Impact Of Foreign Institutional Investors Research Articles

The price impact of foreign institutional herding on large-size stocks in the Taiwan stock market

This study constructs a panel threshold regression model to explore the price impact of foreign institutional herding of firms listed in the Taiwan Stock Exchange during January 2000 to June 2008. Our panel threshold model is constructed to explore the price impact of foreign institutional investors’ herding in the Taiwan stock market after controlling the firm size. By examining the presence of threshold effect, this study analyzes whether firm size would obviously and asymmetrically affect the explanation for the effect of changes in foreign investors’ share ownership on abnormal returns. The empirical results of this study find the significant evidence of threshold effect which divides the stocks into large-size and small-size firms. It is found that foreign institutional investors in the Taiwan stock market tend to hold large-size stocks listed in the Taiwan Stock Exchange. There is an apparent increase in the subsequent abnormal returns on large-size stocks bought in bulk by foreign investors. The signals of changes in share ownership initiated by foreign institutional investors would reveal further information for improving the performance of asset reallocation decisions in Taiwan. The panel threshold model constructed in this paper well describes the price impact of institutional herding yet eschews the possibly subjective data snooping issue resulting from the two-pass sorting method as proposed by previous related researches.

The impact of foreign institutional herding on low- turnover stocks in the Taiwan stock market

This study uses panel threshold regression to analyze the impact of institutional herding behavior on abnormal stock returns in Taiwan. Our panel threshold model is constructed to explore whether or not and how the price impact of foreign institutional investors’ herding is modulated by stock turnover in the Taiwan stock market. The empirical results of this study find significant evidence of a threshold effect which divides the stocks into lower-turnover and higher-turnover firms. It is found that there is an apparent increase in the subsequent abnormal returns on lower-turnover stocks bought in bulk by foreign investors. To be specific, if other investors follow foreign investors by purchasing the stocks of lower-turnover firms on the TAIEX belonging to the Electronics and Textiles sectors and hold them for one month, the subsequent performance persistence is significantly better. The signals for combining the price impact of changes in share ownership by foreign institutional investors with stock liquidity reveal further information for improving the performance of asset reallocation decisions in Taiwan.

Testing Semi-Strong Form of Efficient Market Hypothesis in Relation to the Impact of Foreign Institutional Investors’ (FII’s) Investments on Indian Capital Market

Testing Semi-Strong Form of Efficient Market Hypothesis in Relation to the Impact of Foreign Institutional Investors’ (FII’s) Investments on Indian Capital Market