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An Empirical Analysis of the Taiwan Institutional Trading Volume Volatility Spillover on Stock Market Index Return

  • Ching-Chun Wei

    ()

    (Department of Finance, Providence University)

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    This paper provides interesting empirical evidence on the relation between the volatility impact effect of the Taiwan institutional trading volume and the stock market index by using the MEGARCH model. We found a significant autoregressive coefficient of institutional trading volume and stock market index. The cross-volatility spillover effect, asymmetric leverage effect, and persistence of volatility effect are statistically significant. The feedback and lead-lag relationship between trading volume and stock index return are also statistically significant. Therefore, Taiwan¡¦s institutional trading volume can affect the stock market index through volatility effect and causality.

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    File URL: http://www.accessecon.com/Pubs/EB/2009/Volume29/EB-09-V29-I2-P72.pdf
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    Article provided by AccessEcon in its journal Economics Bulletin.

    Volume (Year): 29 (2009)
    Issue (Month): 2 ()
    Pages: 1264-1275

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    Handle: RePEc:ebl:ecbull:eb-08c30093
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    1. Karpoff, Jonathan M., 1987. "The Relation between Price Changes and Trading Volume: A Survey," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 22(01), pages 109-126, March.
    2. Kim, Dongcheol & Kon, Stanley J, 1994. "Alternative Models for the Conditional Heteroscedasticity of Stock Returns," The Journal of Business, University of Chicago Press, vol. 67(4), pages 563-98, October.
    3. John M. Griffin & Jeffrey H. Harris & Selim Topaloglu, 2003. "The Dynamics of Institutional and Individual Trading," Journal of Finance, American Finance Association, vol. 58(6), pages 2285-2320, December.
    4. Sias, Richard W. & Starks, Laura T., 1997. "Return autocorrelation and institutional investors," Journal of Financial Economics, Elsevier, vol. 46(1), pages 103-131, October.
    5. Engle, Robert F, 1982. "Autoregressive Conditional Heteroscedasticity with Estimates of the Variance of United Kingdom Inflation," Econometrica, Econometric Society, vol. 50(4), pages 987-1007, July.
    6. Xavier Gabaix & Parameswaran Gopikrishnan & Vasiliki Plerou & H. Eugene Stanley, 2006. "Institutional Investors and Stock Market Volatility," The Quarterly Journal of Economics, MIT Press, vol. 121(2), pages 461-504, May.
    7. Bollerslev, Tim, 1986. "Generalized autoregressive conditional heteroskedasticity," Journal of Econometrics, Elsevier, vol. 31(3), pages 307-327, April.
    8. Nelson, Daniel B, 1991. "Conditional Heteroskedasticity in Asset Returns: A New Approach," Econometrica, Econometric Society, vol. 59(2), pages 347-70, March.
    9. Robert F. Engle & Victor K. Ng, 1991. "Measuring and Testing the Impact of News on Volatility," NBER Working Papers 3681, National Bureau of Economic Research, Inc.
    10. William A. Brock & Blake D. LeBaron, 1995. "A Dynamic Structural Model for Stock Return Volatility and Trading Volume," NBER Working Papers 4988, National Bureau of Economic Research, Inc.
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