Pension Fund Trading Behavior and the Index Inclusion: Evidence from the Korean Stock Market

Junho Hwang and Eunyoung Cho

Emerging Markets Finance and Trade, 2023, vol. 59, issue 3, 605-622

Abstract: In this paper, we study the trading effect of Korean pension funds on price change around index inclusions. We find that pension funds strategically respond to index composition changes, and their demand for newly included stocks is high and persistent. The liquidity providers for the demand of pension funds are individual investors. We also find the significant and positive effect of pension funds’ trading on newly included stocks’ prices following the announcement date. On the other hand, we could not find evidence of a positively persistent relationship between the trades of different types of investors and newly added stock returns. Overall, our findings highlight that the trading of pension funds can be an important explanatory factor for the index inclusion effects.

Date: 2023
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.1080/1540496X.2022.2109960 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:emfitr:v:59:y:2023:i:3:p:605-622

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MREE20

DOI: 10.1080/1540496X.2022.2109960

Access Statistics for this article

More articles in Emerging Markets Finance and Trade from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().