||This study investigates the long-term and short-term dynamic relationships among the variables of stock returns and institutional investors' buy-sell difference in Taiwan's stock market for the sample periods from Jan., 2000 through May, 2009. Some econometrical methodologies are used in this study, such as unit test, vector autoregressive model, cointegration test, vector error correction model, impulse response function. |
The major empirical results are shown as follows:
1. Cointegration test
For the sample periods, one long-term equilibrium relationship is found from the Johansen's cointegration test, significantly with 5% confidence level between stock year returns and the buy-sell difference for the foreign investment institutions, the domestic investment institutions, and the dealers. The long-term equilibrium relationship is Ry=1.65*QFII+4.28*FUND+35.22*DLR-1142.6.
2. VECM estimation
(1)With the vector error correction model (VECM) being applied to the sample periods, the findings indicate that the changes of stock returns are not influenced among the short-term dynamic relationships by the changes of institutional investors' buy-sell difference, but only affected by one-period-lag of itself.
(2) Among the short-term dynamic relationships, the changes of foreign investment institutions' buy-sell difference are affected by one-period-lag of institutional investors that positively affected by one-period-lag of the dealers, and inversely affected by one-period-lag of itself and one-period-lag of the domestic investment institutions. However, it is positively affected by one-period-lag of long-term equilibrium, which indicates foreign investment institutions follow positive feedback trading strategies.
(3)The changes of the domestic investment institutions' buy-sell difference are only affected by one-period-lag of itself among the short-term dynamic relationships.
(4)The changes of the dealers' buy-sell difference are positively affected among the short-term dynamic relationships by one-period-lag of the foreign investment institutions. As for the long-term relationships, it is affected by one-period-lag of long-term equilibrium, which also indicates the dealers follow positive feedback trading strategies.
(5)The foreign investment institutions and the dealers have the mutual feedback relationship.