Abstract
This paper investigates the impact and behavior of foreign equity investment on the price of the nine largest KOSPI (Korea Composite Stock Price Index) enterprises and Samsung Electronics preference stocks in terms of market capitalization during the global financial crisis (2 January 2007 to 30 December 2008). The empirical results indicate that foreign investors show strong, positive feedback trading behavior with regard to the stock price of Samsung Electronics, which is the largest KOSPI enterprise in terms of market capitalization. We also found evidence that the behavior of foreign investors significantly increased volatility in the stock returns of the two largest Korean conglomerates (Samsung Electronics and Hyundai Motors), which account for approximately 25 percent of total KOSPI market capitalization.
Highlights
There is considerable debate over whether foreign investors stabilize or destabilize domestic stock markets
Foreign investors are often blamed for difficulties in the Korean economy, such as the collapse of both the Won and the stock market
Most research regarding the behavior of each investor group in the Korean stock market took place during the Asian financial crisis period, and not the global financial crisis
Summary
There is considerable debate over whether foreign investors stabilize or destabilize domestic stock markets. Most research regarding the behavior of each investor group in the Korean stock market took place during the Asian financial crisis period, and not the global financial crisis. We decided to investigate behavior at the firm level (the price of the nine largest KOSPI enterprises and Samsung Electronics preference stocks) during the recent global financial crisis period from 2 January 2007 through 30 December 2008. This paper suggests that researchers, policy officials, and market participants should find it useful to keep both approaches in Sustainability 2019, 11, 1576 their tool kits for analysis. 3 the literature is reviewed note any destabilization the level domestic stock positive feedback trading and destabilization of thetoKorean stock market at theinfirm and not at market caused by foreign investors. Section we investigate whether foreign investors engage in the state or industry level. Positive feedback trading and destabilization of the Korean stock market at the firm level and not at
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