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Volatility–Volume Relationships Among Types of Traders Considering the Investment Limitation to Foreign Investors

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  • Ching-Mann Huang

    ()
    (Department of Business Administration, Hsing-Kuo University of Management, Taiwan, R.O.C.; Department of Business Administration, National Cheng Kung University, Taiwan, 89, Yuying St., Tainan, Taiwan 709, R.O.C.)

  • Tsai-Yin Lin

    ()
    (Department of Finance, National Chung Cheng University, Taiwan 168, University Rd., Min-Hsiung, Chia-Yi 621, Taiwan, R.O.C.)

  • Chih-Hsien Yu

    ()
    (Department of Finance, National Chung Cheng University, Taiwan, 168, University Rd., Min-Hsiung, Chia-Yi 621, Taiwan, R.O.C.)

  • Si-Ying Hoe

    ()
    (Department of Business Administration, National Cheng Kung University, Taiwan, No.1, Ta-Hsueh Road, Tainan 701, Taiwan, R.O.C)

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    Abstract

    This paper examines the volatility–volume relationship in Taiwan stock market, using volume data categorized by type of trader. We consider before and after our event period of lifting the investment restrictions for foreign investors. We partition trading volume into expected and unexpected volume and find that the unexpected volume shocks for individual investors are more important than the expected volume shocks in explaining volatility before lifting the investment restrictions for the foreign investors. We find that the positive volatility–volume relationship is driven by the individual investors even during the period of the lifting of investment restrictions for foreign investors. However, with respect to institutional investors, before the removal of investment restrictions for foreign investors, the unexpected volume of trading of the domestic dealers exhibit positive volatility–volume relationship. Further, after the removal of investment restrictions, the unexpected volume of the foreign investors has a positive volatility–volume relationship.

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    Bibliographic Info

    Article provided by World Scientific Publishing Co. Pte. Ltd. in its journal Review of Pacific Basin Financial Markets and Policies.

    Volume (Year): 09 (2006)
    Issue (Month): 04 ()
    Pages: 575-596

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    Handle: RePEc:wsi:rpbfmp:v:09:y:2006:i:04:p:575-596

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    Related research

    Keywords: Volatility–volume relation; type of trader; foreign investors; investment limitation; JEL Classification: C22; JEL Classification: G23;

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