The Effect of Institutional Trading on Return Dynamics
| Autor: | Chun-Kuei Hsieh, 謝俊魁 |
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| Rok vydání: | 2009 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 97 This doctoral dissertation comprises two essays regarding the effect of institutional trading on return dynamics in the Taiwan stock markets. Essay I focuses on the effect of institutional trading on return autocorrelation while Essay II focuses on the effect of institutional trading on return volatility. Essay I proposes new tests for the prediction of Llorente, Michaely, Saar, and Wang (2002) that information trading drives positive autocorrelation. Data from the Taiwan Stock Exchange is used to exploit the differences in the trading motivations of three groups of institutional investors. Consistent with the predictions, we find that heavy trading by foreigners and mutual funds will increase the autocorrelation particularly for large firms, and that heavy trading by dealers will not. We also find that the sell volume of mutual funds – short sales are disallowed by regulation – has significantly smaller effect on the autocorrelation of returns than buy volume. A portfolio strategy that exploits the observed autocorrelation pattern can generate a significantly positive daily return. When short selling is costly, sales tend to convey less information than buys. In Essay II, we propose hypotheses on how different information content changes the volatility-volume relationship. To test these hypotheses, we use a sample of institutional trading in the Taiwan stock market because these institutions cannot sell short owing to the regulations. Consistent with our hypotheses, the empirical findings show that expected institutional purchases have a less negative effect on volatility than expected institutional sales, and unexpected institutional purchases have a less positive effect on volatility than unexpected institutional sales. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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