RESEARCH DISCUSSION PAPERS

The Profitability of Speculators in Currency Futures Markets

Jonathan Kearns, Phil Manners

RDP2004-07

September 2004

Using weekly data on the positions of different types of participants in currency futures markets we present evidence that suggests speculators are profitable. Across six currencies, speculators’ gross profits are seemingly positive in 60 per cent of weeks. The profits are significant even after accounting for transactions costs. Our estimated speculator profits are consistent both with speculators being paid a risk premium and with speculators having superior forecasting ability.