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Abstract

The positions of hedgers and speculators are correlated with returns in a number of futures markets, but there is much debate as to the interpretation of such a relationship—whether it reflects private information, liquidity, or trend-chasing behavior. This paper studies the relationship between positioning of hedgers and speculators and returns in equity futures markets. I propose a novel test of the private information hypothesis: analyzing the effect of public announcements about futures positions on prices, using high-frequency data in short windows around the announcements. I find that the revelation of speculators' positions is informative to investors more broadly, supporting the private information view. © 2011 Wiley Periodicals, Inc. Jrl Fut Mark