Feedback Trading: Strategies during Day and Night with Global Interconnectedness

46 Pages Posted: 23 Nov 2018

See all articles by Alex Kusen

Alex Kusen

WHU - Otto Beisheim School of Management

Markus Rudolf

WHU Otto Beisheim Graduate School of Management

Date Written: October 30, 2018

Abstract

Feedback trading strategies have gained much popularity among researchers in the last decades
and are used to illustrate how new information based on returns is reflected in the markets. This paper extends previous studies by decomposing the overall return premium and introducing the global feedback trading model. The global feedback trading model assumes an interconnectedness between multiple countries and captures spillovers. Empirical results illustrate two important findings. First, feedback trading strategies differ across markets when distinguishing between day and night returns. Second, evidence for changing feedback trading is provided by examining the interaction of specific markets.

Keywords: Heterogeneous investors, Feedback trading, Conditional volatility, Global interconnectedness, GARCH

JEL Classification: C58, G02, G10, G11, G12, G14, G15, G17

Suggested Citation

Kusen, Alex and Rudolf, Markus, Feedback Trading: Strategies during Day and Night with Global Interconnectedness (October 30, 2018). Available at SSRN: https://ssrn.com/abstract=3275317 or http://dx.doi.org/10.2139/ssrn.3275317

Alex Kusen (Contact Author)

WHU - Otto Beisheim School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany

Markus Rudolf

WHU Otto Beisheim Graduate School of Management ( email )

Burgplatz 2
Vallendar, 56179
Germany
+49-(0)261-6509-420 (Phone)

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