The trading behavior of foreign,domestic institutional,and domestic individual investors: Evidence from the Taiwan stock market |
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Authors: | Sue-Jane Chiang Li-Ju Tsai Pei-Gi Shu Show-Lin Chen |
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Institution: | 1. Department of Business Administration, Fu Jen Catholic University, New Taipei City, Taiwan;2. Department of Finance and International Business, Fu Jen Catholic University, New Taipei City, Taiwan;3. Department of Economics, Fu Jen Catholic University, New Taipei City, Taiwan |
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Abstract: | In this paper, we apply the threshold cointegration model of Hansen and Seo (2002), incorporating differences in the nonlinear behavior of investors across regimes. An examination of the trading behavior of foreign, domestic institutional, and domestic individual investors in Taiwan revealed no predominance among the three types of investors. When the market was near equilibrium, the purchases of domestic individual investors positively impacted stock prices. This finding, which is consistent with Choe et al. (2005), suggests that domestic individual investors have an edge in investment performance over other types of investors. However, when the market departed substantially from equilibrium, the purchases of foreign and domestic institutional investors predicted a rise in stock prices. On the other hand, domestic individuals traded at worse stock prices; these prices tended to fall (rise) after the purchase (sale). |
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