EconPapers    
Economics at your fingertips  
 

Foreign equity flows: Boon or bane to the liquidity of Malaysian stock market?

Ping-Xin Liew, Kian-Ping Lim () and Kim-Leng Goh

The North American Journal of Economics and Finance, 2018, vol. 45, issue C, 161-181

Abstract: This paper examines the impact of gross foreign equity inflows on aggregate liquidity of the Malaysian stock market using newly assembled foreign trading data and the best performing bid-ask spread proxy. Employing vector autoregression, we discover a one-way causality from gross inflows to aggregate liquidity, and foreign investors erode liquidity of the Malaysian stock market. Additional analyses reveal that uncertainties in the U.S. markets negatively affect aggregate liquidity through the flows of foreign institutions, whose positive feedback trading destabilizes the local bourse. Despite the shocks, there is sufficient liquidity provision from local state-backed institutional funds and local proprietary day traders.

Keywords: Foreign equity flows; Aggregate liquidity; Malaysian stock market; Vector autoregression; VIX (search for similar items in EconPapers)
JEL-codes: F32 G10 G12 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1062940817302796
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:ecofin:v:45:y:2018:i:c:p:161-181

Access Statistics for this article

The North American Journal of Economics and Finance is currently edited by Hamid Beladi

More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().

 
Page updated 2019-04-10
Handle: RePEc:eee:ecofin:v:45:y:2018:i:c:p:161-181