Noise Trader Demand in Futures Markets

Dwight R. Sanders, Scott H. Irwin and Raymond M. Leuthold
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Dwight R. Sanders: The Pillsbury Company

Finance from EconWPA

Abstract: Theoretical noise trader models suggest that uninformed traders can impact market prices. However, these models' conclusions depend crucially on the assumed specification for noise trader demand. This research seeks to empirically determine the appropriate demand specification for uninformed traders. Using commercial market sentiment indices as proxies for noise trader demand, Granger causality models are estimated to examine the linear linkages between sentiment and futures returns. The models strongly suggest that noise traders are positive feedback traders (i.e., extrapolative expectations) with relatively long memories.

Keywords: Noise Trader; Market Sentiment; Causality (search for similar items in EconPapers)
JEL-codes: Q13 Q14 (search for similar items in EconPapers)
Date: 1996-09-06
Note: Type of Document - Word Perfect 6.1; prepared on PC; to print on HP Laser Jet; pages: 31; figures: included. Office for Futures and Options Research (OFOR) at the University of Illinois, Urbana-Champaign. Working Paper 96-02. For a complete list of OFOR working papers see
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Related works:
Working Paper: NOISE TRADE DEMAND IN FUTURES MARKETS (1996)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpfi:9609001

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