Trader positions in VIX futures

Chen, Yu‐Lun; Yang, Jun

doi:10.1016/j.jempfin.2020.12.003

Cited by 13 publications

(8 citation statements)

References 39 publications

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“…, 2007; Kurov, 2008; Salm and Schuppli, 2010; Antoniou et al. , 2011; Lai and Wang, 2014, 2015; Smales, 2016; Chen and Yang, 2021) confirming empirically the significance of (predominantly, positive) feedback trading in that segment [83]. At the macro level, positive feedback traders often appear more active in index futures during market slumps (likely due to index futures being utilized for portfolio insurance – Salm and Schuppli, 2010; Antoniou et al.…”

Section: Empirical Evidencementioning

confidence: 58%

“…The bulk of research on feedback trading in derivatives' markets pertains to index futures contracts [82], with a large number of studies (Wang, 2002(Wang, , 2003Ghysels and Seon, 2005;Cheng et al, 2007;Kurov, 2008;Salm and Schuppli, 2010;Antoniou et al, 2011;Wang, 2014, 2015;Smales, 2016;Chen and Yang, 2021) confirming empirically the significance of (predominantly, positive) feedback trading in that segment [83]. At the macro level, positive feedback traders often appear more active in index futures during market slumps (likely due to index futures being utilized for portfolio insurance -Salm and Schuppli, 2010; Antoniou et al, 2011) [84] and extrapolate from horizons of several days ("long memory"; Antoniou et al, 2011).…”

Section: Derivativesmentioning

confidence: 99%

“…Studies on US futures' markets indicate that hedgers (speculators) engaged in positive (negative) feedback trading during the 1990s (Wang, 2002(Wang, , 2003; however, Smales (2016) demonstrated that hedgers (speculators) negative (positive) feedback traded during the 1997-2012 period, yet switched feedback trading signs within the global financial crisis [85]. In addition, US index futures traders have been found to project feedback trading when sentiment (extracted via sentiment surveys) is high (Kurov, 2008) and uncertainty (proxied by the CBOE VIX index) is low (Chen and Yang, 2021) [86]. In the case of Taiwan, earlier evidence by Cheng et al (2007) suggested that positive feedback trading in index futures was confined to retail traders and dealers at the weekly frequency during 2001-2002, with no other trader-type found to feedback trade; later evidence Wang, 2014, 2015), however, denotes that foreign investors (investment trusts) negative (positive) feedback traded during the 2008-2013 window at the daily frequency.…”

Section: Derivativesmentioning

confidence: 99%

See 2 more Smart Citations

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

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PurposeThe purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors' feedback trading, one of the most popular trading patterns observed historically in financial markets. Specifically, the authors aim to synthesize the diverse theoretical approaches to feedback trading in order to provide a detailed discussion of its various determinants, and to systematically review the empirical literature across various asset classes to gauge whether their feedback trading entails discernible patterns and the determinants that motivate them.Design/methodology/approachGiven the high degree of heterogeneity of both theoretical and empirical approaches, the authors adopt a semi-systematic type of approach to review the feedback trading literature, inspired by the RAMESES protocol for meta-narrative reviews. The final sample consists of 243 papers covering diverse asset classes, investor types and geographies.FindingsThe authors find feedback trading to be very widely observed over time and across markets internationally. Institutional investors engage in feedback trading in a herd-like manner, and most noticeably in small domestic stocks and emerging markets. Regulatory changes and financial crises affect the intensity of their feedback trades. Retail investors are mostly contrarian and underperform their institutional counterparts, while the latter's trades can be often motivated by market sentiment.Originality/valueThe authors provide a detailed overview of various possible theoretical determinants, both behavioural and non-behavioural, of feedback trading, as well as a comprehensive overview and synthesis of the empirical literature. The authors also propose a series of possible directions for future research.

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Section: Empirical Evidencementioning

confidence: 58%

Section: Derivativesmentioning

confidence: 99%

Section: Derivativesmentioning

confidence: 99%

See 1 more Smart Citation

Feedback trading: a review of theory and empirical evidence

Economou

Gavriilidis

Gębka

et al. 2022

RBF

View full text Add to dashboard Cite

show abstract

“…Few studies have recognized the usefulness of TFF reports in general, or the reports of VIX futures positions in particular. A notable exception is Chen and Wang (2021), who focus on the role of VIX futures in the trading activities of dealers and leveraged fund managers during low-VIX and high-VIX periods during the period September 2009-June 2016. accommodated some of the demand, other smaller (nonreportable), liquidity traders such as MMs provided the rest. As the familiarity with and demand for volatility products grew, different unlevered and levered products were launched.…”

mentioning

confidence: 99%

Effects of nondiscretionary trading on futures prices

O’Neill

Whaley

2022

Journal of Futures Markets

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This paper examines the effects of the nondiscretionary trading demands of volatility index (VIX) exchange-traded products (ETPs) issuers on the prices and volumes in the VIX futures. We find that the ETPs' informationless, mechanical rebalancing of futures positions to maintain the constant maturity of the index and the promised leverage ratios of the VIX ETPs have significantly positive predictive power for end-of-day futures returns. We also show that the impact on price has diminished through time from increased liquidity provided by hedge funds, and the "natural" hedging of the issuers' inverse products.

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“…It is also known as "Fear Gauge" or "Fear Index". In this research, the cutoff threshold of VIX is followed by Chen and Yang (2021), VIX greater than 23.81% refers to high volatility regime that associated with market uncertainty or crisis period. On the other hand, VIX below 23.81% considered as low volatility regime.…”

Section: ▪ Market Uncertainty (Crisis)mentioning

confidence: 99%

Market liquidity and mutual fund performance during financial crisis

O-warinrat¹

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Market illiquidity influences mutual fund performance differently between crisis and non-crisis period. A significant drop in market liquidity makes investors panic leading to the early and large redemption. Fund managers have to liquidate the portfolio putting pressure on the asset prices, so the underperformance of mutual fund is recognized in non-crisis period. However, the result of illiquidity is different during crisis. The total effect of market illiquidity is positively related to all fund classes. This could then be interpreted as the evidence of management skills, market-timing and volatility-timing skills in fund managers to provide superior fund performance. Moreover, the further investigation on management strategy supports the evidence of manager skills in active fund to minimize the loss during the crisis.

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Trader positions in VIX futures

Cited by 13 publications

References 39 publications

Feedback trading: a review of theory and empirical evidence

Feedback trading: a review of theory and empirical evidence

Effects of nondiscretionary trading on futures prices

Market liquidity and mutual fund performance during financial crisis

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