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Identifying the interaction between stock market returns and trading flows of investor types: Looking into the day using daily data

Numan Ülkü and Enzo Weber

Journal of Banking & Finance, 2013, vol. 37, issue 8, 2733-2749

Abstract: This paper introduces a new method for identifying the simultaneity between returns and trading flows. The proposed method enables us to identify the intraday interaction using daily data, and provides measures of the information content of trading flows, and their instantaneous response to public information and information revealed by market prices. Applying this method to daily data on investor types from the Korea Stock Exchange, we find significant intraday bi-directional interaction between flows and returns and their latent common drivers, altering some of the results of the previous literature based on Cholesky assumptions. Thus, we obtain a number of new insights concerning the behavior of investor types.

Keywords: The interaction between trading flows and returns; Identification; Structural conditional correlation; Investor types; Feedback trading behavior (search for similar items in EconPapers)
JEL-codes: C32 G11 G14 G15 (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:8:p:2733-2749

DOI: 10.1016/j.jbankfin.2013.03.021

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