The dynamic analysis of investors' trading in the taiwan stock market

Authors: Chao-Shin Chiao; Zi-Mei Wang; Chang-Ho Huang

Journal: Chia Da Management Review. Jun. 2009, 29(1): 41-78.

Keywords: Institutional investor; Individual investor; Marketable limit order; Order imbalance

Abstract:
This paper examines the daily and intraday relationship between stock return and the trading of institutional and individual investors on the TSEC 50 securities. First, the contemporaneous relation between stock return and the trade imbalance by institutions (individuals) at the daily level is strongly positive (negative) and institutions (individuals) tend to be trend-chasing (contrarian). Second, applying intraday order data, this paper finds that the observed positive contemporaneous relation is largely driven by the price pressure from institutional trading. Third, no consistent evidence supports that institutional order imbalance predicts future stock returns. Finally, the stock prices will move m ore when the trading direction of individuals is consistent with that of institutions.