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Detecting Positive Feedback Trading when Autocorrelation is Positive

Author

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  • Julijana Angelovska

    (Faculty of Economics and Administrative Science, International Balkan University, Skopje, Macedonia)

Abstract

The temporary convergence of beliefs and actions is a possibility. Positive feedback trading as a stock exchange trading strategy is commonly used as one of the oldest theories about fi nancial markets. Sentana-Wadhwani model was used to test Positive feedback trading. Even though the model supposes that low volatility is associated with positive autocorrelation and high volatility is associated with negative autocorrelation, empirical research for small and young emerging stock exchange shows that high volatility is followed by positive autocorrelation and positive feedback strategy. Accordingly this is evidence in favour of behavioral over traditional fi nance. Investors prefer to follow positive feedback strategy, ignoring fundamental values. JEL Classification: G10; C5

Suggested Citation

  • Julijana Angelovska, 2013. "Detecting Positive Feedback Trading when Autocorrelation is Positive," Zagreb International Review of Economics and Business, Faculty of Economics and Business, University of Zagreb, vol. 16(1), pages 93-101, May.
    • Handle: RePEc:zag:zirebs:v:16:y:2013:i:1:p:93-101
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    References listed on IDEAS

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    Cited by:

    1. Paramita Mukherjee & Rajashri Chatterjee, 2024. "Feedback Trading and Its Implications for Return Autocorrelations in India During COVID," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 23(2), pages 246-270, June.

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    More about this item

    Keywords

    Positive feedback trading; Behavioral finance; GARCH; EGARCH; GJR GARCH;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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