The Crowding Trading and Chinese Stock Index Futures Returns

Main Article Content

Bin Gao, Xinxin Chen, Yu Meng


This paper examines the influence of crowding trading on returns in the stock index futures market. Next, we also examine how the crowding affects the stock index futures returns in different sentiment settings. We develop a model to capture crowding effects of buyer-initiated agents and seller-initiated agents. We also run empirical analysis to examine the crowding effect in futures market and related to investor sentiment. We find that both the
long futures crowding effect and the short futures crowding effect. The coefficient of the long (short) futures crowding effect is 0.047 (-0.029) with a t-statistic of 14.12 (-9.60), which implies that futures return increases/decreases with the long/short futures crowding index. Our analysis also indicate a strong statistical relation between investor crowding and investor sentiment. Examining the crowding effect on futures market, we find that futures returns increase with the long spot crowding and the long futures crowding, but decrease with the
short spot crowding and the short futures crowding. Besides, the joint effects of the crowding index and the investor sentiment on the futures returns are significant and systematic, strongly supported further in different sentiment settings.

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How to Cite
Bin Gao, Xinxin Chen, Yu Meng. (2021). The Crowding Trading and Chinese Stock Index Futures Returns. CONVERTER, 2021(6), 30-48. Retrieved from