Abstract
This paper studies the effect of herding by foreign investors on stock returns in the Korean market. We conduct both pre and post-liberalization analyses and utilize a three-stage least squares analysis in order to control for the simultaneous relationship. We find evidence of a significant impact of foreign investor herding on stock returns in addition to intra-year positive feedback trading by foreign investors. However, changes in domestic institutional ownership do not have any significant effect on stock returns. In addition, foreign investors tend to buy/sell shares that domestic institutions sell/buy in the herding year.
Original language | English |
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Pages (from-to) | 698-710 |
Number of pages | 13 |
Journal | International Review of Economics and Finance |
Volume | 19 |
Issue number | 4 |
DOIs | |
State | Published - Oct 2010 |
Keywords
- Emerging markets
- Feedback trading
- Foreign investment
- Herding