HERDING MOMENTUM EFFECT AND FEEDBACK TRADING OF QUALIFIED FOREIGN INSTITUTIONAL INVESTORS IN THE TAIWAN STOCK MARKET

Yang-Cheng Lu, Jehn-Yih Wong and Hao Fang

The International Journal of Business and Finance Research, 2009, vol. 3, issue 2, 147-167

Abstract: This study extends the herding measures proposed by Warmers (1999), Lakonishok, Shleifer and Vishny (1992) and Borensztein and Gaston (2003) for stocks overbought and oversold by institutional investors as well as the information content related to institutional herding proposed by Nofsinger and Sias (1999). Our analysis further develops a herding measure related to the overbought herding measure, oversold herding measure, and overbought–oversold in dollar ratio for Qualified Foreign Institutional Investors (QFIIs) in the Taiwan stock market. Our results show that the short-term overbought herding measure and the mid-to-long-term oversold in dollar ratio by QFIIs are associated with herding effects resulting from positive feedback trading among QFIIs. The short-to mid-term overbought in dollar ratio by QFIIs is associated with clear herding effects, primarily resulting from the price-impact of herding. The results of this study contribute to the literature on herding measured by the buying number and dollar amounts of institutional investor. The results are also to be integrated with a series of research studies regarding reactions to information on securities markets.

Keywords: herding; feedback trading; cascading; momentum; QFIIs. (search for similar items in EconPapers)
JEL-codes: C21 G11 G14 G21 (search for similar items in EconPapers)
Date: 2009
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Citations: View citations in EconPapers (1)

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