ARE HEDGERS INFORMED? AN EXAMINATION OF THE PRICE IMPACT OF LARGE TRADES IN AGRICULTURAL FUTURES MARKETS
Speaker: Shunquan Zhang Seminar Date: Tuesday 11 August 2015 Brief Abstract: The ‘received’ view in the finance literature is that hedgers are uninformed traders who use futures to fix future price movements in order to prevent losses from unexpected and unknown fluctuations in the purchase or sale price of a commodity. In this session, we examine transactions executed by large traders in relatively illiquid deliverable futures market where most transactions go to expiration and are therefore 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.