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Noise Trader Demand in Futures Markets

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Title: Noise Trader Demand in Futures Markets
Author(s): Sanders, Dwight R.; Irwin, Scott H.; Leuthold, Raymond M.
Subject(s): Granger causality model
Abstract: Theoretical noise trader models suggest that uninformed traders can impact market prices. However, these models conclusions depend crucially on the assumed specification for noise trader demand. This research seeks to empirically determine the appropriate demand specification for uninformed traders. Using commercial market sentiment indices as proxies for noise trader demand, Granger causality models are estimated to examine the linear linkages between sentiment and futures returns. The models strongly suggest that noise traders are positive feedback traders (i.e., extrapolative expectations) with relatively long memories.
Issue Date: 1996-06
Publisher: Office for Futures and Options Research, Department of Agricultural Economics, College of Agricultural, Consumer, and Environmental Sciences at the University of Illinois at Urbana-Champaign
Series/Report: OFOR Working Paper Series, no. 96-02
Genre: Working / Discussion Paper
Type: Text
Language: English
URI: http://hdl.handle.net/2142/4062
Publication Status: published or submitted for publication
Peer Reviewed: not peer reviewed
Date Available in IDEALS: 2008-03-18
 

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