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An Empirical Analysis of the Dynamic Probability of Informed Institutional Trading: Evidence from the Taiwan Futures Exchange

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  • Pei‐Shih Weng
  • Ming‐Hung Wu
  • Miao‐Ling Chen
  • Wei‐Che Tsai

Abstract

Based upon a unique dataset of institutional transactions in the Taiwan index futures market, we analyze the informational role of institutional investors using the “dynamic probability of informed trading” (DPIN). Compared to “trading imbalances” (TIB) and the “volume‐synchronized probability of informed trading” (VPIN), we show that the DPIN of foreign institutional investors outperforms the alternative measures and provides more stable effects in measuring informed trading. Following the strategies highlighted by DPIN, foreign institutional investors also perform better than domestic institutional investors. Our results support the validity of DPIN and present that foreign institutional investors are more informed. © 2016 Wiley Periodicals, Inc. Jrl Fut Mark 37:865–891, 2017

Suggested Citation

  • Pei‐Shih Weng & Ming‐Hung Wu & Miao‐Ling Chen & Wei‐Che Tsai, 2017. "An Empirical Analysis of the Dynamic Probability of Informed Institutional Trading: Evidence from the Taiwan Futures Exchange," Journal of Futures Markets, John Wiley & Sons, Ltd., vol. 37(9), pages 865-891, September.
    • Handle: RePEc:wly:jfutmk:v:37:y:2017:i:9:p:865-891
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    Cited by:

    1. Huang, Hong-Gia & Tsai, Wei-Che & Weng, Pei-Shih & Wu, Ming-Hung, 2021. "Volatility of order imbalance of institutional traders and expected asset returns: Evidence from Taiwan," Journal of Financial Markets, Elsevier, vol. 52(C).
    2. Chang, Sanders S. & Albert Wang, F., 2019. "Informed contrarian trades and stock returns," Journal of Financial Markets, Elsevier, vol. 42(C), pages 75-93.
    3. Chuang, Yi-Wei & Tsai, Wei-Che & Weng, Pei-Shih, 2020. "The impact of weather on order submissions and trading performance," Pacific-Basin Finance Journal, Elsevier, vol. 64(C).

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