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

Umutlu, Mehmet; Shackleton, Mark B.

Authors

Mark B. Shackleton



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.

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