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The Prevalence, Sources, and Effects of HerdingNaomi E. BoydWest Virginia University; U.S. CFTC Bahattin BuyuksahinBank of Canada Jeffrey H. HarrisSyracuse University Michael S. HaighStandard Chartered Bank February 27, 2013 Abstract: We test the prevalence, sources and effects of herding among large speculative traders in thirty U.S. futures markets over 2004-2009. Using unique U.S. Commodity Futures Trading Commission (CFTC) data identifying daily trader positions we compare herding among hedge funds and floor market participants and find similar levels of herding across groups at slightly higher levels than in equity markets. We analyze the sources of herding and find that the number of traders, trading volume and floor-based markets are positively associated with herding. Notably, we find that the moderate levels of herding by hedge funds serve to stabilize, rather than destabilize, prices in futures markets.
Number of Pages in PDF File: 37 Keywords: Herding, Hedge Funds, Futures Markets JEL Classification: G10 working papers seriesDate posted: March 15, 2009 ; Last revised: February 28, 2013Suggested CitationContact Information
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