Abstract
ABSTRACTSpeculators constantly search for mispriced securities, with many studying past prices to identify patterns, known as feedback trading. Positive feedback trading perpetuates a trend and is thus destabilising, as it drives prices away from their fundamental value and contributes to volatility. In contrast, negative feedback trading, trading in the opposite direction of the trend, is stabilising, as it drives prices back to their fundamental value. This study examined whether individual shares on the South African market are prone to feedback trading strategies; the results of which have importance for regulators and policymakers, arbitrageurs and portfolio managers. On average, 23% of the shares showed evidence of feedback trading, with approximately 9% of this being positive feedback trading and 14% negative feedback trading. The implications of these findings for various market participants are discussed.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
