Big Fish in Small Ponds: The Trading Behaviour and Price Impact of Foreign Investors in Asian Emerging Equity Markets

Anthony Richards

RBA Research Discussion Papers from Reserve Bank of Australia

Abstract: This paper analyses data for the aggregate daily trading of all foreign investors in six Asian emerging equity markets and provides two new findings. First, foreigners’ flows into several markets show positive-feedback trading with respect to global, as well as domestic, equity returns. In particular, foreigners tend to be buyers in these markets on the day after rises in these markets or in US markets. The nature of this trading suggests it is due to behavioural factors or foreigners extracting information from recent returns, rather than portfolio-rebalancing effects. Second, the price impacts associated with foreigners’ trading are much larger than earlier estimates. The results suggest that foreign investors and external conditions have a larger effect on emerging markets than implied by previous work.

Keywords: equity markets; emerging markets; foreign investors; positive-feedback trading; price impacts (search for similar items in EconPapers)
JEL-codes: F30 G11 G12 G15 (search for similar items in EconPapers)
Date: 2004-06
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Citations: View citations in EconPapers (4)

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Journal Article: Big Fish in Small Ponds: The Trading Behavior and Price Impact of Foreign Investors in Asian Emerging Equity Markets (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:rba:rbardp:rdp2004-05

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