Noise Trader Demand in Futures Markets

By Dwight R. Sanders, Scott H. Irwin, and Raymond M. Leuthold

Abstract

Theoretical noise trader models suggest that uninformed traders can impact market prices. However, these models conclusions depend crucially on the assumed specification for noise trader demand. This research seeks to empirically determine the appropriate demand specification for uninformed traders. Using commercial market sentiment indices as proxies for noise trader demand, Granger causality models are estimated to examine the linear linkages between sentiment and futures returns. The models strongly suggest that noise traders are positive feedback traders (i.e., extrapolative expectations) with relatively long memories.
 
 

Viewing The Paper

There are two ways to view and print the paper:

1) The Economics Working Paper Archive at Washington University (EconWPA)

This paper is posted on the Economics Working Paper Archive (EconWPA) at Washington University. The paper is listed under the "Finance" section paper # 9609001 . The archive lists an abstract of the paper along with files of the paper that can be viewed and printed. The papers are posted in Adobe Acrobat (*.pdf) format, Postscript (*.ps) format, and in HTML (*.html) format.

Click here to access the EconWPA holding of this paper.

Note: you may have to down load a free copy of the Adobe Acrobat Viewer to view the paper in *.pdf format.

2) The MicroSoft Viewer

To use the Microsoft Viewer Software (freeware) follow the three simple steps:

STEP 1...Download a FREE copy of the Microsoft Viewer

STEP 2...Configure the Microsoft Viewer with your web browser. Directions are provided with the Microsoft Viewer Program. Note, the program only has to be loaded once. You do not need Microsoft Word to use this application. This application should work across platforms.

STEP 3...Click on WP0296.doc to view and print the document.

Note...this is a large paper and depending on your computer capacity, you may not have enough memory to view it using the MicroSoft Viewer.

If you have problems email: fmattos@uiuc.edu