Tracking speculative trading

Managed futures funds are predominantly trend-followers. By analyzing positioning data, we provide novel evidence for this claim and estimate signals applied by these funds. We write trend-followers aggregate position as a weighted sum of past daily returns use generalized ridge regression regularization parameter estimation. This procedure prevents overfitting but remains flexible enough to capture various patterns. For the 23 commodities considered, trend-following can explain speculators’ changes with an average R2 more than 40%. Finally, document that producers act contrarians in way closely mirrors behavior momentum traders.