Do foreign short-sellers predict stock returns? Evidence from daily short-selling in Korean stock market

Shu-Feng Wang and Kuan-Hui Lee

Pacific-Basin Finance Journal, 2015, vol. 32, issue C, 56-75

Abstract: We investigate the daily short-selling by foreign investors and their impact on stock price, liquidity, and volatility in the Korean stock market. From January 1, 2006, to May 31, 2010, we find that the majority of short-selling is performed by foreign, rather than by domestic, investors and that foreign short-sellers are contrarians, whose large short-selling predicts short-run future return. We also find that foreign investors' short-selling is performed when buying-pressure is high, but does not improve stock liquidity. Furthermore, we find that foreign investors' short-selling does not increase volatility, providing evidence against the foreign investors' destabilizing role in emerging markets.

Keywords: Short-selling; Foreign investor; Emerging market; Korean stock market (search for similar items in EconPapers)
JEL-codes: G12 G14 G15 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (15)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:32:y:2015:i:c:p:56-75

DOI: 10.1016/j.pacfin.2015.01.004

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