Liquidity Risk for Institutional Investors Impact on Low-volatility Anomaly
| Autor: | Li-Jen Tsai, 蔡力人 |
|---|---|
| Rok vydání: | 2018 |
| Druh dokumentu: | 學位論文 ; thesis |
| Popis: | 106 Ang, Hodrick, Xing, and Zhang (2006) show that there is negative relation between risk and expected return in U.S stock markets, which is referred to “low-volatility anomaly”. This anomaly counters finance theory argument that high risk is compensated with the higher return. Prior literature documents that constrained institutional investors bid up high-volatility assets, high-volatility stocks is associated with low alpha, and thus may generate in the low-volatility anomaly. On the other hand, behavioral finance theory argues that with limited liability or risk aversion, arbitrageurs might be unwilling or unable to decrease mispricing due to the limits of arbitrage. Therefore, institutional trading plays an influential role of low-volatility anomaly. Particularly, the tightness of liquidity in institutional investors following the tightness of the interbank market. Consequently, institutional investors tend to liquidate existing holding stocks to increase their liquidity. This selling pressure may cause the low-volatility anomaly. According to an official report in 2015, the proportion of institutional investors on Taiwan stock is reaching to 51.8% and among this, foreign institutional investors hold over one-third of the total market value. Hence, there is an important implication to investigate the institutional trading on Taiwan stock market. In this study, Taiwan stock market as setting, we examine whether the liquidity of institutional investors have impact on the low-volatility anomaly. The empirical results are as following: 1. Taiwan stock market has low-volatility anomaly. 2. The net buying of institutional investor has a significantly positive impact on the low-volatility anomaly. Furthermore, we show that during the holding period 1 week, the institutional investors suspend buying on high-volatility stocks; leading to downward stock prices. Accordingly, high-volatility stocks underperformance than low-volatility stocks. 3. The liquidity risk from U.S. interbank market can transmit to Taiwan stock market through subsidiaries and thereby influence the liquidity of Taiwan stock market. Therefore, the transmission of liquidity risk has positive impact on the low-volatility anomaly. |
| Databáze: | Networked Digital Library of Theses & Dissertations |
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