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

Listed author(s):
  • 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)

Registered author(s):

    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.

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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 7 (2007)
    Issue (Month): 10 ()
    Pages: 1-14

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    Handle: RePEc:ebl:ecbull:eb-07g00083
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    1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
    2. David Easley & Maureen O'Hara & P.S. Srinivas, 1998. "Option Volume and Stock Prices: Evidence on Where Informed Traders Trade," Journal of Finance, American Finance Association, vol. 53(2), pages 431-465, 04.
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