| Summary: | 碩士 === 朝陽科技大學 === 財務金融系碩士班 === 95 === In this study, we employ the positive feedback trading model set by Sentana and Wadhwani (1992) to explore the dynamic relationship among the investment behavior of individual investors, the returns in Taiwan Stock Market and Taiwan Futures Market, respectively.
At the bull market, the more market volume the individual investors trade, the more easily individual investors become positive feedback traders (Buy financial instruments as the price rises, sell them as the price falls). We confirm those in Sentana and Wadhwani (1992). Once there are positive feedback traders in stock market, the stock returns hold the negative first order autocorrelation. At the bear market, individual investors’ investment may be inclined to conservative. As the market volume traded by individual investor is the same proportion as the amount by institution investor, the behavior of individual investors being a positive feedback attracts the stock price to diverge from its fundamental price. However, the behavior of institutional investor is opposite to that of individual investor, so institutional investor can obtain normal profit. Furthermore, it regains the stock price return to the fundamental price.
There are two characters in the futures market: one is a lower transaction cost and the other is a higher leverage. The characters above are accordance with risk-loving individual investor. We found that the returns of futures hold negative first order autocorrelation from 2002/10/15 to 2007/6/30 and individual investor is a positive feedback trader in the futures market. On the contrary, we fail to find this phenomenon exists in the stock market. Therefore, the positive feedback trades shift to the futures market.
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