Feedback Trading and Its Implications for Return Autocorrelations in India During COVID

IF 1.2 Q3 BUSINESS, FINANCE

Journal of Emerging Market Finance Pub Date : 2024-02-06 DOI:10.1177/09726527231215541

Paramita Mukherjee, Rajashri Chatterjee

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引用次数: 0

Abstract

In emerging capital markets, feedback trading is a widely pursued strategy by investors. Such behavior may potentially lead to volatility and cause negative autocorrelation in market returns, especially during high volatility. In India, such a linkage has not been explored so far, though institutional investors have pursued feedback trading for the last two decades. Also, COVID-19 has led to higher volatility in the markets and might have altered investors’ behavior. This article focuses on finding whether feedback trading is still pursued by institutional investors in Indian equity markets post-COVID and also whether the presence of feedback traders exerts any influence on autocorrelations in market returns. Asymmetric GARCH models are employed to explore the linkage. Findings suggest that while foreign institutional investors continue to pursue positive feedback trading, as in the pre-pandemic period, domestic investors pursue negative feedback trading. However, in the post-pandemic period, as other types of trading became weak or perished, positive feedback traders have started dominating, leading to negative autocorrelation in market returns during heightened volatility. Evidence of negative autocorrelation was not present in the pre-pandemic period. Further, negative news leads to more volatility in returns. JEL Codes: F21, F32, G11

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COVID 期间印度的反馈交易及其对回报自相关性的影响

在新兴资本市场，反馈交易是投资者广泛采用的一种策略。这种行为可能会导致波动，并造成市场回报的负自相关性，尤其是在高波动率时期。在印度，尽管机构投资者在过去二十年中一直在进行反馈交易，但迄今为止尚未对这种联系进行过探讨。此外，COVID-19 导致市场波动加剧，也可能改变了投资者的行为。本文重点研究 COVID 后印度股票市场的机构投资者是否仍在进行反馈交易，以及反馈交易者的存在是否会对市场回报的自相关性产生影响。研究采用了非对称 GARCH 模型来探讨两者之间的联系。研究结果表明，与大流行前一样，外国机构投资者继续进行正反馈交易，而国内投资者则进行负反馈交易。然而，在大流行病后时期，随着其他类型的交易变弱或消亡，正反馈交易者开始占据主导地位，导致市场收益在波动加剧时出现负自相关性。而在大流行之前，负自相关的证据并不存在。此外，负面消息会导致回报率波动更大。JEL Codes：F21, F32, G11

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来源期刊

Journal of Emerging Market Finance BUSINESS, FINANCE-

CiteScore

1.80

自引率

33.30%

发文量

期刊介绍： The Journal of Emerging Market Finance is a forum for debate and discussion on the theory and practice of finance in emerging markets. While the emphasis is on articles that are of practical significance, the journal also covers theoretical and conceptual aspects relating to emerging financial markets. Peer-reviewed, the journal is equally useful to practitioners and to banking and investment companies as to scholars.