Foreign investors and the delay of information dissemination in the Korean stock market

Jangkoo Kang, Kyung Yoon Kwon and Hyoung-jin Park

Pacific-Basin Finance Journal, 2016, vol. 38, issue C, 1-16

Abstract: This study examines whether foreign investors improve the transmission of global and local market information on individual stock prices in the Korean stock market from 1999 to 2012. We investigate the beneficial effect of foreign investors in the Korean market using the weekly trading data of domestic institutional, individual, and foreign investors. Using the normalized foreign trading share volume as a measure for foreign trading, we find that foreign trading significantly reduces delays in global market information dissemination, along with that of local market information, though not as much as that of global information. Next, we find a more significant relation between foreign trading and delays in information dissemination for global firms with high levels of international trading activity. This indicates that foreign investors are more advantaged than local investors with respect to global information. Finally, the trading of domestic institutional investors reduces delays in local and global information dissemination, but the effect of foreign trading persists, even after controlling for the trading of domestic institutional and/or individual investors.

Keywords: Korean stock market; Foreign investors; Information efficiency; Price adjustment; Information dissemination (search for similar items in EconPapers)
JEL-codes: F36 G14 G15 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:38:y:2016:i:c:p:1-16

DOI: 10.1016/j.pacfin.2016.03.004

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