Foreign investor trading and information asymmetry: evidence from a leading emerging market

Chune Young Chung, Hyeyoen Kim and Doojin Ryu

Applied Economics Letters, 2017, vol. 24, issue 8, 540-544

Abstract: This article examines the influence of foreign investor trading on information asymmetry in the Korean stock market, a representative emerging market characterized by a high level of information asymmetry between corporate insiders and outsiders, and among investors. We find a significantly positive relationship between foreign investor trading and the consequent bid–ask spread – the latter of which is considered as a proxy for the degree of information asymmetry – on both daily and weekly bases. Our results indicate that active foreign investor trading tends to exacerbate informational variation.

Date: 2017
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DOI: 10.1080/13504851.2016.1208349

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