Positive feedback trading: evidence from futures markets

A. Antoniou, G. Koutmos, Gioia Pescetto

Research output: Contribution to journalArticlepeer-review

Abstract

Shiller (1990) hypothesises that the positive feedback mechanism in financial markets may exhibit longer memory in the sense that feedback may operate over long time intervals. This paper tests the Shiller hypothesis using data from major index futures markets. The analysis is based on a modified dynamic capital asset pricing model that assumes two types of investors: 1 expected utility maximisers 2 positive feedback traders who sell during market declines and buy during market advances. According to the model, the interaction of the two groups induces negative time varying autocorrelation. There is some evidence of time-varying negative autocorrelation, consistent with the notion that some participants engage in positive feedback trading. Moreover, the feedback mechanism exhibits persistence in support of Shiller’s (1990) hypothesis.
Original languageEnglish
Pages (from-to)13-25
Number of pages13
JournalGlobal Business and Economics Review (GBER)
Volume13
Issue number1
DOIs
Publication statusPublished - 2011

Fingerprint

Dive into the research topics of 'Positive feedback trading: evidence from futures markets'. Together they form a unique fingerprint.

Cite this