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|Title: ||Three essays on microstructure and institutional investors of Taiwan financial markets|
|Other Titles: ||三篇與臺灣金融市場微結構及機構投資人相關的論文|
|Authors: ||張志宏;Chang, Chi-hung|
|Keywords: ||磁吸效應;委託簿;期貨與選擇權市場;造市者與機構投資人;price limit;magnet effect;limit order book;futures and options markets;market makers and institutional traders|
|Issue Date: ||2010-01-11 00:59:05 (UTC+8)|
Recently, institutional investor plays more and more important a role on Taiwan financial markets. On the stock market, the ratios of share holding and volume of institutional investors are increasing. On the option market, the role of market maker played by institutional investor is indispensable. On the future market, institutional investor also plays an important role. This dissertation discusses the microstructure issues of institutional investor, especially the topics of the role of institutional investors on Taiwan financial markets.
This dissertation consists of three essays: The title of part 1 is “Are Magnet Effects Caused by Uninformed Traders? Evidence from Taiwan Stock Exchange.” Using transactions and quotes data, significant magnet effects of price limit rules in Taiwan Stock Exchange (TSEC) is confirmed. When limit hits are imminent, trading activities intensify with higher volumes and volatility. More importantly, my transactions data allows me to examine the roles of institutions and individuals in the magnet effects on the TSEC. There is strong evidence that the magnet effects are caused by uninformed individuals, whereas if trade volumes are dominated by institutions, no significant magnet effect is found. The policy implication is that transparency and institutional participation can help to remove magnet effects.
The title of part 2 is “The Role of Market Makers on the Taiwan Options Markets.” In this essay, I investigate the role that market makers play on the TXO (TAIEX Option) market. The evidence shows that market makers play more important a role as sellers on the TXO market, especially on the put market. The spread has been narrowed down on
the put market when market makers participant on the best bid/ask sides. However, no evidence shows similar phenomenon on the call market. On the other hand, the majority of depth on both buy-side and sell-side is offered by non-market makers. I conclude that market makers of TXO play the role as liquidity demanders more than the role as liquidity providers.
The title of part 3 is “Liquidity Provision of Futures Markets.” In this essay, I investigate the trading behaviors of individual and institutional traders on the TAIEX (TX) stock index futures market. Evidence shows that the depth supply at multiple prices is different to that of stocks markets. Depth displays a normal demand/supply curve. That is, depth is monotonically increasing on the buy (sell) side as bid (ask) price decreases (increases). Besides, I find that institutional traders offer liquidity when the spread is wide. Finally, the evidence shows that the market order percentage of both individual and institutional traders is extremely higher in the last interval of trading day. I conjecture it may be due to the difference in owning private information between stocks markets and stock index markets.
|Appears in Collections:||[Graduate Institute & Department of Banking and Finance] Thesis|
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