What do movements in financial traders’ net long positions reveal about aggregate stock returns?

Trading behavior in bitcoin futures: Following the “smart money”

“…We examine trading behavior using the weekly Commitment of Traders (COT) report issued by the US Commodity Futures Trading Commission (CFTC). In addition to finding widespread use among market participants, the COT report has been utilized to study the behavior of traders in a range of futures markets, including agricultural (Sanders et al, 2009; Wang, 2001), metals (Bosch & Pradkhan, 2015; Mutafoglu et al, 2012), energy (Ederington & Lee, 2002; Sanders et al, 2004), equity (Dunbar & Jiang, 2020; Schwarz, 2012), and foreign exchange (Röthig & Chiarella, 2011; Tornell & Yuan, 2012) futures.…”

“…On the one hand, several studies suggest that speculators are unable to forecast returns or risk premiums (Gorton et al, 2012; Klitgaard & Weir, 2004; Sanders et al, 2009; Wang, 2003). Alternatively, others demonstrate that knowledge of speculators' positions is instructive to investors (Schwarz, 2012), movements in net positions are helpful predictors (Dunbar & Jiang, 2020), and extreme positions or sentiment even more useful (Mutafoglu et al, 2012; Tornell & Yuan, 2012; Wang, 2004).…”

Trading Behavior in Agricultural Commodity Futures around the 52-Week High

“…For instance, although there is a positive contemporaneous correlation between speculator positions and returns [12,21,22], several authors report that positions do not lead, or predict, returns in a variety of future markets [5,6,14,23]. Others find that speculators provide valuable timing indicators in agricultural futures [24], currency futures [25], financial futures [26], and even Bitcoin futures [27]. There is even evidence of superior forecasting ability among speculators in frozen pork bellies futures [28] and S&P 500 index futures [17,29].…”