The relationship between funds and futures prices: An empirical study based on the copper futures market

In recent years, rising copper futures prices and derivative risk events related to copper futures markets have drawn attention to the role international funds play in price fluctuations. To better understand the relationship between the fund's strategy and copper futures prices, the paper studies the Commodity Futures Trading Commission (CFTC)'s Commitments of Traders (COT) for copper futures contracts and employs Granger causality tests to determine if relationships between funds' positions and market prices exist. Empirical results show that positive returns result in an increase in noncommercial net long positions, while traders' net positions do not lead market returns in general. Furthermore, the results of instantaneous Granger Causality indicate that there exists instantaneous Granger causality between net positions held by funds and returns.