Stock-return volatility and daily equity trading by investor groups in Korea

Umutlu, Mehmet; Shackleton, Mark B.

Abstract

We examine the short-run relationship between stock-return volatility and daily equity trading by several investor groups in the Korean Stock Exchange. We also investigate whether trade characteristics and trading styles can explain the potential distinct volatility effects of these investor groups. For large stocks, we find that whether a trade is a purchase or a sale and whether it is a contrarian or a momentum trade does not play a role in the relation between volatility and trading. It is the trading of informed institutional investors against non-informed individual investors that drives volatility and produces a negative volatility effect. We further show that net foreign trading has an increasing impact on volatility though it is not always significant. Our results are robust to alternative measures of volatility and obtained after controlling for volatility persistency, total volume and lagged stock returns.

Citation

Umutlu, M., & Shackleton, M. B. (2015). Stock-return volatility and daily equity trading by investor groups in Korea. Pacific-Basin Finance Journal, 34, 43-70. https://doi.org/10.1016/j.pacfin.2015.05.003

• Journal Article Type: Article
• Acceptance Date: May 15, 2015
• Online Publication Date: May 23, 2015
• Publication Date: 2015-09
• Deposit Date: Jan 29, 2023
• Journal: Pacific-Basin Finance Journal
• Print ISSN: 0927-538X
• Publisher: Elsevier
• Peer Reviewed: Peer Reviewed
• Volume: 34
• Pages: 43-70
• DOI: https://doi.org/10.1016/j.pacfin.2015.05.003
• Keywords: Stock-return volatility, Trading, Investor groups