TY  - JOUR
AU  - Aulerich, Nicole M
AU  - Irwin, Scott H
AU  - Garcia, Philip
TI  - Bubbles, Food Prices, and Speculation: Evidence from the CFTC's Daily Large Trader Data Files
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 19065
PY  - 2013
Y2  - May 2013
DO  - 10.3386/w19065
UR  - http://www.nber.org/papers/w19065
L1  - http://www.nber.org/papers/w19065.pdf
N1  - Author contact info:
Nicole Aulerich
Cornerstone Research
E-Mail: naulerich@cornerstone.com

Scott H. Irwin
University of Illinois at Urbana-Champaign
Department of Agricultural and Consumer Economics
E-Mail: sirwin@illinois.edu

Philip Garcia
University of Illinois at Urbana-Champaign
Department of Agricultural and Consumer Economics
E-Mail: p-garcia@illinois.edu
M1  - published as Nicole M. Aulerich, Scott H. Irwin, Philip Garcia. "Bubbles, Food Prices, and Speculation: Evidence from the CFTC's Daily Large Trader Data Files," in Jean-Paul Chavas, David Hummels, and Brian D. Wright, editors, "The Economics of Food Price Volatility" University of Chicago Press (2014)

M3  - presented at "The Economics of Food Price Volatility Conference", August 15-16, 2012
AB  - The "Masters Hypothesis" is the claim that unprecedented buying pressure from new financial index investors created a massive bubble in agricultural futures prices at various times in recent years.  This paper analyzes the market impact of financial index investment in agricultural futures markets using non-public data from the Large Trader Reporting System (LTRS) maintained by the U.S. Commodity Futures Trading Commission (CFTC).  The LTRS data are superior to publicly-available data because commodity index trader (CIT) positions are available on a daily basis, positions are disaggregated by contract maturity, and positions before 2006 can be reliably estimated.  Bivariate Granger causality tests use CIT positions in terms of both the change in aggregate new net flows into index investments and the rolling of existing index positions from one contract to another.  The null hypothesis of no impact of aggregate CIT positions on daily returns is rejected in only 3 of the 12 markets.  Point estimates of the cumulative impact of a one standard deviation increase in CIT positions on daily returns are negative and very small, averaging only about two basis points. The null hypothesis that CIT positions do not impact daily returns in a data-defined roll period is rejected in 5 of the 12 markets and estimated cumulative impacts are negative in all 12 markets; the opposite of the expected outcome if CIT rolling activity simultaneously pressures nearby prices downward and first deferred prices upward.  Overall, the results add to the growing body of literature showing that buying pressure from financial index investment in recent years did not cause massive bubbles in agricultural futures prices.
ER  -