The Dynamics of Individual and Institutional Trading in the TAIEX Futures Markets

This study investigates the daily dynamic relation between returns and institutional and individual trades in the TAIEX futures market. I find that both past individual and institutional buys and sells have no predictive power for index returns; both individual and institutional trading activities are strongly related to their own past trades, and individual open-buy trading is also influenced by institutional open-buy trading, and vice versa. However, this does not occur in terms of open-sell trading. In the context of close trading, individual prior close-buy leads to institutional close-buy trading; on the contrary, institutional close-sell affects individual close-sell trading. Individual investors are contrarians, but institutional investors are positive feedback traders. Finally, the average return of each contract for individuals is negative but institutions have positive returns, suggesting that individual investors are less-informed. But individual trading activity is more aggressive for their higher proportions of market order and shorter holding time of a round trade.