Herding and the role of foreign institutions in emerging equity markets

Charles Chang

Pacific-Basin Finance Journal, 2010, vol. 18, issue 2, 175-185

Abstract: This study examines herding surrounding qualified foreign institutional investors (QFIIs) in an emerging equity market. Using five years of weekly order flow data, I find that, when QFIIs increase (decrease) their weightings in particular sectors, dealers', margin traders', and mutual funds' holdings/weightings likewise increase (decrease) during the same and following weeks, despite controls for return and trading momentum. This herding is potentially destabilizing as prices overshoot and mean revert highlighting the potential negative impact of this level of transparency and of the policy of disclosing QFII trading in emerging markets.

Keywords: Herding; Emerging; markets; Foreign; institutions; Order; flows (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (20)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:18:y:2010:i:2:p:175-185

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