Abstract
AbstractThis study investigates trading behavior and investment performance of foreign investors in 60 large‐size firms listed on the Taiwan Stock Exchange. Strong evidence is found that foreign investors employ momentum strategies of buying past winners and selling past losers and favor large‐size, high book‐to‐market, and high‐tech stocks, while no evidence is found that foreign investors herd on market consensus. Findings show that foreign investors are short‐term superior performers but long‐term inferior performers. The short‐term superior performance appears to be driven partially by price momentum of winners portfolios rather than by risk taking. After controlling for firm size, share turnover, and industry, foreigners' short‐term performance in large‐size, high‐turnover, and high‐tech stocks is better than it is in small‐size, low‐turnover, and non‐high‐tech stocks.
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