Big Fish in Small Ponds: the Trading Behaviour and Price Impact of Foreign Investors in Asian Emerging Equity Markets
نویسنده
چکیده
This paper analyses data for the aggregate daily trading of all foreign investors in six Asian emerging equity markets and provides two new findings. First, foreigners’ flows into several markets show positive-feedback trading with respect to global, as well as domestic, equity returns. In particular, foreigners tend to be buyers in these markets on the day after rises in these markets or in US markets. The nature of this trading suggests it is due to behavioural factors or foreigners extracting information from recent returns, rather than portfolio-rebalancing effects. Second, the price impacts associated with foreigners’ trading are much larger than earlier estimates. The results suggest that foreign investors and external conditions have a larger effect on emerging markets than implied by previous work. JEL Classification Numbers: F30, G11, G12, G15
منابع مشابه
Big Fish in Small Ponds: the Momentum Investing and Price Impact of Foreign Investors in Asian Emerging Equity Markets
Data for the daily net purchases by foreigners in six Asian emerging equity markets over 1999-2001 provide strong evidence of positive-feedback trading with respect to recent domestic, U.S., and regional equity returns. There is also strong contemporaneous correlation between equity returns and net inflows, which appears to primarily reflect price pressures from demand shocks. The estimated pri...
متن کاملMacroeconomic, International Linkage and Effects of External Shocks in Southeast Asian Emerging Economies
This study is an attempt to examine the effects of external shocks on macroeconomic variables in selective small open emerging economies in Southeast Asia. A quarterly Global Vector Autoregressive (GVAR) model, including 33 countries, was used throughout 1979–2013. The empirical results showed that the target countries were affected by external shocks, especially the shocks in the U.S, Euro are...
متن کاملDoes Foreign Trading Destabilize Local Stock Markets?
This paper investigates the impact of foreign trading on short term volatility and on the correlation of local with world returns. I find that trading in general is associated with higher volatility, whether it is trading by foreigners or domestic investors. However, controlling for total trading volume, foreign trading has no impact on volatility in developed countries, and only a marginally s...
متن کاملImpact of the Selected Domestic and Foreign Markets Returns on Stock Price in Iran
One of the features of a financial market, the stock market, in particular, is the market sentiment which is the overall attitude of investors toward a particular security or financial market. Investors always seek to create a portfolio with minimum risk while maintaining the expected return level. Therefore, perceiving the relationship between the stock returns and markets returns can be helpf...
متن کاملEconometrics and Metaheuristic Optimization Approaches to International Portfolio Diversification
Using advanced techniques of econometrics and a metaheuristic optimization approach, this study attempts to evaluate the potential advantages of international portfolio diversification for East Asian international investors when investing in the Middle Eastern emerging markets. Overall, the results of both econometric and the metaheuristic optimization methods are supporting each other. Finding...
متن کامل