Whose trades move stock prices? Evidence from the Taiwan Stock Exchange

Abstract

Analyzing firms listed on the Taiwan Stock Exchange, this research examines whose trades move stock prices. To emphasize the roles of different types of investors, we construct the weighted price contribution (WPC), explore sensitivities of the price contribution to order submission behavior, and then test whether their order aggressiveness and trade size, along with current price contribution, affect future stock returns. Our empirical results reveal several new findings. First, individual traders account for more than 80% of WPC, while institutional investors make up less than 20% of WPC. Second, although mutual funds make up the smallest proportion of WPC, their WPC per order (or per lot) and their order aggressiveness are both the highest among all types of traders. Finally, price contributions generated by large orders of professional institutions are closely related to future stock performance, although they account only for a small proportion of total WPC.