Herdin Behavior in Taiwan Stock Exchange-A Comparison of Institutional and Individual Investors
Date Issued
2012
Date
2012
Author(s)
Peng, Chien-Hao
Abstract
Based on the M-value of Grinblatt et al.（1995）and the model of Fama and MacBeth（1973）, this thesis discusses the herding behavior of Taiwan Stock market and tries to find out the factors that influence the herding behavior. Investors are separated into two parts which are institutional and non-institutional investors. There are three main institutional investors in Taiwan: foreign investors, mutual funds and security dealers. First, I pick the days that TAIEX increased or decreased more than 2% in one day, and investigate the change of stock holding percentage. What I have discovered in this research is that institutional investors have faster and more information than non-institutional investors, so they can respond the market tendency immediately. However, non-institutional investors didn’t respond as soon as institutional investors did, so they just followed institutional investors’ decision. If the market value of company is not so huge, the herding behavior of non-institutional investors will be more apparent.
I also choose four factors which includes liquidity, beta, PE ratio and PB ratio to detect which factor influence the herding behavior of investors more. Finally, I discovered that liquidity was the most important factor influence herding behavior of investors, but there are more evident shows that the herding behavior has no relation with those factors. Non-institutional investors just follow the market trends.
This is the reason why institutional investors can do positive feedback, but non-institutional investors usually make the wrong decision, buying stocks in high price and selling them in low price.
Subjects
Herding behavior
Institutional investor
Non-institutional investor
Momentum
Type
thesis
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