Contracts for dummies? The performance of investors in contracts for difference

Publication Type:
Journal Article
Accounting and Finance, 2014, 54 (3), pp. 965 - 997
Issue Date:
Full metadata record
© 2013 AFAANZ. Investors widely use contracts for difference (CFDs) to leverage and short sell underlying financial assets. We investigate the after cost performance of investors in Australian Securities Exchange listed share CFDs, and find that market order CFD trades earn small positive returns at the daily horizon, with negative returns reported for one month to one year horizons due to financing costs. Market orders also net sell positions, which suggests that investors use CFDs for shorting opportunities. Overall, we find that liquidity demanders in CFDs obtain favourable execution, which is inconsistent with the view that CFDs are used by naive individuals.
Please use this identifier to cite or link to this item: