Does speculation Granger cause return in Chinese commodity markets?

ABSTRACT

We test the Granger causal relations between speculation and returns in Chinese commodity markets using quantile regression method. We find that speculation Granger causes returns in rebar, bean pulp and rapeseed oil markets. At lower quantiles, estimates are negative; but estimates are positive at upper quantiles. This indicates that larger speculation results in larger return volatility.

KEYWORDS:

• Speculation
• return
• quantile regression
• sup-Wald test

JEL CLASSIFICATION:

• G10
• G13
• L61
• Q14

Additional information

Funding

We appreciate the financial support of National Natural Science Foundation of China [grant number 71271136 /G0115]; Anhui Province Excellent Young Talent Foundation [grant number 2013SQRW074ZD].