, Futures market, Linkage (software), Derivatives market

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