Behavior and Effects of Equity Foreign Investors on Emerging Markets

Alemanni, Barbara; Ornelas, José Renato Haas

doi:10.2139/ssrn.1105719

Cited by 5 publications

(3 citation statements)

References 27 publications

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“…The data used in the study is in USD due to the fact the derivative foreign exchange markets and other currency hedging instruments did not exist for Turkish Lira during the most of the sample period and the relatively new derivative foreign exchange market in Turkey is still at crawling stage. Alemanni and Ornelas (2007) argue that without currency hedging opportunities for foreign investors in a market, the data that should be used to study that market is USD.…”

Section: Methodsmentioning

confidence: 99%

“…Specifically, this part of the literature focuses on whether there is a lagged and contemporaneous relationship between stock returns and foreign investor flows by implementing Granger causality tests. The second implication is to investigate whether foreign investor flows destabilize the local markets focusing on several destabilizing effects such as positive feedback trading, price pressure, herding, and volatility increases (Alemanni and Ornelas, 2007).…”

Section: Overview Of Literaturementioning

confidence: 99%

“…For instance, Lin et al (2010), Choe et al (1999), Bowe and Domuta (2004), Chakrabarti (2001), Tabak (2003) and Clark and Berko (1997) study Taiwan, Korea, Indonesia, India, Brazil and Mexico, respectively. The two European studies focusing on Sweden and diversified set of emerging markets including Eastern Europe are Dahlquist and Robertsson (2001, 2004) and Alemanni and Ornelas (2007), respectively. For the set of countries studies, Richards (2005) and Griffin et al (2004) focus on emerging Asian countries.…”

Section: Overview Of Literaturementioning

confidence: 99%

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Foreign investor flows and “blue chip” stock returns

Adaoglu

Katırcıoğlu

2013

Int Journal of Emerging Mkts

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PurposeThe purpose of this paper is to investigate the direction of causality between the monthly stock returns and the monthly net foreign investor flows, and the existence of feedback trading by foreign investors for the “blue chip” stocks of the Istanbul Stock Exchange (ISE), an emerging stock market.Design/methodology/approachMonthly net foreign investor flows and stock returns of “blue chip” stocks for the period January 1997‐June 2010 are used. Particularly, taking into account the structural changes in the foreign investor trading activity, the study focuses on the two sub‐periods – before and after the start of European Union (EU) accession negotiations of Turkey. The study uses the bivariate VAR Granger causality approach, impulse response analysis and uses regressions with the vector autoregressive structure and contemporaneous structure (without lag).FindingsUnidirectional Granger causality running from monthly stock returns to monthly net foreign investor flows is detected for the pre‐EU accession negotiations period accompanied by a negative feedback trading effect, but a causality relationship and feedback trading could not be established for the post‐EU accession negotiations period. The relationship is a contemporaneous one rather than a lagged relationship for the latter period.Research limitations/implicationsThe studies on the impact of foreign investor flows utilize daily and/or monthly data depending on availability. For the ISE, only monthly full data is available. Further research on the effects of foreign investors in the ISE such as the base broadening and price pressure effects should be undertaken.Practical implicationsThe findings are particularly useful for financial managers, portfolio managers, traders, domestic and foreign investors dealing with the ISE.Originality/valueThe article contributes to the limited empirical evidence on the price effects of foreign investor flows in the stock exchanges located in Eastern Europe, Middle East and surrounding countries. The study also considers the significant increase in the amount of foreign investor flows after the start of EU accession negotiations of Turkey and detects a change in the price effect. Unlike the strong empirical evidence of positive feedback trading in the finance literature, negative feedback trading is detected in the ISE, but only for the period before the start of EU accession negotiations. Using monthly data, any feedback trading could not be detected for the period after.

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Section: Methodsmentioning

confidence: 99%

Section: Overview Of Literaturementioning

confidence: 99%

Section: Overview Of Literaturementioning

confidence: 99%

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Foreign investor flows and “blue chip” stock returns

Adaoglu

Katırcıoğlu

2013

Int Journal of Emerging Mkts

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Market-wide Herding and the Impact of Institutional Investors in the Indian Capital Market

Lakshman

Basu

Vaidyanathan

2013

Journal of Emerging Market Finance

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The article tries to identify the presence of ‘market-wide herding’ in the Indian capital market and whether institutional investors impact such herding. In particular, the article looks at the impact of Foreign Institutional Investors flows as well as mutual funds on herding. The work also looks at the the impact of index return and volatility on herding. JEL Classification: G140, G180, C580, G120

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Herding Behaviour by Equity Foreign Investors on Emerging Markets

Ornelas

Alemanni²

2008

SSRN Journal

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Behavior and Effects of Equity Foreign Investors on Emerging Markets

Cited by 5 publications

References 27 publications

Foreign investor flows and “blue chip” stock returns

Foreign investor flows and “blue chip” stock returns

Market-wide Herding and the Impact of Institutional Investors in the Indian Capital Market

Herding Behaviour by Equity Foreign Investors on Emerging Markets

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