Investor Sentiment, Trading Behavior and Informational Efficiency in Index Futures Markets

21 Pages Posted: 8 Feb 2008

See all articles by Alexander Kurov

Alexander Kurov

West Virginia University - College of Business & Economics

Multiple version iconThere are 3 versions of this paper

Abstract

This paper shows that traders in index futures markets are positive feedback traders - they buy when prices increase and sell when prices decline. Positive feedback trading appears to be more active in periods of high investor sentiment. This finding is consistent with the notion that feedback trading is driven by expectations of noise traders. Consistent with the noise trading hypothesis, order flow in index futures markets is less informative when investors are optimistic. Transitory volatility measured at high frequencies also appears to decline in periods of bullish sentiment, suggesting that sentiment-driven trading increases market liquidity.

Suggested Citation

Kurov, Alexander, Investor Sentiment, Trading Behavior and Informational Efficiency in Index Futures Markets. Financial Review, Vol. 43, No. 1, pp. 107-127, February 2008. Available at SSRN: https://ssrn.com/abstract=1090690 or http://dx.doi.org/10.1111/j.1540-6288.2007.00188.x

Alexander Kurov (Contact Author)

West Virginia University - College of Business & Economics ( email )

P.O. Box 6025
Morgantown, WV 26506
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
21
Abstract Views
544
PlumX Metrics