Noise Trader Demand in Futures Markets

Sanders, Dwight R.; Irwin, Scott H.; Leuthold, Raymond M.

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https://hdl.handle.net/2142/4062 Copy

Description

Title

Noise Trader Demand in Futures Markets

Author(s)

• Sanders, Dwight R.
• Irwin, Scott H.
• Leuthold, Raymond M.

Issue Date

1996-06

Keyword(s)

Granger causality model

Date of Ingest

2008-03-18T18:25:41Z

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.

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 Name or Number

OFOR Working Paper Series, no. 96-02

Type of Resource

text

Genre of Resource

Working / Discussion Paper

Language

en

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http://hdl.handle.net/2142/4062

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