Hot money and cross-section of stock returns during the global financial crisis

Daehwan Kim and Seiichiro Iwasawa

International Review of Economics & Finance, 2017, vol. 50, issue C, 8-22

Abstract: We investigate a hitherto unexplored aspect of the hot money phenomenon: the effect of hot money at the individual stock level. In the South Korean stock market, foreign capital flow right before the global financial crisis can be characterized as hot money. A larger increase in foreign investors’ ownership of a particular stock in the pre-crisis period resulted in a bigger decline in their ownership of the stock, a sharper drop in the stock's price, and higher volatility of the stock during the crisis. Our findings supplement the existing evidence for the destabilizing effect of certain international capital flows.

Keywords: F32; F65; G12; G15; G23; Hot money; Cross-section of stock returns; Global financial crisis; Foreign ownership; South Korean stock market (search for similar items in EconPapers)
Date: 2017
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Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:50:y:2017:i:c:p:8-22

DOI: 10.1016/j.iref.2017.03.022

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