Investor Trading Behavior and Performances: Evidence from Taiwan Stock Index Options

41 Pages Posted: 16 Feb 2009 Last revised: 27 May 2010

See all articles by Bing Han

Bing Han

University of Toronto, Rotman School of Management

Yi-Tsung Lee

Peking University - Guanghua School of Management

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking

Date Written: January 1, 2009

Abstract

A unique data set allows us to examine trading behavior and realized returns of all participants in the Taiwan stock index options. On average individual investors lose money and foreign institutions profit from trading options, even when they use the same trading strategy and for the same type of options. Foreign institutions that trade out-of-the-money options most frequently have the highest returns, while individual investors who predominately trade short-term and out-of-the-money options have the worse performance. Option trades initiated via market orders or aggressive limit orders have a higher probability of correctly predicting the underlying stock index movements and higher realized returns. Individual investors' trading performance improves with experience and sophistication. Finally, disposition effect distracts from trading performance.

Keywords: investor behavior, trading performance, index options

Suggested Citation

Han, Bing and Lee, Yi-Tsung and Liu, Yu-Jane, Investor Trading Behavior and Performances: Evidence from Taiwan Stock Index Options (January 1, 2009). McCombs Research Paper Series No. FIN-06-09, Available at SSRN: https://ssrn.com/abstract=1343270

Bing Han (Contact Author)

University of Toronto, Rotman School of Management ( email )

Toronto, Ontario M5S 3E6
Canada
4169460732 (Phone)

Yi-Tsung Lee

Peking University - Guanghua School of Management ( email )

Office 336, Guanghua Building 2
Beijing, Beijing 100871
China
(86-10) 6275 5742 (Phone)
(86-10) 6275 5742 (Fax)

Yu-Jane Liu

National Chengchi University (NCCU) - Department of Finance and Banking ( email )

64, Chih-nan Rd., Sec. 2, Mucha,
Taipei, 116
Taiwan ROC
(882)-2-2939-3091 ext. 81123 (Phone)

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