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Findings in the Area of Derivatives and Hedge Funds Reported from Central University (Have Domestic Institutional Investors Become as Market Savvy as...

September 2, 2014



Findings in the Area of Derivatives and Hedge Funds Reported from Central University (Have Domestic Institutional Investors Become as Market Savvy as Foreign Investors? Evidence from the Taiwan Options Market)

By a News Reporter-Staff News Editor at China Weekly News -- Fresh data on Derivatives and Hedge Funds are presented in a new report. According to news reporting out of Beijing, People's Republic of China, by VerticalNews editors, research stated, "Previous empirical studies indicate that informed investors can predict future index returns. In emerging markets like Taiwan, previous research documents that only foreign institutional investors can predict next-day index returns of the host country."

Our news journalists obtained a quote from the research from Central University, "Unlike previous empirical results, we find that in more recent periods, the put/call ratio of domestic institutional investors shows significant predictive power for daily TAIEX returns, except during the 2008 financial crisis. In contrast, the put/call ratio of foreign institutional investors has weak predictability for the TAIEX returns prior to the severe global market downturn in late 2008. We further explore the intraday lead-lag relationship among index returns and put/call ratios of different trader types. Our results show that only the trading of domestic institutional investors possesses predictive capability for intraday TAIEX returns prior to the 2008 financial crisis."

According to the news editors, the research concluded: "During the 2008 financial crisis, intraday TAIEX returns significantly lead option trades of foreign and domestic institutional investors, suggesting that although institutional investors closely watch and react to market fluctuations, they are unable to predict market movement beforehand."

For more information on this research see: Have Domestic Institutional Investors Become as Market Savvy as Foreign Investors? Evidence from the Taiwan Options Market. Journal of Derivatives, 2014;21(4):63-81. Journal of Derivatives can be contacted at: Inst Investor Inc, 225 Park Ave South, New York, NY 10003, USA. (World Scientific Publishing - www.worldscientific.com/; Journal of Derivatives - www.worldscinet.com/jda/jda.shtml)

Our news journalists report that additional information may be obtained by contacting W.C. Chiu, Chinese Academy Finance & Dev, Cent Univ Finance & Econ, Beijing, People's Republic of China. Additional authors for this research include H.H. Lee and C.W. Wang.

Keywords for this news article include: Taiwan, Beijing, Finance and Investment, People's Republic of China, Derivatives and Hedge Funds

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Source: China Weekly News


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