scholarly journals Bayesian analysis of time-varying interactions between stock returns and foreign equity flows

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Boubekeur Baba ◽  
Güven Sevil
Keyword(s):  
Stock Returns ◽  
Negative Feedback ◽  
Positive Feedback ◽  
Positive Response ◽  
Time Varying ◽  
Economic Uncertainty ◽  
Foreign Investors ◽  
New Findings ◽  
Net Flows ◽  
Feedback Trading

AbstractThis study discusses the trading behavior of foreign investors with respect to economic uncertainty in the South Korean stock market from a time-varying perspective. We employ a news-based measure of economic uncertainty along with the model of time-varying parameter vector autoregression with stochastic volatility. The empirical analysis reveals several new findings about foreign investors’ trading behaviors. First, we find evidence that positive feedback trading often appears during periods of high economic uncertainty, whereas negative feedback trading is exclusively observable during periods of low economic uncertainty. Second, the foreign investors’ feedback trading appears mostly to be well-timed and often leads the time-varying economic uncertainty except in periods of global crises. Third, lagged negative (positive) response of net flows to economic uncertainty is found to be coupled with lagged positive (negative) feedback trading. Fourth, the study documents an asymmetric response of foreign investors with regard to negative and positive shocks of economic uncertainty. Specifically, we find that they instantly turn to positive feedback trading after a negative contemporaneous response of net flows to shocks of economic uncertainty. In contrast, they move slowly toward negative feedback trading after a positive response of net flows to uncertainty shocks.

scholarly journals Stock returns, illiquidity and feedback trading

2020 ◽  
Vol 19 (2) ◽  
pp. 135-145
Author(s):  
Jing Chen ◽  
David G. McMillan
Keyword(s):  
Stock Returns ◽  
Positive Feedback ◽  
Stock Prices ◽  
Sovereign Debt ◽  
Negative Impact ◽  
Estimation Methods ◽  
Content Type ◽  
Study Results ◽  
European Markets ◽  
Feedback Trading

Purpose This study aims to examine the relation between illiquidity, feedback trading and stock returns for several European markets, using panel regression methods, during the financial and the sovereign debt crises. The authors’ interest here lies twofold. First, the authors seek to compare the results obtained here under crisis conditions with those in the existing literature. Second, and of greater importance, the authors wish to examine the interaction between liquidity and feedback trading and their effect on stock returns. Design/methodology/approach The authors jointly model both feedback trading and illiquidity, which are typically considered in isolation. The authors use panel estimation methods to examine the relations across the European markets as a whole. Findings The key results suggest that in common with the literature, illiquidity has a negative impact upon contemporaneous stock returns, while supportive evidence of positive feedback trading is reported. However, in contrast to the existing literature, lagged illiquidity is not a priced risk, while negative shocks do not lead to greater feedback trading behaviour. Regarding the interaction between illiquidity and feedback trading, the study results support the view that greater illiquidity is associated with stronger positive feedback. Originality/value The study results suggest that when price changes are more observable, due to low liquidity, then feedback trading increases. Therefore, during the crisis periods that afflicted European markets, the lower levels of liquidity prevalent led to an increase in feedback trading. Thus, negative liquidity shocks that led to a fall in stock prices were exacerbated by feedback trading.

Price Momentum in Korea and the Effect of Investors’ Trading

2019 ◽  
Vol 27 (3) ◽  
pp. 329-364
Author(s):  
Kyoim Lee
Keyword(s):  
Positive Feedback ◽  
Institutional Investors ◽  
Individual Investors ◽  
Price Setting ◽  
Medium Term ◽  
Foreign Investors ◽  
Price Momentum ◽  
Momentum Profits ◽  
Large Size ◽  
Feedback Trading

This study investigates domestic individual, institutional and foreign investors’ trading, to test Hong and Stein (1999)’s behavioral explanation that momentum profit is generated as some uninformed investors underreact to information on medium-term prices. Using Hvidkjaer (2006)’s methodology, we examine the respective investors’ trading tendencies reflected in their active price-setting orders. We analyze a special database compiling details on every transaction for the stocks listed on the KSE during 1996:12~2009:08. During 2001~2007, individual investors’ underreaction in trading large-size winner stocks contributes to positive momentum profits. They seem to induce weak negative profits to emerge in 1997~2000, too. Foreign investors underreact to small-size loser stocks, incurring positive momentum profits during 2001~2007. They engage in positive feedback trading, when they trade large-size winner stocks. This trading tendency does not seem to be based on information on firm fundamentals, as we find those winner stocks’ returns are not sustained. Institutional investors’ trading seems to be relatively in line with future returns, but evidences are not strong enough to support they are informed investors. Overall, the behavioral hypothesis on investors’ underreaction seems to explain medium-term momentum profits in Korea, but evidences differing across subsamples suggest possibility of other unknown influences.

scholarly journals U.S. Economic Uncertainty Shocks and China’s Economic Activities: A Time-Varying Perspective

