Title: Impacts of day trading on the intraday pattern of market quality

Authors: Tsung-Yu Hsieh; Ying-Fen Fu; Shih-Ya Ma

Addresses: Department of Finance, MingDao University, Pitou, ChangHua, Taiwan ' Department of Finance, Tainan University of Technology, Yongkang, Tainan, Taiwan ' Department of Finance, MingDao University, Pitou, Chang Hua, Taiwan

Abstract: In Taiwan's stock market, buying first and selling later, as well as selling first and buying later, are permitted, as of January 1, 2014, and June 30, 2014, respectively. This study investigates day trading stocks (pilot stocks) and non-day trading stocks (control stocks) that appear in the Taiwan 50 index and Taiwan mid-cap 100 index during 2013–2014, with the goal of investigating the impact of day trading on the intraday pattern of market quality. With the difference analysis and cross-sectional regression analysis, this study reveals insights into a stock market that is populated mainly by individual investors. Prior research into intraday patterns of market quality rarely focused on individual investors. The current study demonstrates that the effective spread of pilot stocks decreases significantly, and trading depth increases significantly, after the implementation of buying first and selling later options. This liquidity increase phenomenon then is offset when the selling first and buying later option is permitted.

Keywords: market quality; day trading; buying first and selling later; selling first and buying later; intraday pattern.

DOI: 10.1504/IJSTM.2020.10027042

International Journal of Services Technology and Management, 2020 Vol.26 No.1, pp.20 - 37

Received: 11 Nov 2016
Accepted: 22 Aug 2017

Published online: 28 Feb 2020 *

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