;As the coffee futures market is a very speculative market, this study examines how various investor sentiment measures affect the returns on coffee futures. Specifically, this thesis explores how the trading of professional institutional investors and individual investors affect the coffee futures prices from the behavioral finance perspective.
Using the Consensus Bullish Sentiment Index as an institutional investor sentiment indicator, the empirical evidence indicates that professional institutional investors are optimistic about the futures prices, the following will also rise, which means that institutional investors are smart investors. On the contrary, various individual investor sentiment indicators (i.e., MCSI, BW, CCI) are negatively correlated with coffee futures prices, suggesting that individual investors are irrational noise traders.