SAGE Open ◽  
2021 ◽  
Vol 11 (3) ◽  
pp. 215824402110326
Author(s):  
Lin Liu
Keyword(s):  
Global Financial Crisis ◽  
The United States ◽  
Time Varying ◽  
Economic Uncertainty ◽  
Transient Effects ◽  
Economic Activities ◽  
Common Shocks ◽  
Uncertainty Shocks ◽  
Intensive Intervention ◽  
The Global Financial Crisis

This paper presents new empirical evidence concerning the time-varying responses of China’s macroeconomy to U.S. economic uncertainty shocks through a novel TVP-VAR model. The results robustly reveal that a rise in U.S. economic uncertainty would exert sizable, persistent, and significant detrimental effects on China’s gross domestic product (GDP), price level, and short-term interest rate during the period when common shocks take place, such as the global financial crisis around 2008, whereas small and transient effects in the tranquil times. Therefore, China should diversify its international linkages and gradually reduce the dependence on the United States into a certain range to shield the domestic economy, as well as improve the independence of monetary policy. Furthermore, to withstand unfavorable external shocks, China should be prudent on greater opening-up and carry out more intensive intervention when common shocks hit the world economy. Finally, investors should be alert to the potential detrimental impact of U.S. economic uncertainty on Chinese assets’ fundamentals.

scholarly journals Suppression of personality variation in boldness during foraging in three-spined sticklebacks

2021 ◽  
Vol 75 (4) ◽  
Author(s):  
Hannah E. A. MacGregor ◽  
Aislinn Cottage ◽  
Christos C. Ioannou
Keyword(s):  
Negative Feedback ◽  
Risk Taking ◽  
Positive Feedback ◽  
Gasterosteus Aculeatus ◽  
Control Treatment ◽  
Refuge Use ◽  
Individual Level ◽  
Behavioural Type ◽  
State Behaviour

Abstract Consistent inter-individual variation in behaviour within a population, widely referred to as personality variation, can be affected by environmental context. Feedbacks between an individual’s behaviour and state can strengthen (positive feedback) or weaken (negative feedback) individual differences when experiences such as predator encounters or winning contests are dependent on behavioural type. We examined the influence of foraging on individual-level consistency in refuge use (a measure of risk-taking, i.e. boldness) in three-spined sticklebacks, Gasterosteus aculeatus, and particularly whether changes in refuge use depended on boldness measured under control conditions. In the control treatment trials with no food, individuals were repeatable in refuge use across repeated trials, and this behavioural consistency did not differ between the start and end of these trials. In contrast, when food was available, individuals showed a higher degree of consistency in refuge use at the start of the trials versus controls but this consistency significantly reduced by the end of the trials. The effect of the opportunity to forage was dependent on behavioural type, with bolder fish varying more in their refuge use between the start and the end of the feeding trials than shyer fish, and boldness positively predicted the likelihood of feeding at the start but not at the end of the trials. This suggests a state-behaviour feedback, but there was no overall trend in how bolder individuals changed their behaviour. Our study shows that personality variation can be suppressed in foraging contexts and a potential but unpredictable role of feedbacks between state and behaviour. Significance statement In this experimental study, we examined how foraging influences consistency in risk-taking in individual three-spined sticklebacks. We show that bolder individuals become less consistent in their risk-taking behaviour than shyer individuals during foraging. Some bolder individuals reinforce their risk-taking behaviour, suggesting a positive feedback between state and behaviour, while others converge on the behaviour of shyer individuals, suggesting a negative feedback. In support of a role of satiation in driving negative feedback effects, we found that bolder individuals were more likely to feed at the start but not at the end of the trials. Overall, our findings suggest that foraging can influence personality variation in risk-taking behaviour; however, the role of feedbacks may be unpredictable.

scholarly journals The time-varying effects of oil prices on oil–gas stock returns of the fragile five countries

2021 ◽  
Vol 7 (1) ◽  
Author(s):  
Begüm Yurteri Kösedağlı ◽  
Gül Huyugüzel Kışla ◽  
A. Nazif Çatık
Keyword(s):  
Stock Returns ◽  
Positive Impact ◽  
Structural Break ◽  
Oil Prices ◽  
Time Varying ◽  
Asset Pricing Model ◽  
Daily Data ◽  
Structural Break Test ◽  
The Impact ◽  
Oil Gas

AbstractThis study analyzes oil price exposure of the oil–gas sector stock returns for the fragile five countries based on a multi-factor asset pricing model using daily data from 29 May 1996 to 27 January 2020. The endogenous structural break test suggests the presence of serious parameter instabilities due to fluctuations in the oil and stock markets over the period under study. Moreover, the time-varying estimates indicate that the oil–gas sectors of these countries are riskier than the overall stock market. The results further suggest that, except for Indonesia, oil prices have a positive impact on the sectoral returns of all markets, whereas the impact of the exchange rates on the oil–gas sector returns varies across time and countries.

The determinants of positive feedback trading behaviors in Bitcoin markets

2021 ◽  
pp. 102120
Author(s):  
Jying-Nan Wang ◽  
Yen-Hsien Lee ◽  
Hung-Chun Liu ◽  
Ming-Chih Lee
Keyword(s):  
Positive Feedback ◽  
Feedback Trading
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