One of the most active areas of research in finance today is on the patterns of foreign portfolio investors' investment and their impact on the performance of emerging markets.
No definite conclusions can yet be drawn as a number of different factors can affect the findings. The inconsistency in findings may be attributed to differences in the countries selected, the period of analysis, data frequency, frequency of trading, the means of accommodating alternative investment opportunities, and the market microstructure.
This paper addresses the behavior and performance of foreign portfolio investors in the Korean stock market from January 1995 to December 2001 and seeks to ascertain whether the abnormal returns are due to better information or investment strategies. The rather long period of analysis makes our study comparable to existing literature and allows us to effectively deal with mean reversion in returns. In order to avoid the shortcomings related to monthly returns, we track the movement of cumulative daily returns over 5, 20, 60, and 240 trading days after trading occurs. At least three consecutive trades in the same direction constitute net buying or net selling in our sample. This accommodates stealth trading hypothesis and avoids temporary portfolio adjustments. We employ the change in shareholdings instead of the so-called Lakonishok's D-ratio as a measure of net buying or net selling in order to control the distortion arising from different numbers of shares outstanding of listed companies. We measure the strength of net buying and net selling separately according to recent findings in the literature, and we check the robustness of our empirical results from simple returns using market-adjusted returns.
외국인투자자의 주식투자행태와 성과분석(Foreign portfolio investor's investment patterns and performance in Korea)
|Series Title; No||금융조사보고서 / 2005-06|
|Subject Country||South Korea(Asia and Pacific)|
|Subject||Economy < Financial Policy|
|Holding||한국금융연구원; KDI 국제정책대학원|