 How does FX liquidity affect the relationship between foreign ownership and stock liquidity?Jieun Lee and Doojin Ryu Emerging Markets Review, 2019, vol. 39, issue C, 101-119 Abstract: This study investigates the roles foreign investors play in a representative emerging market, focusing on the relationship between foreign ownership and stock market liquidity as well as this relationship's response to foreign exchange (FX) liquidity. Our analyses yield three main results. First, the bid–ask spread and price impact of stock trades decrease along with foreign ownership, supporting the view that foreign investors tend to improve stock liquidity. Second, foreign ownership decreases along with a decline in FX liquidity, suggesting that foreign investors care about FX liquidity when determining their stock holdings. Third, stock liquidity increases continuously along with foreign ownership as FX liquidity decreases. Overall, this study's evidence indicates that foreign investors, as liquidity providers, can play a positive role in an emerging economy even when FX liquidity declines. Keywords: Foreign exchange market; Foreign ownership; Liquidity; Price impact; Spread; Stock market (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ememar:v:39:y:2019:i:c:p:101-119 DOI: 10.1016/j.ememar.2019.04.001 Access Statistics for this article Emerging Markets Review is currently edited by Jonathan A. Batten More articles in Emerging Markets Review from Elsevier |
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