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Trading behavior in S&P 500 index futures
Author(s) -
Smales Lee A.
Publication year - 2016
Publication title -
review of financial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.347
H-Index - 41
eISSN - 1873-5924
pISSN - 1058-3300
DOI - 10.1016/j.rfe.2015.11.001
Subject(s) - speculation , futures contract , futures market , economics , volatility (finance) , financial economics , position (finance) , sample (material) , trading strategy , monetary economics , index (typography) , context (archaeology) , finance , paleontology , chemistry , chromatography , world wide web , computer science , biology
This article examines the determinants of trading decisions and the performance of trader types, in the context of the E‐Mini S&P 500 futures and S&P 500 futures markets. Speculators and small traders tend to follow positive feedback strategies while hedgers dynamically adjust positions in response to market returns. Such strategies apparently reverse during the 2008–09 financial crisis. Investor sentiment and market volatility play an important role in determining the net trading position of traders across the sample period. While all trader types are better at foreseeing market upturns, an out‐of‐sample test suggests that speculators and small traders have some predictive ability for short‐term market returns.