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Do foreign investors destabilize stock markets? The Korean experience in 1997

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  • Do foreign investors destabilize stock markets? The Korean experience in 1997
  • Choe, Hyuk; Kho, Bong-Chan; Stulz, Rene M.
  • National Bureau of Economic Research


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Title Do foreign investors destabilize stock markets? The Korean experience in 1997
Similar Titles
Material Type Reports
Author(English)

Choe, Hyuk; Kho, Bong-Chan; Stulz, Rene M.

Publisher

Cambridge:National Bureau of Economic Research

Date 1998-07
Series Title; No NBER Working Paper Series / 6661
Pages 40
Subject Country South Korea(Asia and Pacific)
Language English
File Type Link
Original Format pdf
Subject Economy < Financial Policy
Holding National Bureau of Economic Research

Abstract

This paper examines the impact of foreign investors on stock returns in Korea from November 30, 1996, to the end of 1997 using trade data. We find strong evidence of positive feedback trading and herding by foreign investors before the period of Korea's economic crisis during the last three months of 1997. The evidence of herding becomes weaker during the crisis period and positive feedback trading by foreign investors disappears. We find no evidence that trades by foreign investors had a destabilizing effect on Korea's stock market over our sample period. In particular, the market adjusted quickly and efficiently to large sales by foreign investors and these sales were not followed by negative abnormal returns amplifying their impact.