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Impact of futures’ trader types on stock market quality: evidence from Taiwan

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  • Ya-Wen Lai

    (National Formosa University)

Abstract

This study investigates whether specific types of institutional futures traders have varying impacts on the quality of the underlying stock market. An assessment of the traders’ effect on market-level price efficiency and excess volatility reveals that futures trading by foreign institutions diminishes the quality of the stock market. On the other hand, futures trading by dealers and investment trusts marginally increases quality, with dealers improving intraday price efficiency and investment trusts reducing excess volatility. This study provides evidence of negative information spillovers driven by foreign investors, thus supporting Stein’s (1987) and Biais and Hillion’s (1994) argument.

Suggested Citation

  • Ya-Wen Lai, 2023. "Impact of futures’ trader types on stock market quality: evidence from Taiwan," Journal of Economics and Finance, Springer;Academy of Economics and Finance, vol. 47(2), pages 417-436, June.
    • Handle: RePEc:spr:jecfin:v:47:y:2023:i:2:d:10.1007_s12197-022-09612-9
    DOI: 10.1007/s12197-022-09612-9
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    References listed on IDEAS

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