Feedback Trading in Currency Markets: International Evidence

We investigate the presence of feedback trading in 66 currencies for the 2001–2018 period and find that feedback traders are active in many of them, giving rise mostly to positive feedback trading, when present. This suggests that feedback traders assume a stabilizing role, buying when currencies depreciate and selling when they appreciate, with depreciations found to boost positive feedback trading more strongly than appreciations. Feedback trading is found to exhibit long memory for most currencies, while no discernible feedback trading patterns surface within-versus-outside the recent global financial crisis