Friend or Foe? Foreign investors and the liquidity of six Asian markets

Diego Agudelo () and Milena Castano

No 10653, Documentos de Trabajo de Valor Público from Universidad EAFIT

Abstract: Studying Foreign flows and the liquidity of six Asian markets we provide evidence of two empirical regularities: On the one hand, foreign trade has a negative but transitory impact on the overall liquidity of the market on a daily basis.This finding is shown consistent with two hypotheses: that foreign investors demand liquidity more aggressively than locals, and, to a lesser extent, that foreigners incorporate market-wide information. On the other hand, the overall share of foreign ownership in the market is positively related to improved liquidity, as shownin a sample of emerging markets, after controlling for a set of confounding factors. Overall, the results portray foreign investors as aggressive liquidity demanding, and nevertheless having a positive effect on the liquidity in short horizons.

Keywords: Asian markets; liquidity; Foreign investors (search for similar items in EconPapers)
Pages: 38
Date: 2010-07-04
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Citations: View citations in EconPapers (8)

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