The Informative Content of the Net-Buy Information of Institutional Investors in the Taiwan Stock Market: A Revisit Using Conditional Analysis

2006 ◽  
Vol 09 (04) ◽  
pp. 661-697 ◽  
Author(s):  
Chaoshin Chiao ◽  
David C. Cheng ◽  
Yunju Shao
Keyword(s):  
Stock Market ◽  
Transaction Costs ◽  
Institutional Investors ◽  
Conditional Analysis ◽  
Economic Recovery ◽  
Foreign Investors ◽  
Security Investment ◽  
Investment Trust ◽  
Informative Content

Chiao and Lin (2004) argue that the strategies following the investment pace of security investment trust companies (SITCs) are more profitable than the market and those following foreign investors (FIs) and security dealers (SDs) in the Taiwan stock market. We reexamine their results under various market events and economic states. Employing the close-to-close returns, our results are mostly consistent with Chiao and Lin (2004) except that, during the period of economic recovery, following FIs is more profitable. However, employing the open-to-close returns and considering transaction costs, none of the strategies are profitable.

The Informative Content of the Net-Buy Information of Institutional Investors: Evidence from the Taiwan Stock Market

2004 ◽  
Vol 07 (02) ◽  
pp. 259-288 ◽  
Author(s):  
Chaoshin Chiao ◽  
Ko-I Lin
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Trading Volume ◽  
Market Frictions ◽  
Investment Strategies ◽  
Foreign Investors ◽  
Security Investment ◽  
Growth Stocks ◽  
Trading Volumes ◽  
Informative Content

This paper studies the informative content of the NB (net-buy) information of institutional investors, including foreign investors (FIs), security investment trust companies (SITCs), and security dealers (SDs), in the Taiwan stock market. First, with/without considering prevailing market frictions, the investment strategies based on the NB trading volume and dollar trading volume of SITCs, outperform the market and those strategies based on those of FIs and SDs. Second, on average, institutional investors trade mostly large and growth stocks. Third, evidence supports negative leading roles of the aggregate/disaggregate NB dollar trading volumes of FIs over those of SITCs.

Volatility–Volume Relationships Among Types of Traders Considering the Investment Limitation to Foreign Investors

2006 ◽  
Vol 09 (04) ◽  
pp. 575-596 ◽  
Author(s):  
Ching-Mann Huang ◽  
Tsai-Yin Lin ◽  
Chih-Hsien Yu ◽  
Si-Ying Hoe
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Trading Volume ◽  
Individual Investors ◽  
Volume Data ◽  
Foreign Investors ◽  
Volume Relationship ◽  
Before And After ◽  
The Individual

This paper examines the volatility–volume relationship in Taiwan stock market, using volume data categorized by type of trader. We consider before and after our event period of lifting the investment restrictions for foreign investors. We partition trading volume into expected and unexpected volume and find that the unexpected volume shocks for individual investors are more important than the expected volume shocks in explaining volatility before lifting the investment restrictions for the foreign investors. We find that the positive volatility–volume relationship is driven by the individual investors even during the period of the lifting of investment restrictions for foreign investors. However, with respect to institutional investors, before the removal of investment restrictions for foreign investors, the unexpected volume of trading of the domestic dealers exhibit positive volatility–volume relationship. Further, after the removal of investment restrictions, the unexpected volume of the foreign investors has a positive volatility–volume relationship.

Who Drive the Rise and Fall of the Bubbles in Korean Stock Market?

2017 ◽  
Vol 25 (4) ◽  
pp. 591-622
Author(s):  
Bong-Chan Kho ◽  
Jin-Woo Kim
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Risk Model ◽  
Early Stage ◽  
Disposition Effect ◽  
Individual Investors ◽  
Foreign Investors ◽  
Peak Point ◽  
Korean Stock Market ◽  
Informed Traders

In this paper, we analyze the trading patterns of investors around the bubble events selected for stocks traded in Korean Stock Market from 1999 to 2013, whose holding period returns exceed 200% for 250 trading days prior to the event and then drop subsequently below -50% thereafter for the next 250 trading days. We examine whether individual investors, commonly known as noise traders, drive the bubbles, and whether institutional investors and foreign investors, known as informed traders, take an arbitrage position to shrink the pricing errors or ride the bubbles to maximize their profits. We also examine whether individual investors suffer losses due to their disposition effect even after the bubble bursts. Major findings of this paper are as follows : First, we find that individual investors are actually shown to drive the bubbles in our full sample, whereas the burst of the bubbles are largely driven by institutional investors and foreign investors. In particular, it is shown for large-cap stocks that foreign investors take the lead in raising the price at an early stage of the bubbles and then institutional investors follow them until the bubble peak point. Second, for mid-cap and large-cap stocks, institutional investors are found to ride the bubbles from about 75 days prior to the bubble peak point, when foreign investors reverse their trades and start selling to realize profits. Such bubble riding behavior of institutional investors is consistent with the synchronization risk model of Abreu and Brunnermeier (2002, 2003), where it is optimal for informed traders to ride the bubbles until all of informed traders start selling at the bubble peak point. Third, individual investors are found to suffer losses as they keep buying the bubble stocks even after the bubble bursts due to their disposition effect.

