What explains the orange juice puzzle: Sentiment, smart money, or fundamentals?

Pin Huang Chou, Chia Hsun Hsieh, Carl Hsin Han Shen

Research output: Contribution to journalArticlepeer-review

4 Scopus citations


In the famous "orange juice puzzle," a large amount of inexplicable price volatility arises in frozen concentrated orange juice (FCOJ) futures contracts. Temperature is considered the most important fundamental factor in this market, but its explanatory power is low and limited, so are those of various consumer and stock market sentiment measures that reflect the noise traders' opinions. In contrast, shifts in a survey-based index called the Consensus Bullish Sentiment Index (CBSI), which reflect the overall opinions of professional investors, provide the largest explanatory power among all measures. Further analysis reveals that bullish shifts in the CBSI are followed by higher FCOJ returns but lower conditional volatility, thus supporting the notion that the index reflects the smart money effect.

Original languageEnglish
Pages (from-to)47-65
Number of pages19
JournalJournal of Financial Markets
StatePublished - 1 Jun 2016


  • Investor sentiment
  • Orange juice
  • Smart money
  • Temperature


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