Empirical evidence on feedback trading in mature and emerging stock markets

Martin Bohl and Pierre Siklos

Applied Financial Economics, 2008, vol. 18, issue 17, 1379-1389

Abstract: We investigate the hypothesis that some participants in mature and emerging stock markets engage in feedback trading. The analysis is based on the Shiller-Sentana-Wadhwani model, which has the attractive property that it yields testable implications about the presence of positive and negative feedback traders in stock markets. In addition, the Shiller-Sentana-Wadhwani model is particularly well-suited to investigate whether momentum type behaviour might be present during periods of large stock market downturns. This theoretical framework, together with asymmetric GARCH-type models, allows us to draw conclusions whether differences exist between mature and emerging stock markets in terms of the degree of feedback trading as well as the behaviour of traders during stock market crashes.

Date: 2008
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Working Paper: Empirical Evidence on Feedback Trading in Mature and Emerging Stock Markets (2004)
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DOI: 10.1080/09603100701704280

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