Information,hedging demand,and institutional investors: Evidence from the Taiwan Futures Exchange |
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Authors: | Cheng-Yi Chien Hsiu-Chuan Lee Shih-Wen Tai Tzu-Hsiang Liao |
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Affiliation: | 1. Department of Finance, Feng Chia University, Taichung, Taiwan;2. Department of Finance, Ming Chuan University, Taipei, Taiwan;3. Department of Business Administration, Lunghwa University of Science and Technology, Taoyuan, Taiwan |
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Abstract: | This paper examines the effect of hedging demand by various types of institutional investor on subsequent returns and volatility. Using data from the Taiwan Futures Exchange, empirical results indicate that the hedging demand of foreign investors has a significant negative impact on subsequent returns and volatility. In addition, trading strategies based on the extreme hedging demand of foreigners are positively correlated with trading performance. Furthermore, there is evidence to show that returns (volatility) also affect the subsequent hedging demand of foreign investors, suggesting a feedback relation. Finally, the hedging demand of foreign investors has a greater impact on subsequent returns and volatility after global financial turmoil. Accordingly, this paper concludes that foreign investors are informed hedgers in the Taiwan futures market, especially after global financial turmoil. |
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Keywords: | Information Hedging demand Institutional investors Futures market Global financial turmoil |
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