This article examines the market timing ability of three major types of investors, including foreign institutional investors, domestic institutional investors and proprietary investors, in the Taiwan index futures markets over November 25, 2009 - December 28, 2012, using the daily long and short trading net positions and net open interest. We investigate traders’ market-timing ability, and also study how traders’ performance varies with trade size.
The results show that the foreign institutional investors have the best performance for their daily long and short trading positions and net open interest, and their large transactions on sell side earn positive returns, On the other hand, domestic institutional investors have the worst performance, as, their net open interest and large transactions on sell side both, exhibit negative returns. Our results imply that foreign institutional investors have the superior forecasting ability in Taiwan futures markets. On the contrary, domestic institutional investors have inferior forecasting ability in Taiwan futures market.
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