Feedback trading and stock return autocorrelation: Evidence for the Philippine stock market

Date of Publication

2009

Document Type

Bachelor's Thesis

Degree Name

Bachelor of Science in Commerce Major in Management of Financial Institutions

Subject Categories

Finance and Financial Management

College

Ramon V. Del Rosario College of Business

Department/Unit

Financial Management

Thesis Adviser

Andrew Adrian Yu Pua

Defense Panel Member

Lawrence Dacuycuy
Leila Kabigting

Abstract/Summary

The paper provides empirical findings in detecting the presence of feedback trading in the Philippine equities market. According to the Shiller-Sentana-Wadhwani model, there are two types of investor in the market, smart money traders who base their decisions on fundamentals, and feedback traders who base their trades on past prices. The model also presents the link between return autocorrelation and volatility. In addition, the study uses Nelson's EGARCH to model the conditional variance.

There is evidence of enough positive feedback trading among the stocks and indices to induce negative autocorrelation of returns during volatile periods. Seventeen selected stocks were used to examine if feedback trading is present in an exchange, since previous studies made use of indices and these indices can generalize the effect of its individual components. Results show that for the year 2007, positive feedback trading seems to be more dominant compared to negative feedback trading in most stocks. However for the year 2008, despite being a very volatile year, positive feedback trading is not dominant and there were more evidences of negative feedback trading, which is contrary with the model. This is further explained using the crash analysis, wherein there is evidence of positive feedback traders at the earlier part of the year however, negative feedback traders have become more dominant during the latter part of the year.

Abstract Format

html

Language

English

Format

Print

Accession Number

TU21701

Shelf Location

Archives, The Learning Commons, 12F, Henry Sy Sr. Hall

Physical Description

v, 77, [100] leaves : illustrations (some color)

Keywords

Stock exchanges--Philippines; Invesments--Philippines

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