INVESTOR SENTIMENTS, TRADING BEHAVIOR AND INFORMATIONAL EFFICIENCY IN INDIAN STOCK FUTURES MARKET

Title

INVESTOR SENTIMENTS, TRADING BEHAVIOR AND INFORMATIONAL EFFICIENCY IN INDIAN STOCK FUTURES MARKET

Creator

AGGARWAL MONIKA

Description

The study entitled Investor Sentiments, Trading Behavior and Informational Efficiency in Indian Stock Futures Market shows that the traders in Indian Stock Futures Markets are positive feedback traders-they buy when prices increase and sell when prices decline. Positive Feedback trading appears to be more active in periods of high investor sentiments. Our primary objective is to examine the relationship between the investor sentiments and transitory volatility. The data used in the study is secondary data which is being collected from the National Stock Exchange. The sample period of the study is of past 5 years i.e. from July 2006 to September 2011.The Pharmaceutical sector has been chosen and around seven companies are selected. We used Vector AutoRegression (VAR) Model to test the contemporaneous and causal relationship between order flow, stock return and return volatility. Augmented Dickey Fuller (ADF) and Phillips-Perron (PP) unit root tests have been employed to test the stationarity of the investor sentiment measures. We found that futures market tends to be more liquid in periods of bullish sentiments. We also found that controlling for feedback trading; the persistence of order flow is significantly lower in high sentiment periods. Further the study shows a strong positive relation between investor sentiments and transitory volatility. The result also suggested that stock futures prices tend to follow the underlying efficient price more closely in bullish periods, consistent with increased liquidity in bullish states. Overall, it can be concluded that this study provides new evidence on the link between investor attitudes, trading behavior and price efficiency at the microstructure level. Key Words: Investor Sentiments, Market Efficiency, Futures Market, Volatility, Order .

Source

Commerce

Date

2012