Order Flows, Investor Sentiments and Feedback Trade in Index Futures Market

Ameet Kumar Banerjee () and H. K. Pradhan ()
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Ameet Kumar Banerjee: Xavier University
H. K. Pradhan: XLRI, Xavier School of Management

Journal of Quantitative Economics, 2020, vol. 18, issue 4, No 3, 767-782

Abstract: Abstract This paper examines the presence of feedback trading, and investor sentiment drove feedback trading by traders in the Nifty 50 index futures contract in India. The results of the study using high-frequency data sampled at 10 min interval using VAR and contemporaneous VAR model as applied to market microstructure settings reveals negative evidence of feedback trade and investor sentiment-driven feedback trade in Nifty 50 futures contract. Further, consistency with noise trading hypothesis, order flows in Nifty 50 futures contract is less informative when traders are overly optimistic.

Keywords: Feedback trading; Investor sentiment; VAR; Market microstructure; Futures markets (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s40953-020-00198-9

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