Hedge funds have long been accused of adding to overall market volatility, but a new study suggests the very opposite may be true when it comes to the energy sector. Analysis from the New York Mercantile Exchange finds that during periods of heavy hedge fund trading in certain futures markets, price volatility actually declines rather than increases. Such a decline in price volatility stems from the added liquidity hedge funds and managed futures traders inject into the markets.
The study found the link between higher trading volume and lower price volatility was notable in many energy-sector markets. Hedge