Market Return, Liquidity, and Trading Activity of Various Trader Types in the Emerging Market: A Study of the TAIFEX
Journal
Asia-Pacific Journal of Financial Studies
Journal Issue
45
Pages
499-534
Date Issued
2016-08
Author(s)
Abstract
Abstract Using a large data set with detailed classifications of different trader types, this study sheds further light on the trading activity of various trader types on the Taiwan futures exchange ( TAIFEX ). Compared with domestic traders on the TAIFEX , we find that foreign institutional traders act as contrarians. In addition, when the market becomes illiquid, foreign institutional traders are net buyers and individual traders are net sellers. The result implies that both foreign institutional traders and individual traders may contribute to the recovery of liquidity dry‐ups together. Among all traders, only the order imbalance of foreign institutional investors presents return predictability when the market is illiquid, which suggests they have an information advantage in such a market.
Type
journal article