The Response of Korean Stock Market and Market Participants to the Sub-Prime Mortgage Crisis

2012 ◽  
Vol 20 (2) ◽  
pp. 165-193
Author(s):  
Jay M. Chung
Keyword(s):  
Stock Market ◽  
Information Transmission ◽  
Strong Evidence ◽  
Institutional Investors ◽  
Foreign Investors ◽  
Market Participants ◽  
Mortgage Crisis ◽  
Korean Stock Market ◽  
Using Data ◽  
Informational Advantage

We investigate how Korean stock market and its participants react to the sub-prime mortgage crisis. Using data for the ABX sub-prime index, we find strong evidence of information transmission from ABX to KOSPI and VKOSPI during 2007 sub-prime mortgage crisis period. Responding to the drop of ABX, domestic institutional investors buy, whereas foreign investors sell. Furthermore, we find KOSPI reacts to ABX less than the response implied by KOSPI response to S&P 500 and S&P 500 response to ABX, which are considered as an efficient channel of information transmission. This phenomenon occurs because domestic investors buy stocks as ABX drops, thus keeping KOSPI from responding fully to information on ABX. On the contrary, foreign investors sell stocks as ABX drops, which show that foreign investors play as a channel for sub‐prime mortgage information transmission. This evidence supports the hypothesis of Kho (2011) that foreign investors have an informational advantage over domestic investors on overseas information.

scholarly journals The effect of foreign investment flow on commonality in liquidity on the Brazilian stock market

2020 ◽  
Vol 31 (84) ◽  
pp. 425-443
Author(s):  
Claudio Pilar Silva ◽  
Márcio André Veras Machado
Keyword(s):  
Stock Market ◽  
Transaction Costs ◽  
Current Literature ◽  
Foreign Investment ◽  
Financial Crises ◽  
Stock Exchange ◽  
Foreign Investor ◽  
Foreign Investors ◽  
International Financial Crises ◽  
Investor Trading

ABSTRACT The aim of this study was to analyze the characteristics and determinants of commonality in liquidity in the Brazilian stock market. Since the internationalization of the Brazilian stock market (Bolsa, Brasil, Balcão - B3), the flow of foreign investment in Brazil has increased over the years, except in times of crisis. Thus, the present study argues that, in the Brazilian stock market, commonality in liquidity is partly determined by foreign investor trading. Despite the benefits obtained from foreign resources in the Brazilian stock market, it is important to analyze the effect of this flow of foreign investment into the Brazilian stock market. This paper contributes to the current literature by providing evidence for commonality in liquidity in the Brazilian stock market and by showing its stronger effect in periods of market decline. Therefore, investors pay greater attention to the risk of commonality in their portfolios when executing orders and to their trading timing due to the increase in transaction costs of the stocks most sensitive to commonality in liquidity. The study sample consisted of a set of companies listed on the Brazilian stock exchange from January 2007 through December 2017. To analyze commonality in liquidity, we used the model proposed by Karolyi, Lee, and Djik (2012) and by Qian, Tam, and Zhang (2014). To measure the influence of foreign investors on the Brazilian stock market, we used three measures based on Gonçalves and Eid (2016). The results showed that commonality occurs in the Brazilian stock market and that it peaks during international financial crises, as well as indicated that commonality might be higher in times of crisis due to capital constraint. In addition, the results showed that foreign investor participation partly determined commonality.

Pricing models of shares of Russian companies and their practical application

2019 ◽  
pp. 48-76 ◽  
Author(s):  
Alexander E. Abramov ◽  
Alexander D. Radygin ◽  
Maria I. Chernova
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Factor Model ◽  
Investment Strategies ◽  
Pricing Models ◽  
Foreign Portfolio Investment ◽  
Market Portfolio ◽  
Stock Market Performance ◽  
Long Time ◽  
Russian Stock Market

The article analyzes the problems of applying stock pricing models in the Russian stock market. The novelty of the study lies in the peculiarities of the methodology used and the substantive conclusions on the specifics of the influence of fundamental factors on the pricing of shares of Russian companies. The study was conducted using its own 5-factor basic pricing model based on a sample of the most complete number of issues of shares of Russian issuers and a long time horizon, from 1997 to 2017. The market portfolio was the widest for a set of issuers. We consider the factor model as a kind of universal indicator of the efficiency of the stock market performance of its functions. The article confirms the significance of factors of a broad market portfolio, size, liquidity and, in part, momentum (inertia). However, starting from 2011, the significance of factors began to decrease as the qualitative characteristics of the stock market deteriorated due to the outflow of foreign portfolio investment, combined with the low level of development of domestic institutional investors. Also identified is the cyclical nature of the actions of company size and liquidity factors. Their ability to generate additional income on shares rises mainly at the stage of the fall of the stock market. The results of the study suggest that as domestic institutional investors develop on the Russian stock market, factor investment strategies can be used as a tool to increase the return on investor portfolios.

Relationship between Foreign Portfolio Investments (FPI), Domestic Institutional Investors, and Stock Market Returns in India

GIS Business ◽  
2017 ◽  
Vol 12 (6) ◽  
pp. 1-9
Author(s):  
Dhananjaya Kadanda ◽  
Krishna Raj
Keyword(s):  
Stock Market ◽  
Institutional Investors ◽  
Negative Relationship ◽  
Trading Strategies ◽  
Market Returns ◽  
Stock Market Returns ◽  
Foreign Portfolio Investment ◽  
Stock Market Return ◽  
Indian Stock Market ◽  
Feedback Trading

The present article attempts to understand the relationship between foreign portfolio investment (FPI), domestic institutional investors (DIIs), and stock market returns in India using high frequency data. The study analyses the trading strategies of FPIs, DIIs and its impact on the stock market return. We found that the trading strategies of FIIs and DIIs differ in Indian stock market. While FIIs follow positive feedback trading strategy, DIIs pursue the strategy of negative feedback trading which was more pronounced during the crisis. Further, there is negative relationship between FPI flows and DII flows. The results indicate the importance of developing strong domestic institutional investors to counteract the destabilising nature FIIs, particularly during turbulent times.

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