Are soft commodities markets affected by the Halloween effect?

Within the last three decades commodity markets, including soft commodities markets, have become more and more like financial markets. As a result, prices of commodities may exhibit similar patterns or anomalies as those observed in the behaviour of different financial assets. Their existence may cast doubts on the competitiveness and efficiency of commodity markets. It motivates us to conduct the research presented in this paper, aimed at examining the Halloween effect in the markets of basic soft commodities (cocoa, coffee, cotton, frozen concentrated orange juice, rubber and sugar) from 1999 to 2020. This long-time span ensures the credibility of results. Apart from performing the two-sample t-test and the rank-sum Wilcoxon test, we additionally investigate the autoregressive conditional heteroskedasticity (ARCH) effect. Its presence in our data allows us to estimate generalised autoregressive conditional heteroskedasticity [GARCH (1, 1)] models with dummies representing the Halloween effect. We also investigate the impact of the January effect on the Halloween effect. Results reveal the significant Halloween effect for cotton (driven by the January effect) and the significant reverse Halloween effect for sugar. It brings implications useful to the main actors in the market. They may apply trading strategies generating satisfactory profits or providing hedging against unfavourable changes in soft commodities prices.

Part III UK Derivatives, Money, and Debt Markets, 11 UK Derivatives and Commodities Markets

This chapter considers the markets for the trading of derivatives and commodities in the UK, which form an important part of the financial services industry of the City of London. This chapter describes the precursors of the types of trading activities that were conducted historically in the City of London and have spread to neighbouring areas of west, central, and east London for the past forty years. It also emphasizes the growth of electronic trading platforms and the rapid growth of technology that diffuses trading activities geographically. This chapter addresses the question as to whether it makes sense to continuously speak of “UK” derivatives and commodities markets, as opposed to European or international markets. It talks about over—the—counter (OTC) trades executed in the UK that often involve at least one party operating from a location outside the UK.

CAN INDIVIDUAL INVESTORS BENEFIT FROM TECHNICAL ANALYSIS IN MARKETS OF SOFT COMMODITIES? EMPIRICAL STUDY FOR 2010–2018

After the 2008 financial crisis, many investors diversified their portfolios with different commodities, including the so-called softs. This paper aims to answer the question of whether individual investors can benefit from technical analysis on soft commodity markets. The empirical study is based on daily quotations of six soft commodities: coffee, cocoa, sugar, cotton, rubber and frozen concentrated orange juice from 2010 to 2018, and investigates the profitability of applying indicators and oscillators based on moving averages with different length. The results show that the application of five-day simple and weighted moving averages and momentum oscillators was most effective, providing positive returns in five out of six soft commodities markets.