Please use this identifier to cite or link to this item: https://doi.org/10.1016/j.pacfin.2007.06.004
Title: Interaction of investor trades and market volatility: Evidence from the Tokyo Stock Exchange
Authors: Bae, K.-H.
Yamada, T. 
Ito, K.
Keywords: Contrarian traders
Market liquidity
Momentum traders
Trading volume
Volatility
Issue Date: 2008
Source: Bae, K.-H.,Yamada, T.,Ito, K. (2008). Interaction of investor trades and market volatility: Evidence from the Tokyo Stock Exchange. Pacific Basin Finance Journal 16 (4) : 370-388. ScholarBank@NUS Repository. https://doi.org/10.1016/j.pacfin.2007.06.004
Abstract: This paper examines the relation between market volatility and investor trades by identifying who supplies and demands market liquidity on the Tokyo Stock Exchange. Because the different trading patterns of various investor types such as individual investors, institutional investors, and foreign investors affect market liquidity differently, we find that market volatility fluctuates significantly depending on which investor types participate in trade. We show that market volatility increases by more than 50% from the average level when there are greater buy trades by momentum investors that demand liquidity and there are less sell trades by contrarian (or profit-taking) investors that supply liquidity. On the other hand, volatility dampens by more than 57% when there are greater sell trades by profit-taking investors, mostly by domestic investors, while there are less momentum buy trades. © 2007 Elsevier B.V. All rights reserved.
Source Title: Pacific Basin Finance Journal
URI: http://scholarbank.nus.edu.sg/handle/10635/44435
ISSN: 0927538X
DOI: 10.1016/j.pacfin.2007.06.004
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