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Positive feedback trading in stock index futures: International evidence

  • Salm, Christian A.
  • Schuppli, Michael
Registered author(s):

    Using a simple intertemporal asset pricing model with heterogeneous agents, this paper addresses the issue of trend-chasing investor behavior in stock index futures markets. There is strong evidence of positive feedback trading in the majority of 32 emerging and mature markets. Trend-chasing appears most pronounced after price drops during periods of financial crisis. Our empirical findings are of great concern for investors who want to use index futures as an instrument to hedge risk or exploit arbitrage opportunities. They also have implications for the debate on destabilizing effects of futures trading.

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    File URL: http://www.sciencedirect.com/science/article/B6W4W-511C057-1/2/40ff72eb8ba493aa9bf337ada4c49207
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    Article provided by Elsevier in its journal International Review of Financial Analysis.

    Volume (Year): 19 (2010)
    Issue (Month): 5 (December)
    Pages: 313-322

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    Handle: RePEc:eee:finana:v:19:y:2010:i:5:p:313-322
    Contact details of provider: Web page: http://www.elsevier.com/locate/inca/620166

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