Business cycle variation in positive feedback trading: Evidence from the G-7 economies

Frankie Chau and Rataporn Deesomsak ()

Journal of International Financial Markets, Institutions and Money, 2015, vol. 35, issue C, 147-159

Abstract: Using the business cycle indicators and the aggregate stock market data, this paper examines the degree of positive feedback trading in the G-7 economies and the extent to which such behaviour varies across business cycle. The evidence suggests that there is a significant positive feedback trading in the major stock exchanges of G-7 countries and its intensity is linked to the overall macroeconomic conditions. Specifically, our investigation reveals that in expansions there is more active positive feedback trading than in recessions. Overall, our results yield an important insight into the effect of business cycle on investors’ behaviour and market dynamics and bear important implications for the investment professions and market regulators.

Keywords: Business cycle; Feedback trading; G-7 economies (search for similar items in EconPapers)
JEL-codes: C22 G14 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:intfin:v:35:y:2015:i:c:p:147-159

DOI: 10.1016/j.intfin.2014.12.003

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