Feedback Trading: The Intraday Case of Retail Derivatives
Date
Authors
Baule, R
Frijns, B
Schlie, S
Supervisor
Item type
Journal Article
Degree name
Journal Title
Journal ISSN
Volume Title
Publisher
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.Description
Keywords
3502 Banking, Finance and Investment, 35 Commerce, Management, Tourism and Services, 1502 Banking, Finance and Investment, Finance, 3502 Banking, finance and investment
Source
Journal of Futures Markets, ISSN: 0270-7314 (Print); 1096-9934 (Online), Wiley, 44(9), 1487-1507. doi: 10.1002/fut.22536