The Interrelationships among Returns, Institutional Investorsf Buy-Sell Difference and Trading Strategy in Taiwanfs OTC Market

This paper examines the interrelationships among stock returns, institutional investorsf buy-sell difference and trading strategy in Taiwanfs OTC (over-the-counter) market. The three key institutional investors are: foreign institutional investors [a combination of QFII (qualified foreign institutional investors) and foreign mutual funds], domestic mutual funds, and security dealers. Applying the vector autoregressive model (VAR) for the data available period (July 4, 1996~Dec. 18, 1999), the findings indicate that stock returns are not influenced by institutional investorsf buy-sell difference. It appears foreign institutional investorsf trading enjoys a leading position in influencing security dealers, which subsequently affect domestic mutual funds. In essence, the trading strategy adopted by foreign institutional investors is more independent. Key words:Institutional investors, Vector autoregressive