The Dynamics of foreign portfolio inflows and equity returns in India

Amita Batra
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Amita Batra: Indian Council for Research on International Economic Relations

Indian Council for Research on International Economic Relations, New Delhi Working Papers from Indian Council for Research on International Economic Relations, New Delhi, India

Abstract: The Foreign Institutional Investors (FIIs) have emerged as important players in the Indianequity market in the recent past. This paper makes an attempt to develop anunderstanding of the dynamics of the trading behavior of FIIs and returns in the Indianequity market by analyzing daily and monthly data. From our analysis we find that thereis strong evidence of FIIs chasing trends and adopting positive feedback trading strategiesat the aggregate level on a daily basis. However there is no evidence of positive feedbacktrading on a monthly basis. The results of our analysis also indicate that foreign investorshave a tendency to herd together in their trading activity in India. The trading behaviorand biases of the FIIs do not appear to have a destabilizing impact on the equity market

Pages: 32 pages
Date: 2003-09
New Economics Papers: this item is included in nep-fin
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Citations: View citations in EconPapers (16)

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