Topic: Do Institutional Trades Stabilize the Retail Investor Dominated Market?
Presenter：Steven Wang, Associate Professor，School of Accounting and Finance, the Hong Kong Polytechnic University
Time: December 7, 2007（Friday）3：00—4：30 PM
Venue: Room 513, Jiageng Bld 2
Chair： Yujun Wu, assistant professor in finance, IFAS
Abstract：
Using a unique database, we investigate whether and how institutional trading can stabilize or destabilize stock prices. We document a significant negative relation between price volatility and institutional trading in the individual investor dominated emerging Chinese market. This negative relation is more pronounced for unexpected institutional buy-sell imbalance and buy. Second, we find that institutional investors do not significantly increase purchases in up days and sells in down days, except for the largest stocks. Institutions time volatility and trade less when volatility is high. Third, institutions herd in their trading but do not systematically engage in positive-feedback trading; they buy current winners but do not sell current losers, and systematically sell past losers but do not systematically buy past winners. Finally, institutional trading is persistent and more strongly related to lag institutional demand than lag returns. Overall, trading of the better-informed and more rational institutional investors tends to stabilize stock prices in the retail investor dominated Chinese market.
Presenter Introduction：
Dr Steven Wang got his bachelor and master degree in statistics in Renmin University of China and his PhD. degree in Finance and Management Science in Queen’s University in Canada. His teaching areas include Corporate Finance, International Finance and Investment and Applied Econometrics. His research interests include Corporate Finance, International Financial Markets, Financial Econometrics and Derivative Securities.
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