We use cookies to ensure that we give you the best experience on our website. By continuing to browse this repository, you give consent for essential cookies to be used. You can read more about our Privacy and Cookie Policy.

Durham Research Online
You are in:

Index futures and positive feedback trading : evidence from major stock exchanges.

Antoniou, A. and Koutmos, G. and Pericli, A. (2005) 'Index futures and positive feedback trading : evidence from major stock exchanges.', Journal of empirical finance., 12 (2). pp. 219-238.


This paper tests the hypothesis that the introduction of index futures has increased positive feedback trading in the spot markets of six industrialized nations. The analysis is based on a model that assumes two different groups of investors, i.e., risk averse expected utility maximizing investors and positive feedback traders. There is evidence consistent with positive feedback trading before the introduction of index futures across all markets under investigation. In the period following the introduction of index futures, there is no evidence supporting the hypothesis that positive feedback trading drives short-term dynamics of stock returns. The possibility that this is due to possible migration of feedback traders from the spot to the futures markets is also tested. The results show no evidence of positive feedback trading in the futures markets. Overall, the findings support the view that futures markets help stabilize the underlying spot markets by reducing the impact of feedback traders and thus attracting more rational investors who make the markets more informationally efficient and thus providing investors with superior ways of managing risk.

Item Type:Article
Keywords:Stock index futures, Feedback trading, Efficiency.
Full text:Full text not available from this repository.
Publisher Web site:
Record Created:20 Feb 2009
Last Modified:01 Feb 2010 15:40

Social bookmarking: del.icio.usConnoteaBibSonomyCiteULikeFacebookTwitterExport: EndNote, Zotero | BibTex
Look up in GoogleScholar | Find in a UK Library