Abstract
The day trading in Taiwanese stock market expands considerably at the beginning of 2016, which increases the transactions of stocks consequently and sparks our interest in exploring the issue of day trading. In this study, we use the data of Taiwan Stock Exchange listed firms to investigate whether the day trading volume over total trading volume (hereinafter referred to as the day trading ratio) and the turnover ratio enhanced by the increase of day trading volume would affect the shareholding and trading behaviors of diverse institutional and individual investors. Unquestionably, we bring out several impressive findings. First, foreign institutional investors would not prefer holding or trading the stocks with high day trading ratios, whereas individual investors would prefer holding these kinds of stocks. We infer that this finding might result from the fundamental and the speculative concerns of these various investors. Second, domestic institutional investors and security dealers would prefer trading the stocks with high turnover ratios, but foreign institutional investors still lack of interest in trading these stocks, implying that the investment strategies would be dissimilar among various institutional investors. Since foreign institutional investors are regarded as the successful institutional investors in Taiwan, we argue that our revealed results may help market participants trace the behaviors of diverse investors, especially the foreign institutional investors, after day trading relaxation in Taiwan.
Highlights
From the perspective of psychology, there is an environment-behavior theory that discusses the relationship between environmental change and behavior reaction
We explore whether the trading and the shareholding behaviors of diverse investors, including foreign institutional investors (FIIs), domestic institutional investors (DIIs), SDs, and individual investors, would be affected by day trading ratio and turnover ratio after incorporating board structure, financial statements, and other controlling variables
Aside from the exploration of shareholding behaviors of diverse investors, we examine whether trading behaviors of diverse investors would be impacted by the day trading ratio as well as the turnover ratio and further compare the similarities as well as differences of these two behaviors among diverse investors
Summary
From the perspective of psychology, there is an environment-behavior theory that discusses the relationship between environmental change and behavior reaction. The environment is defined as the self-report measures used to assess subjective reactions to that environment [1] and people evaluate their behavior with regard to the environment [2]. The intention is the best predictor of environmental behavior, whereas personal norms, attitudes, and perceived behavioral control have significant influences on behavioral intention [3].
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