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Noise Trader Demand in Commodity Futures Markets

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  • Sanders, Dwight R.
  • Irwin, Scott H.

Abstract

Theoretical noise trader models suggest that uninformed traders can impact market prices. However, these models' conclusions depend on the assumed specification for noise trader demand. This research seeks to empirically determine the appropriate demand specification for uninformed traders. Using a commercial market sentiment index as a proxy for noise trader demand, a Granger causality model is estimated to examine the linear linkages between sentiment and futures returns. The results suggest that noise traders are positive feedback traders with relatively long memories.

Suggested Citation

Handle: RePEc:ags:nc8191:285668
DOI: 10.22004/ag.econ.285668
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