Time-Varying Liquidity Provision

• Main Authors: Chun-Yu Chou, 周俊宇
• Other Authors: William T. Lin
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/80006758851335764051

碩士 === 淡江大學 === 財務金融學系碩士班 === 101 === The trading volume of Taiwan stock market changes over time, but we can’t actually explain the difference between the liquidity provided by different types of investors, therefore, in this study we observe the trading behavior of the stock market traders, and try to analyze the reason why different types of investors does not provide the same liquidity. We separate the investors in to five groups and categorize the orders into two types, aggressive and passive, then investigate the impact of market and corporate types on the liquidity provided by investors. The evidence shows that all kinds of investors significantly provide market liquidity. Small individual traders would prefer trading stock with high turnover rate and low book-market ratio. On the other hand, big individual traders and institutional investors would rather trade the stock with large-cap and high turnover rate, and we also find that dealer is the main liquidity provider of small-cap stock. Market and the liquidity provided by small individual traders are positively correlated, that is differ from the big individual traders. However, market influence the institutional investor in the same way, they provide higher liquidity when orders imbalance, price volatility and information asymmetry go higher, but provide less liquidity when market noise is high. Finally, we observe information asymmetry proxies and market noise proxies. We conclude that big individual investors are liquidity traders, while aggressive small individual investors are noise traders, and institutional investors are informed traders.