A futures pricing model with long-term and short-term traders

Bin Gao, Jun Xie and Yun Jia

International Review of Economics & Finance, 2019, vol. 64, issue C, 9-28

Abstract: This paper proposes a dynamic futures pricing model, analyzes different investors’ sentiment effect, and tries to find an explanation for financial anomalies of market inefficiency. The model focuses on the interaction of different types of investors in futures market, with a vast majority being short-term investors, and shows how this interaction sustains incorrect prices. The major findings are: firstly, in calm situations, short-term sentiment has a greater impact on pricing than long-term sentiment; secondly, in crashes situations, the number of short-term investors decrease, and market efficiency is improved when regulators introduce policies to reduce the number of short-term investors; lastly, the empirical results show that the pricing model in the paper outperforms other models, which is useful to better predict futures price.

Keywords: Behavioral finance; Heterogeneous sentiments; Dynamic futures pricing model; Market inefficiency (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056018305926
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:64:y:2019:i:c:p:9-28

DOI: 10.1016/j.iref.2019.05.010

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().