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Study Completed: 2015
College of Business
The Role of Media Content in Explaining the Index Futures Market Behaviour
Miss Pok derived sentiment measures from routine financial news and outlined the impact of the media content on three main index futures contracts of Hong Kong Exchanges and Clearing Limited, Bursa Malaysia and Singapore Exchange. Highly pessimistic news factors (Pessimism, Negative and Weak) predict lower returns on the same day, while the negative impact will reverse within the next five days. Investors initially overreact to negative market news and drive the price lower, before the price corrects itself. The trading strategy based on this finding becomes more economically significant compared to paying full price in the spot market. In addition, during a high sentiment period, noise traders dominate the trading activities, leading to a weaker mean-variance trade off. Her findings suggest that sentiment can be incorporated into the index futures pricing model, through its interaction with returns volatility.
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Last updated on Tuesday 04 April 2017