Institutional Trading Strategies and Contagion around the Financial Crisis

34 Pages Posted: 10 Sep 2012

See all articles by V. Ravi Anshuman

V. Ravi Anshuman

Indian Institute of Management Bangalore

Rajesh Chakrabarti

O. P. Jindal Global University

Kiran Kumar

University of Mumbai - National Institute of Securities Markets

Date Written: September 5, 2012

Abstract

We examine the impact of the recent financial crisis on institutional trading strategies in the Indian equity markets. We find that foreign institutional investors (FIIs) act as short-term momentum traders or positive feedback traders who demand liquidity. Domestic institutional investors (DIIs) act as liquidity suppliers. Both FII and DII order flow exhibit strong persistence and are negatively related. During the crisis period, FIIs are net sellers and reduce their reliance on positive feedback trading strategies but DIIs absorb this increase in liquidity demand by acting as contrarian traders. We also find that, during the crisis period, FII trading provides an additional channel to transmit contrarian (good) news from the U.S. markets to the Indian equity markets.

Keywords: Foreign Investors, Emerging Markets, Momentum, Feedback Trading, Crisis, Contagion

Suggested Citation

Anshuman, V. Ravi and Chakrabarti, Rajesh and Kumar, Kiran, Institutional Trading Strategies and Contagion around the Financial Crisis (September 5, 2012). Available at SSRN: https://ssrn.com/abstract=2143803 or http://dx.doi.org/10.2139/ssrn.2143803

V. Ravi Anshuman (Contact Author)

Indian Institute of Management Bangalore ( email )

Bannerghatta Rd.
Department of Finance
Bangalore, Karnataka

Rajesh Chakrabarti

O. P. Jindal Global University ( email )

Sonepat Narela road
Sonepat
Sonepat, Haryana 131001
India

Kiran Kumar

University of Mumbai - National Institute of Securities Markets ( email )

Plot No. 82, Sector - 17
Vashi, Navi Mumbai, 400 705
India

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
101
Abstract Views
889
rank
324,175
PlumX Metrics