The role of institutional investors in market volatility during the subprime mortgage crisis

Tseng-Chan Tseng and Hung-Cheng Lai

Applied Financial Economics, 2014, vol. 24, issue 23, 1529-1536

Abstract: In this study, we obtain intraday data on the Taiwan Stock Exchange Capitalization Weighted Stock Index and apply the range-based estimation method to measure intraday high-low prices, whilst also incorporating the variable of net trading volume of institutional investors into the heterogeneous autoregressive model of realized volatility (RV). Our findings demonstrate that the trading behaviour of institutional investors does have a significant impact on future RV whilst also suggesting that institutional investors play a stabilizing role in the Taiwan stock market. The empirical results also show that institutional investors' net selling caused more volatility in the Taiwan stock market during the subprime mortgage crisis in the United States in 2007, indicating that institutional investors tend to sell more actively than individuals when the market drops sharply. We also demonstrate that the modified model enhances volatility forecasting performance, thereby indicating that the modified model has more accurate predictive ability than the benchmark model.

Date: 2014
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://hdl.handle.net/10.1080/09603107.2014.925075 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:taf:apfiec:v:24:y:2014:i:23:p:1529-1536

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RAFE20

DOI: 10.1080/09603107.2014.925075

Access Statistics for this article

Applied Financial Economics is currently edited by Anita Phillips

More articles in Applied Financial Economics from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().