Title: Returns and volatilities of cotton futures markets: impacts of participants' contract positions

Authors: Orhan Özaydın; Serkan Çankaya; Najiba Benabess

Addresses: Finance and Banking, Nisantasi University, Maslak Neighb. Tasyoncasi Str., No. 1V and No. 1Y Sariyer/Istanbul, Turkey ' Graduate School of Finance, Istanbul Commerce University, Örnektepe Mah. Imrahor Cad. No. 88/2, Beyoglu/Istanbul, Turkey ' School of Business at Elizabethtown College, One Alpha Drive, Elizabethtown, PA 17022-2298, 1184 W. Main St. Decatur, IL 62522, USA

Abstract: This study examines how the positions (short or long positions) of hedgers, speculators, and index investors in futures markets influence the returns and volatilities of cotton futures markets. Previous work in futures returns and volatility has typically focused on energy and agriculture commodities, with little work dealing with cotton. We use autoregressive conditional heteroscedasticity (ARCH) effect on ten years (2009-2018) return data. Our study demonstrates that both long contract positions of non-hedgers and short positions of hedgers are positively correlated with futures returns; and further, while long positions do not have an impact on volatility of futures returns, short positions of hedgers do. We recommend that market participants trading cotton consider the type of contract position in their forecasting analysis of future cotton prices.

Keywords: commodity futures; futures market; futures; cotton market; derivative market participants.

DOI: 10.1504/JIBED.2022.125699

Journal for International Business and Entrepreneurship Development, 2022 Vol.14 No.2, pp.206 - 225

Received: 31 Dec 2021
Accepted: 05 Apr 2022
Published online: 26 Sep 2022 *

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