Does stealth trading behavior and price manipulation reveal in the institutional investors in the Taiwan stock market ?

• Main Authors: Ka-Te Li, 李卡特
• Other Authors: Yang-Cheng Lu
• Format: Others
• Language: en_US
• Published: 2009
• Online Access: http://ndltd.ncl.edu.tw/handle/354em2

碩士 === 銘傳大學 === 財務金融學系碩士班 === 97 === In line with the stealth trading hypothesis advanced by Barclay and Warner (1993) and Chakravarty (2001), this study extends the test of fragmentation of trades for different types of institutional investors in the Taiwan stock market – a pure order-driven emerging market. The trade-size clustering is investigated through a longitudinal analysis of the tick data for Taiwan’s equity market from 1998/1/2 to 2006/12/31. To mitigate the research biases resulting from the deregulation of foreigners’ holdings during our study period, the sample data is also divided into three periods according to the investment caps for foreign investors in Taiwan for performing these tests (30%: 1998/1/2-1999/3/31, 50%: 1999/4/1-2000/12/31, no limit: 2001/1/2-2006/12/31). We compare the degree of trade fragmentation of different institutional investors with individual investors to confirm the stealth trading behavior inherent in institutional investors. The trade-size clustering for different institutional investors is also tested to prove the mutuality of stealth trading among different identities of institutional investors. Whatever identity the investor has, most of the cumulative price changes are affected by small and medium-sized trades. Small cumulative price changes are contributed by large-size trades. To corroborate the robustness of our results, the sample data are also divided into small, medium and large sizes. The empirical results further prove the existence of stealth trading behavior and the price manipulation hypothesis for institutional investors in Taiwan. Our finding agrees with the price manipulation results of China’s stock market proposed by Cai, Cai and Keasey (2006). However the small-size stealth trading behavior is quite different from the results proposed by Cai, Cai and Keasey (2006) in regard to the large block trades results. The results presented in this paper may have implications for the regulatory oversigh