Positive feedback trading in stock index futures: International evidence

Christian A. Salm and Michael Schuppli

International Review of Financial Analysis, 2010, vol. 19, issue 5, 313-322

Abstract: 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.

Keywords: Stock; index; futures; Heterogeneous; agents; Feedback; trading; Hedging; Market; efficiency (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (25)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finana:v:19:y:2010:i:5:p:313-322

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