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Empirical Study on momentum effect of commodity futures market and the positive feedback trading

Author: ZhangYue
Tutor: LiuXiBiao
School: Yunnan University of Finance
Course: Finance
Keywords: Momentum Effect positive feedback trading behavioral finance Chinese commodity futures
CLC: F724.5
Type: Master's thesis
Year: 2013
Downloads: 9
Quote: 0
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The focus of this study is the momentum effect and positive feedback trading. Thetwo concepts are a particular phenomenon in the stock market, inconsistent with theefficient market hypothesis; both cannot be explained by the theory ofEMH. Momentum effect refers to the continuation of the original price trends, thestock, that is, over a period of time higher-yielding stock yield was obtained in the fu-ture will be higher than the lower yields in the past, stocks, and vice versa. Positivefeedback trading refers to trading in accordance with the price of short-term perfor-mance of securities transactions, prices are raising, when prices fall short, the "chasesell. In this paper, by analyzing the two concepts equivalent, and follow to the Chinesecommodity futures market.In this paper, the two concepts were an empirical test, by contrast, the conclusionsof both mutual authentications. Momentum Effect through Debondt and Thaler empir-ical test, select the time period of June1,2007to2012, the sample for the ShanghaiCommodity Exchange’s copper, rubber, fuel, aluminum; Dalian Commodity Ex-change’s beans, beans two, corn, soybean meal, soybean oil; and Zhengzhou Commod-ity Exchange’s cotton, sugar, PTA. Come to China’s futures market, the winner combi-nation of some of the relatively short period of memory in the momentum effect, suchas the observation period and the holding period (1,4),(2,1),(4,1) only; For the loserportfolio, there is a reverse effect such as (2,1),(2,4),(4,1); for momentum tradingportfolio, momentum trading portfolio excess return is significantly greater than zerocombination (1,4) group.Empirical test positive feedback trading utilizes the Sentana and Wadhwani (1992)test model. Sample2007.6.12012.6.1week closing price of copper, rubber, corn, sug-ar. Copper from the autocorrelation of the rising phase of the inspection and rubber testresults can be seen, there is a positive feedback traders in the futures market in Chi-na. A positive (negative) feedback trading behavior can be seen as noise trading beha-vior, especially in a variety of transactions rose sharply, noise traders do not consider the true value of species, irrational chase led to China’s futures market is prone to sub-stantial fluctuations., Irrational investors positive feedback trading in the futures mar-kets more volatile stage mainly positive feedback trading exacerbated the market’s vo-latility, reduce market efficiency and predictability.Finally, combined with the empirical results, and analysis of the problems and thestructure of investors in the commodity futures market, and put forward suggestions forimprovement of the commodity futures market. This article momentum trading strate-gies used in the commodity futures market, it can be an investment reference for insti-tutional investors to enter the market.

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CLC: > Economic > Trade and Economic > China's domestic trade and economic > Circulation of commodities > Futures Trading
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