Which Types of Stocks Herded by Foreign Institutional Investors are Informational in the Emerging Stock Market?

Hao Fang (), Joseph C. P. Shieh (), Tsangyao Chang and Meng-Wen Wu
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Hao Fang: Graduate Institute of Finance, National Taiwan University of Science and Technology No.43, Keelung Rd., Sec.4, Da'an Dist., Taipei 10607, Taiwan, ROC, and Associate Professor at the School of Economics in Qufu Normal University
Joseph C. P. Shieh: Graduate Institute of Finance, National Taiwan University of Science and Technology No.43, Keelung Rd., Sec.4, Da'an Dist., Taipei 10607, Taiwan, ROC
Meng-Wen Wu: Department of Business Administration, National Taipei University 151, University Rd., San Shia District, New Taipei City, Taiwan 23741, R.O.C

Journal for Economic Forecasting, 2020, issue 3, 31-48

Abstract: This study analyses which types of the stocks herded by foreign institutional investors (FII) in buying side are informational in the stock markets of the emerging countries such as Taiwan. By employing a panel smooth transition regression (PSTR) model, we find that the FII buying herding patterns are informational for lower firms’ unexpected earning and lower return stocks and undervalued value stocks. Next, the price effects of the FII buying herding on stock types are different in bull and bear periods. To improve portfolio performance, general investors can follow FII to purchase the stock types of FII buying herding in the emerging markets. The price persistence of institutional herding can be further integrat

Keywords: price impact; herding; stock types; institutional investors; PSTR (search for similar items in EconPapers)
JEL-codes: C21 G11 G14 G21 (search for similar items in EconPapers)
Date: 2020
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