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The impact of foreign trading information on emerging futures markets: a study of Taiwan's unique data set

Author

Listed:
  • Wen-Hsiu Kuo

    (Tainan University of Technology)

  • Liu-Hsiang Hsu

    (Southwestern University of Finance and Economics,and Ling Tung University)

  • Ching-Chung Lin

    (Kao-Yuan University)

Abstract

Using a unique dataset from the Taiwan Futures Exchange, this paper investigates whether trading imbalances by foreign investors affect emerging Taiwan futures market in terms of returns and volatility. First, this evidence demonstrates a positive relation between contemporaneous futures returns and net purchases by foreign investors when other market factor effects are controlled. Second, this failure to detect price reversals is inconsistent with the price pressure hypothesis. Third, foreign investors do not exhibit positive feedback trading patterns. Fourth, a bi-directional Granger-causality relationship exists between futures volatility and foreign trading flows. As found for other stock or foreign exchange markets, our empirical results demonstrate that foreign trading flows do have impacts on the return and volatility of developing futures market, suggesting that trading by foreign investors may enhance the information flow of the local futures market.

Suggested Citation

  • Wen-Hsiu Kuo & Liu-Hsiang Hsu & Ching-Chung Lin, 2007. "The impact of foreign trading information on emerging futures markets: a study of Taiwan's unique data set," Economics Bulletin, AccessEcon, vol. 7(10), pages 1-14.
    • Handle: RePEc:ebl:ecbull:eb-07g00083
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    References listed on IDEAS

    as
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    2. Dahlquist, Magnus & Robertsson, Goran, 2004. "A note on foreigners' trading and price effects across firms," Journal of Banking & Finance, Elsevier, vol. 28(3), pages 615-632, March.
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    Cited by:

    1. Fotini Economou & Konstantinos Gavriilidis & Bartosz Gebka & Vasileios Kallinterakis, 2022. "Feedback trading: a review of theory and empirical evidence," Review of Behavioral Finance, Emerald Group Publishing Limited, vol. 15(4), pages 429-476, February.

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    More about this item

    Keywords

    Foreign trading;

    JEL classification:

    • G0 - Financial Economics - - General
    • G1 - Financial Economics - - General Financial Markets

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