The Influence Of Speculative Sentiment And Hedging Sentiment On The Energy Futures Market

Energy is an important pillar of modern social and economic development.In the global energy consumption structure,traditional fossil energy such as petroleum,heating oil,gasoline,and natural gas accounts for more than 80% of the global energy share,which profoundly affects the world economy.However,in recent years,the influx of hot money in the international energy futures market and the sharp fluctuations in prices have become one of the uncertainties in the development of the global economy.Traditional financial theory cannot fully explain the price volatility of the energy futures market,and with the maturity of behavioral finance,investors in the financial market have also developed from financial rational people into limited rational people,and investor sentiment has also been included in asset pricing.Therefore,this paper uses investor sentiment in behavioral finance to study the influences of investor behavior on the energy futures market.Due to the large differences in the financial strength,product cognition ability,risk management control ability and investment experience of different types of investors in the energy futures market,the impact of different investment behaviors on the energy futures market is also different.According to the classification of the US Commodity Futures Commission(CFTC),trader types in the futures and options markets include speculators,hedgers and arbitrageurs.However,with the development of the energy financial market and the improvement of the regulatory system,the arbitrageurs in the energy futures market have decreased.Therefore,this paper aims to distinguish the types of investors,focusing on the influences of speculative sentiment and hedging sentiment on the international energy futures market.In addition,the international energy futures market mainly includes crude oil,heating oil,gasoline,and natural gas futures markets.Due to the large price fluctuations in the energy futures market in recent years and the interaction between the four energy futures markets,specifically,natural gas is a substitute for crude oil products.Early natural gas market prices were even based on crude oil prices in the region,and studies have shown that there is information transferred between the crude oil market and the natural gas market.Also,crude oil and gasoline,and crude oil and heating oil are very closely related,resulting the volatility spillover effect between the energy futures markets and the cross-market impact of investor sentiments and fluctuations of four futures market returns.Therefore,this paper takes the crude oil,heating oil,gasoline and natural gas futures markets as research objects,and studies the influence of speculative sentiment and hedging sentiment on the four energy futures markets.In view of this,this paper selects crude oil,heating oil,gasoline and natural gas from the New York Mercantile Exchange(NYMEX)as the research object,using the fund positions and commercial positions data to construct two kinds of indicators of speculative sentiment and hedging sentiment in the energy futures market which is similar to the COT index.Secondly,this paper analyzes the impact of speculative sentiment and hedging sentiment on the return and volatility of the international energy futures market.At the same time,it examines the impact of market information(good news and bad news)on the leverage of different types of sentiments,and on this basis,studies the cross-market impact of investor sentiments and fluctuations of four futures market returns.The influence of positive sentiment and negative sentiment of speculators and hedgers on the fluctuation of the energy futures market is further analyzed.The empirical research shows that:(1)Speculative sentiment and return in the crude oil futures market is negative first,and then positive,existing a reversal effect which is different from the traditional financial market that is negative,however,the relationship between speculative sentiment in the three futures markets of heating oil,gasoline and natural gas and its income is consistent with the traditional financial market,showing a significant negative relationship;the effect of hedging sentiment on the energy market futures of the above four markets is not significant.(2)Speculative sentiment will increase the volatility of the energy futures market,and have positive systemic risk compensation for the above four futures market returns;the hedging sentiment has no significant impact on the above four energy futures market volatility.(3)This study obtains an interesting discovery that the speculative sentiment in the above four energy futures markets is more affected by the good news than the bad news,and the leverage effect of the hedging sentiment is not significant.(4)Speculative sentiment in the crude oil futures market has a positive cross-market volatility effect on the other three markets and the hedging sentiment in the crude oil futures market has a negative cross-market volatility effect on the other three markets,however,the other three markets have no cross-market volatility effects of sentiment.(5)After distinguishing between positive hedging sentiment and negative hedging sentiment,the crude oil futures market has significant systemic risk compensation under positive hedging sentiment,the other three markets were not significant both positive hedging sentiment and negative hedging sentiment,indicating that the positive hedging sentiment is mixed with speculative sentiment.This further confirms that there is a phenomenon in the energy futures market that “speculation in the name of hedging”,and the regulatory authorities should pay special attention to the crude oil futures market.