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INSTITUTIONAL TRADING AND OPENING PRICE BEHAVIOR: EVIDENCE FROM A FAST‐EMERGING MARKET
Author(s) -
Chiao Chaoshin,
Hung Weifeng,
Lee Cheng F.
Publication year - 2011
Publication title -
journal of financial research
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.319
H-Index - 49
eISSN - 1475-6803
pISSN - 0270-2592
DOI - 10.1111/j.1475-6803.2010.01276.x
Subject(s) - herding , institutional investor , herd behavior , monetary economics , pairs trade , stock (firearms) , financial economics , trading strategy , open outcry , stock price , economics , alternative trading system , business , high frequency trading , positive correlation , stock market , stock trading , algorithmic trading , finance , corporate governance , mechanical engineering , paleontology , engineering , horse , series (stratigraphy) , forestry , biology , geography , medicine
Using daily and intraday data, we investigate the cross‐sectional relation between stock prices and institutional trading in the Taiwan stock market. Consistent with the investigative herding hypothesis, we find that institutional herding exists because of institutional positive feedback trading behavior rather than following trades made by other institutions, as suggested by the information cascade hypothesis. Moreover, the positive correlation between institutional trade imbalance and stock returns mainly comes from institutional positive feedback trading. The institutional trading decisions rely on returns measured not only over the lagged trading day but also over the opening session during the same day.