Impacts of day trading on the intraday pattern of market quality Online publication date: Fri, 28-Feb-2020
by Tsung-Yu Hsieh; Ying-Fen Fu; Shih-Ya Ma
International Journal of Services Technology and Management (IJSTM), Vol. 26, No. 1, 2020
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.
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