Liquidity provision and informed trading by individual investors

Tian, Xiao; Huu, Binh; Duong, Huu Nhan; Kalev, Petko S.

doi:10.1016/j.pacfin.2014.11.005

Cited by 16 publications

(9 citation statements)

References 49 publications

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“…The positive relationship between individual investors and PIN seems puzzling because the former have been regarded as uninformed traders due to behavioral biases (Barber and Odean, 2000), noise trading (Foucault et al, 2011) and the lack of information advantage about local stocks (Seasholes and Zhu, 2010). However, there is growing empirical evidence that individual investors possess valuable private information and engage in informed trading (Kelley and Tetlock, 2013;Fong et al, 2014a;Tian et al, 2015). This possibility of individuals having private information cannot be ruled out in the context of Malaysia, given the prevalence of ownership concentration in the hands of family (see Carney and Child, 2013).…”

Section: Estimation Results and Discussionmentioning

confidence: 99%

“…Third, the types of account that investors trade do matter for liquidity, which in the Malaysian context, is between direct and nominee accounts. In Australia, Fong et al (2014a) and Tian et al (2015) find that the types of retail brokers (discount versus full-service) that investors engage are important to the informativeness of trades. Last but not least, apart from the popular information asymmetry and trading effects, liquidity is also driven by the largely ignored competition channel.…”

Section: Resultsmentioning

confidence: 99%

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Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

2015

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Abstract:This paper examines the relationship between shareholdings of various investor groups and stock liquidity for Malaysian public listed firms over the [2002][2003][2004][2005][2006][2007][2008][2009] sample period. Using the Amihud illiquidity ratio, we extend the literature by addressing the issues of investor heterogeneity, trading account types and the interactions of competing liquidity channels. The analysis reveals that only local institutions and local individual investors who trade through the direct accounts are significantly associated with the liquidity of domestic firms. In contrast, the significant liquidity effect for foreign investors operates through the nominee accounts. While institutional ownership exhibits a linear negative relationship, our findings on local individuals and foreign nominees differ greatly from previous studies in that their relationship with stock liquidity is non-monotonic. Apart from the widely researched information asymmetry and trading effects, we find that liquidity is also driven by the largely ignored information competition channel. An important insight from our findings is that the large shareholdings by any particular investor group is detrimental to stock liquidity as they exacerbate information asymmetry, reduce the degree of competition and lower the level of trading activity.JEL Classifications: G12; G32

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Section: Estimation Results and Discussionmentioning

confidence: 99%

Section: Resultsmentioning

confidence: 99%

Corporate Shareholdings and the Liquidity of Malaysian Stocks: Investor Heterogeneity, Trading Account Types and the Underlying Channels

2015

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“…We match the broker numbers provided by SIRCA with the broker list provided by IRESS to work out the broker identities (names) behind every special and matching orders. For each order in our sample, we identify whether the broker is an institution or a retail trader using the classifications of brokers in Fong et al (2014) and Tian et al (2015). This classification process involves manually searching the descriptions on the broker's website to determine its main group of customers.…”

Section: Who Uses Special Orders?mentioning

confidence: 99%

The information content of special orders

Duong

Lajbcygier

2017

Pacific-Basin Finance Journal

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“…However, such aggressiveness decreases over time. Tian, Do, Duong and Kalev (2015) examine the relation between individual investor trading and future stock returns in the Australian equity market and show that the net trading individual investors is positively related to future returns. They further show that this association is driven by individual investors who play the role of liquidity providers.…”

Section: Accepted Manuscriptmentioning

confidence: 99%