What does futures market interest tell us about the macroeconomy and asset prices?
By: Harrison Hong, Motohiro Yogo
Contributors: Yogo, Motohiro; National Bureau of Economic Research
Series: NBER working paper series -- working paper 16712; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16712.
Publisher: National Bureau of Economic Research
Published: 2011
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "Open interest, or the amount of contracts outstanding in futures markets, has remarkable power to forecast commodity, currency, bond, and stock prices.  Changes in open interest are highly pro-cyclical and predict asset-price fluctuations better than a number of alternative variables including past prices.  In commodity markets, rising open interest predicts rising commodity prices, falling bond prices, and a rising short rate.  In currency markets, rising open interest predicts appreciation of foreign currencies relative to the U.S.  dollar.  In bond and stock markets, rising open interest predicts falling bond prices and rising stock prices, respectively.  We offer a theoretical explanation of our empirical findings.  Open interest is a more informative signal of future economic activity and inflation than past prices because of hedging demand and downward-sloping demand curves in futures markets"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 4/21/2011.

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