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Big Fish in Small Ponds : the Positive Feedback Trading and Price Impact of Foreign Investors in Asian Emerging Equity Markets
| Content Provider | Semantic Scholar |
|---|---|
| Author | Richards, Anthony J. |
| Copyright Year | 2003 |
| Abstract | This paper analyses daily data for the net purchases by foreign investors in six Asian emerging equity markets over 1999-2002. There are two major new findings. First, foreigners’ net purchases demonstrate strong evidence of positive-feedback trading with respect to recent global, as well as domestic, equity returns. Second, the estimated price impacts associated with the trading of foreigners is much larger than earlier estimates. The pattern and speed of the positive-feedback trading suggests that it is due either to foreigners extracting information from recent returns or to behavioural factors, rather than to a portfolio-rebalancing model. The price impact of foreigners’ trading appears to primarily reflect permanent price pressures from demand shocks, but surprisingly appears no larger than related US estimates of price impacts. Overall, the results suggest that foreign investors and external conditions have a more significant impact on emerging markets than implied by previous work. |
| File Format | PDF HTM / HTML |
| Alternate Webpage(s) | http://faculty.georgetown.edu/evansm1/New%20Micro/Richards.pdf |
| Language | English |
| Access Restriction | Open |
| Content Type | Text |
| Resource Type | Article |
