Have Domestic Institutional Investors Become as Market Savvy as Foreign Investors?<i>Evidence from the Taiwan Options Market</i>

Chiu, Wan-Chien; Lee, Han-Hsing; Wang, Chih‐Wei

doi:10.3905/jod.2014.2014.1.036

Cited by 2 publications

(1 citation statement)

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“…Erenburg, Kurov, and Lasser () find that local futures traders can respond to macroeconomic shocks faster than off‐exchange traders do, which indicates that domestic traders may have an information edge. Chiu, Lee, and Wang () examine the put–call volume ratios of domestic and foreign institutional investors and find that the options trades of domestic institutions can significantly predict the Taiwanese daily stock index. Furthermore, some microstructure studies find that domestic individual investors who submit large orders have an information edge; these studies conclude that such domestic investors are professional and experienced individual investors.…”

Section: Introductionmentioning

confidence: 99%

The directional information content of options volumes

Ryu

Yang

2018

Journal of Futures Markets

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This study examines the directional information content realized by trades in a highly liquid options market by constructing put–call volume ratios and decoupled options‐to‐spot volume ratios. By investigating whether the specific investor type predicts underlying returns and the method used to exploit a directional information advantage, we find that foreign investment firms can leverage their directional information by executing buy trades to open new positions. Their open‐buy trades significantly predict next‐day spot returns, whereas trades initiated by domestic firms do not. This relationship becomes stronger for out‐of‐the‐money, large, and short‐horizon options trades and during the short‐sale restriction period.

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Section: Introductionmentioning

confidence: 99%