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Feedback trading: A review of theory and empirical evidence

Lookup NU author(s): Professor Bartosz GebkaORCiD



This work is licensed under a Creative Commons Attribution-NonCommercial 4.0 International License (CC BY-NC 4.0).


Purpose: The purpose of this paper is to comprehensively review a large and heterogeneous body of academic literature on investors’ feedback trading, one of the most popular trading patterns observed historically in financial markets. Specifically, we aim to synthesize the diverse theoretical approaches to feedback trading in order to provide a detailed discussion of its various determinants, and to systematically review the empirical literature across various asset classes to gauge whether their feedback trading entails discernible patterns and the determinants that motivate them. Design/methodology/approach: Given the high degree of heterogeneity of both theoretical and empirical approaches, we adopt a semi-systematic type of approach to review the feedback trading literature, inspired by the RAMESES protocol for meta-narrative reviews. The final sample consists of 243 papers covering diverse asset classes, investor types, and geographies. Findings: We find feedback trading to be very widely observed over time and across markets internationally. Institutional investors engage in feedback trading in a herd-like manner, and most noticeably in small domestic stocks and emerging markets. Regulatory changes and financial crises affect the intensity of their feedback trades. Retail investors are mostly contrarian and underperform their institutional counterparts, while the latter’s trades can be often motivated by market sentiment. Originality/value: We provide a detailed overview of various possible theoretical determinants, both behavioural and non-behavioural, of feedback trading, as well as a comprehensive overview and synthesis of the empirical literature. We also propose a series of possible directions for future research.

Publication metadata

Author(s): Economou F, Gavriilidis K, Gebka G, Kallinterakis V

Publication type: Article

Publication status: Published

Journal: Review of Behavioral Finance

Year: 2022

Volume: 15

Issue: 4

Pages: 429-476

Online publication date: 18/02/2022

Acceptance date: 02/02/2022

Date deposited: 03/02/2022

ISSN (print): 1940-5979

ISSN (electronic): 1940-5987

Publisher: Emerald Publishing Limited


DOI: 10.1108/RBF-12-2021-0268

ePrints DOI: 10.57711/xp3t-nm55


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