The way back home: Trading behaviours of foreign institutional investors in China amid the COVID-19 pandemic

Jinhua Zhang, Rui Mao, Jieyu Wang and Mengying Xing

Pacific-Basin Finance Journal, 2021, vol. 68, issue C

Abstract: By using foreign institutional investors' daily trading data on 958 firms in China and COVID-19 infection data of six countries, this paper aims to investigate how the pandemic has influenced foreign institutional investors' trading behaviours during the first half year of 2020. In addition to domestic returns and foreign returns, ‘pull factors’ of COVID-19 pandemic in host country and ‘push factors’ of COVID-19 pandemic in home country were used to explain net foreign inflows. We find that ‘push factors’ of COVID-19 in home country are dominant in explaining the reduction of net foreign inflows in five out of 11 sectors, and ‘pull factors’ of domestic returns are dominant in explaining net foreign inflows in most sectors. The price impact of net foreign flows differs across sectors as well. A strong negative correlation between net foreign outflows and same-day return could be identified in the Financials sector. On the flip side, positive correlation between net foreign inflows and same-day return could be identified in seven other sectors. Finally, a pattern of flight-to-liquidity was discovered, as foreign institutional investors strategically sell illiquid stocks to conserve liquidity when market uncertainty is heightened.

Keywords: Foreign institutional investors; COVID-19; Net foreign flows; Flight-to-liquidity (search for similar items in EconPapers)
JEL-codes: G11 G15 G18 G23 G28 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0927538X21001256
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:68:y:2021:i:c:s0927538x21001256

DOI: 10.1016/j.pacfin.2021.101618

Access Statistics for this article

Pacific-Basin Finance Journal is currently edited by K. Chan and S. Ghon Rhee

More articles in Pacific-Basin Finance Journal from Elsevier
Bibliographic data for series maintained by Catherine Liu ().