;This thesis examines how margin trading affects the returns on two Taiwanese listed exchange-traded funds, namely the Yuanta/P-shares Taiwan Top 50 ETF (stock code 0050) and Yuanta Daily Taiwan 50 Bear -1X ETF50 (stock code TF00632R). The empirical results indicate that retail investors, normally treated as noise traders, overreact in the sense that their short-selling (long-buying) trading is positively (negatively) related to subsequent ETF returns. By contrast, institutional investors’ short-selling trading is negatively related to subsequent ETF returns, suggesting that institutional investors are rational, smart traders.
