Why and how do foreign institutional investors outperform domestic investors in futures trading: Evidence from Taiwan

A unique data set containing all transactions from the Taiwan Futures Exchange allows us to dissect the long‐lasting outperformance of foreign institutional investors in this emerging market. We show that foreign institutional investors comprehensively outperform domestic investors in trade directio...

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Published in:The journal of futures markets 2019-03, Vol.39 (3), p.279-301
Main Authors: Chuang, Yi‐Wei, Lin, Yu‐Fen, Weng, Pei‐Shih
Format: Article
Language:English
Subjects:
Aggressiveness
foreign institutional investors
Futures
futures market
information advantage
Institutional investments
International finance
Investors
order aggressiveness
Profits
Stock offerings
Trading
trading performance
Transactions
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description A unique data set containing all transactions from the Taiwan Futures Exchange allows us to dissect the long‐lasting outperformance of foreign institutional investors in this emerging market. We show that foreign institutional investors comprehensively outperform domestic investors in trade directions, submission types, trading counterparties, order sizes, and order aggressiveness. Although submitting passive orders increases the trading profits of each investor group significantly, particularly for foreign institutions, the most passive domestic trades still lose to the most aggressive foreign institutional trades. We suggest that information advantage plays a more important role than order submission strategy in foreign institutional investors’ superior performance.
doi_str_mv 10.1002/fut.21975
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source International Bibliography of the Social Sciences (IBSS); Wiley:Jisc Collections:Wiley Read and Publish Open Access 2024-2025 (reading list); Business Source Ultimate
subjects Aggressiveness
foreign institutional investors
Futures
futures market
information advantage
Institutional investments
International finance
Investors
order aggressiveness
Profits
Stock offerings
Trading
trading performance
Transactions
title Why and how do foreign institutional investors outperform domestic investors in futures trading: Evidence from Taiwan
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