Feedback Trading: The Intraday Case of Retail Derivatives
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Baule, R
Frijns, B
Schlie, S
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Wiley
Abstract
We analyze retail order flow in terms of intraday feedback trading patterns. Using a unique data set of exchange trades and high-frequency quotes, we first provide evidence that retail investors actively and consciously respond to short-term intraday returns in a negative feedback, contrarian fashion. Second, we show that some retail investors also feedback trade on tick-by-tick returns. Third, we find that on average this behavior leads to significant losses on the day they open a position. These losses are primarily due to the bid-ask spread and to investors' timing inability, but not to market makers taking advantage of investors.
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3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 1502 Banking, Finance and Investment, Finance, 3502 Banking, finance and investment
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Journal of Futures Markets, ISSN: 0270-7314 (Print); 1096-9934 (Online), Wiley, 44(9), 1487-1507. doi: 10.1002/fut.22536
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Creative Commons Attribution-NonCommercial-NoDerivatives License
© 2024 The Author(s). The Journal of Futures Markets published by Wiley Periodicals LLC. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
© 2024 The Author(s). The Journal of Futures Markets published by Wiley Periodicals LLC. This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.
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Except where otherwise noted, this item's license is described as Creative Commons Attribution-NonCommercial-NoDerivatives License