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Investor sentiment, market timing, and futures returns

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Author Info
Changyun Wang
Abstract

This study examines whether actual trader position-based sentiment index is useful for predicting returns in the S&P 500 index futures market. The results show that large speculator sentiment is a price continuation indicator, whereas large hedger sentiment is a contrary indicator. Small trader sentiment hardly forecasts future market movements. Moreover, extreme large trader sentiments and the combination of extreme large trader sentiments tend to provide more reliable forecasts. These findings suggest that large speculators possess superior timing ability in the market.

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Publisher Info
Article provided by Taylor and Francis Journals in its journal Applied Financial Economics.

Volume (Year): 13 (2003)
Issue (Month): 12 (December)
Pages: 871-878
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Handle: RePEc:taf:apfiec:v:13:y:2003:i:12:p:871-878

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. De Bondt, Werner P. M., 1993. "Betting on trends: Intuitive forecasts of financial risk and return," International Journal of Forecasting, Elsevier, vol. 9(3), pages 355-371, November. [Downloadable!] (restricted)
  2. Whitney K. Newey & Kenneth D. West, 1986. "A Simple, Positive Semi-Definite, Heteroskedasticity and AutocorrelationConsistent Covariance Matrix," NBER Technical Working Papers 0055, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  3. Graham, John R. & Harvey, Campbell R., 1996. "Market timing ability and volatility implied in investment newsletters' asset allocation recommendations," Journal of Financial Economics, Elsevier, vol. 42(3), pages 397-421, November. [Downloadable!] (restricted)
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  4. Kyle, Albert S, 1985. "Continuous Auctions and Insider Trading," Econometrica, Econometric Society, vol. 53(6), pages 1315-35, November. [Downloadable!] (restricted)
  5. Chang, Eric C, 1985. " Returns to Speculators and the Theory of Normal Backwardation," Journal of Finance, American Finance Association, vol. 40(1), pages 193-208, March. [Downloadable!] (restricted)
  6. Anat R. Admati, Paul Pfleiderer, 1988. "A Theory of Intraday Patterns: Volume and Price Variability," Review of Financial Studies, Oxford University Press for Society for Financial Studies, vol. 1(1), pages 3-40. [Downloadable!] (restricted)
  7. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  8. Nam, Joong-soo & Branch, Ben, 1994. "Tactical Asset Allocation: Can It Work?," Journal of Financial Research, Southern Finance Association and Southwestern Finance Association, vol. 17(4), pages 465-79, Winter.
  9. Dwight R. Sanders & Scott H. Irwin & Raymond M. Leuthold, 1997. "Noise Traders, Market Sentiment, and Futures Price Behavior," Finance 9707001, EconWPA. [Downloadable!]
  10. Chang, Eric C. & Michael Pinegar, J. & Schachter, Barry, 1997. "Interday variations in volume, variance and participation of large speculators," Journal of Banking & Finance, Elsevier, vol. 21(6), pages 797-810, June. [Downloadable!] (restricted)
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  1. Fagan, Stephen & Gencay, Ramazan, 2008. "Liquidity-Induced Dynamics in Futures Markets," MPRA Paper 6677, University Library of Munich, Germany. [Downloadable!]
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