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The impacts of large trades by trader types on intraday futures prices: Evidence from the Taiwan Futures Exchange

  • Chou, Robin K.
  • Wang, George H.K.
  • Wang, Yun-Yi
  • Bjursell, Johan
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    This paper employs a unique data set to investigate the total price, liquidity and information effects of large institutional trades versus individual trades on three futures contracts traded on the Taiwan Futures Exchange. Several interesting results are obtained. We find that, for the entire sample period, most buyer-initiated large trades have larger permanent price effects than seller-initiated large trades and vice versa for liquidity effects. However, we find that the permanent price effects of large sells are larger than the effects of large purchases in bearish markets and the reverse pattern is found for bullish markets. These results are consistent with the current economic condition hypothesis which is used to explain the asymmetry between total price impacts, information and liquidity effects of large buys and sells. Our new empirical results demonstrate that the asymmetric patterns between price impacts of large buys and sells hold for individual traders as well as for institutional traders.

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    Article provided by Elsevier in its journal Pacific-Basin Finance Journal.

    Volume (Year): 19 (2011)
    Issue (Month): 1 (January)
    Pages: 41-70

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    Handle: RePEc:eee:pacfin:v:19:y:2011:i:1:p:41-70
    Contact details of provider: Web page: http://www.elsevier.com/locate/pacfin

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    1. Brad M. Barber & Terrance Odean & Ning Zhu, 2009. "Do Retail Trades Move Markets?," Review of Financial Studies, Society for Financial Studies, vol. 22(1), pages 151-186, January.
    2. Scholes, Myron S, 1972. "The Market for Securities: Substitution versus Price Pressure and the Effects of Information on Share Prices," The Journal of Business, University of Chicago Press, vol. 45(2), pages 179-211, April.
    3. Chiraphol N. Chiyachantana & Pankaj K. Jain & Christine Jiang & Robert A. Wood, 2004. "International Evidence on Institutional Trading Behavior and Price Impact," Journal of Finance, American Finance Association, vol. 59(2), pages 869-898, 04.
    4. Barclay, Michael J. & Warner, Jerold B., 1993. "Stealth trading and volatility : Which trades move prices?," Journal of Financial Economics, Elsevier, vol. 34(3), pages 281-305, December.
    5. Christopher Ting, 2006. "Which Daily Price is Less Noisy?," Financial Management, Financial Management Association, vol. 35(3), Autumn.
    6. Keim, Donald B. & Madhavan, Ananth, 1997. "Transactions costs and investment style: an inter-exchange analysis of institutional equity trades," Journal of Financial Economics, Elsevier, vol. 46(3), pages 265-292, December.
    7. Chan, Louis K C & Lakonishok, Josef, 1995. " The Behavior of Stock Prices around Institutional Trades," Journal of Finance, American Finance Association, vol. 50(4), pages 1147-74, September.
    8. Christopher Ting, 2006. "Which Daily Price is Less Noisy?," Financial Management, Financial Management Association International, vol. 35(3), pages 81-95, 09.
    9. Gemmill, Gordon, 1996. " Transparency and Liquidity: A Study of Block Trades on the London Stock Exchange under Different Publication Rules," Journal of Finance, American Finance Association, vol. 51(5), pages 1765-90, December.
    10. Saar, Gideon, 2001. "Price Impact Asymmetry of Block Trades: An Institutional Trading Explanation," Review of Financial Studies, Society for Financial Studies, vol. 14(4), pages 1153-81.
    11. Kraus, Alan & Stoll, Hans R, 1972. "Price Impacts of Block Trading on the New York Stock Exchange," Journal of Finance, American Finance Association, vol. 27(3), pages 569-88, June.
    12. Holthausen, Robert W. & Leftwich, Richard W. & Mayers, David, 1990. "Large-block transactions, the speed of response, and temporary and permanent stock-price effects," Journal of Financial Economics, Elsevier, vol. 26(1), pages 71-95, July.
    13. Shleifer, Andrei, 1986. " Do Demand Curves for Stocks Slope Down?," Journal of Finance, American Finance Association, vol. 41(3), pages 579-90, July.
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