Institutional Investor Sentiment and Market Returns: Evidence from the Taiwan Futures Market

Ralph Yang-Cheng Lu (), Hsiu-Chuan Lee () and Peter Chiu ()
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Ralph Yang-Cheng Lu: Department of Finance at Ming-Chuan University , Taipei, Taiwan (ROC).
Hsiu-Chuan Lee: Department of Finance at Ming-Chuan University , Taipei, Taiwan (ROC). Corresponding author.
Peter Chiu: Taiwan Futures Exchange, Taipei, Taiwan.

Journal for Economic Forecasting, 2014, issue 4, 140-167

Abstract: This study explores the dynamic relationship between the sentiment of institutional investors and market returns in the futures market. Using data from the Taiwan futures market, the empirical results show that the dynamic relationship between the sentiment of foreign institutional investors and the futures returns is much stronger than that of the sentiment of domestic institutional investors and the futures returns. Our empirical results also display that the sentiment of foreign institutional investors Granger-causes the sentiment of domestic institutional investors, but not vice versa. Finally, the sentiment of foreign institutional investors has a larger effect on subsequent market returns and market states than that of the sentiment of domestic institutional investors. Overall, our empirical results suggest that the relationship among the institutional investor sentiment, market returns, as well as market conditions in the Taiwan futures market is dominated by the sentiment of foreign institutional investors.

Keywords: Institutional Investor Sentiment; Foreign Investors; Domestic Investors; Futures Returns; Market States. (search for similar items in EconPapers)
JEL-codes: G12 G14 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (2)

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