Foreign investors and the speed of price adjustment across multiple correlation regimes in Korea

Jinyong Kim and Yongsik Kim

Finance Research Letters, 2018, vol. 25, issue C, 137-144

Abstract: This paper investigates whether foreign investors have information advantage by testing for the speed of price adjustment between the portfolios of stocks sorted by foreign ownership in Korea. The tests are performed across multiple correlation regimes between the world and domestic markets estimated by the dynamic conditional correlation model. We find that, while the stocks with high foreign ownership have higher adjustment speed in the low-correlation regimes, the evidence becomes weaker in the high-correlation regimes. This result indicates that the information advantage of foreign investors found in the literature is mainly driven by the pattern in the low-correlation regimes.

Keywords: Foreign investors; Speed of price adjustment; Correlation regimes (search for similar items in EconPapers)
JEL-codes: G14 G15 (search for similar items in EconPapers)
Date: 2018
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:25:y:2018:i:c:p:137-144

DOI: 10.1016/j.frl.2017.10.022

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