Analysis on Appearance Reasons of the Positive Feedback Traders

In this paper, the authors apply empirical evidence to demonstrate how important positive feedback trading factors in understanding exchange rate behavior. Utilizing the GARCH augmented feedback model, or the exchange rate model set out by Laopodis (2005), the author analyzes autocorrelation in exchange rate parameters and volatility in key ASEAN markets to yield the deeper understanding of momentum periods. The authors contend that positive feedback traders affect exchange rate volatility in ASEAN countries and induce the autocorrelation of negative returns within high exchange rate volatility. This study found that Singapore demonstrated a significant positive feedback trading during the period 1995-2014, while the authors further contend that Thailand, Indonesia, Malaysia, the Philippines, Brunei Darussalam, and Singapore also demonstrated positive feedback trading during the 1997-1998 Asian financial crisis. In addition to analyzing the positive feedback trading on exchange rate volatility, we also identify the exchange rate volatility spillover across the ASEAN countries. Related to this context, we found that Indonesia and Thailand play a dominant role as a dominant exchange rate volatility transmitter in the ASEAN region.

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Do Foreign Exchange Fund Managers Behave Like Positive Feedback Traders?

SSRN Electronic Journal ◽

10.2139/ssrn.1963069 ◽

2011 ◽

Author(s):

Remco C. J. Zwinkels ◽

Willem F. C. Verschoor

Keyword(s):

Foreign Exchange ◽

Positive Feedback ◽

Fund Managers ◽

Positive Feedback Traders

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Trading Patterns and Performance of Trader Types in Taiwan Futures Market

Review of Pacific Basin Financial Markets and Policies ◽

10.1142/s0219091505000403 ◽

2005 ◽

Vol 08 (02) ◽

pp. 217-234 ◽

Cited By ~ 7

Author(s):

Chao-Hsien Lin ◽

Hsinan Hsu ◽

Chwan-Yi Chiang

Keyword(s):

Positive Feedback ◽

Futures Market ◽

Foreign Investors ◽

Trading Patterns ◽

Weak Evidence ◽

And Performance ◽

Positive Feedback Traders

By analyzing the behavior and performance of trader types in the Taiwan futures market, we find that the foreign investors, futures dealers and security dealers are positive feedback traders, whereas individuals are contrarians. Evidence shows that the foreign investors and security dealers earn significant profits. We conclude that they are information-based traders. Instead, the individuals and futures traders perform poorly. However, weak evidence reveals that futures dealers are behavioral-based traders. As it is also reported, the cumulative performance demonstrates that foreign investors are the clear winners and individuals are the clear losers in the Taiwan futures market.

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