| dc.description.abstract | The purpose of this study is to reexamine the mysteries surrounding Frozen Concentrated Orange Juice (FCOJ) futures. There are numerous unexplained price movements in frozen orange juice futures prices, and despite temperature being considered a fundamental factor with potential explanatory power, the detected explanatory ability is significant yet remarkably low. We extend the sample period, comparing the entire duration and differences between two sample intervals delineated by the year 2010. This study utilizes the weekly minimum temperatures closest to the production area in Florida, the Consensus Bullish Sentiment Index (CBSI) as an institutional sentiment indicator, and the Investor Sentiment Index compiled by the American Association of Individual Investors (AAII) as an individual investor sentiment indicator.
Unlike previous research samples, the current orange production in the United States is no longer monopolizing the market, leading us to anticipate a reduction in the impact of fundamental factors. Empirical results show that under extreme weather conditions, temperature provides minimal explanatory power, while CBSI offers the highest explanatory power, reaching nearly 30%. Subsequently, we use a GARCH model to examine the nature of the CBSI index. It is found that before 2010, the CBSI index could rationally reflect the volatility and risk of FCOJ futures returns. However, after 2010, consistent with previous literature, it reflects the characteristics of the smart money hypothesis: when the CBSI index indicates bullish sentiment, it is accompanied by an increase in FCOJ futures prices and a decrease in return volatility; conversely, when the CBSI index indicates bearish sentiment, FCOJ futures prices decrease, and return volatility relatively increases. Therefore, we still believe that CBSI has the ability to lead and predict FCOJ futures prices, further supporting the effectiveness of the smart money hypothesis. | en_US |