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

Richards, Anthony

doi:10.2139/ssrn.318025

Cited by 106 publications

(240 citation statements)

References 30 publications

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“…11 Richards (2005) finds from 1999-2002 evidence of price impacts associated with foreigners' trading in Asian emerging equity markets (Indonesia, Korea, Philippines, Taiwan, and Thailand). We do not find this to be the case in our sample.…”

Section: Table 3amentioning

confidence: 99%

International fund investment and local market returns

Jinjarak

Wongswan

Zheng

2011

Journal of Banking & Finance

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a b s t r a c tInternational fund investment in bonds and equities is characterized by a positive association between current net inflows and contemporaneous and past market returns: positive-feedback trading, while being possibly profitable for international fund investors, could be destabilizing for the underlying markets. Allowing for interactions between equity investment and bond investment, our panel vector autoregression shows that past equity returns contain useful information in forecasting equity and bond flows and that bond flows impact future equity returns positively.

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Section: Table 3amentioning

confidence: 99%

International fund investment and local market returns

Jinjarak

Wongswan

Zheng

2011

Journal of Banking & Finance

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“…Grinblatt andKeloharju, 2000, Seasholes, 2000). A common feature of these studies is that, notwithstanding performance outcomes, foreign investors incur higher transaction costs measured as round trip costs (CKS) or market impact (Bonser-Neal et al, 1999 andRichards, 2005). Institutional investors are widely regarded as sophisticated yet foreign investors who are mostly institutions appear on average to suffer a significant economically and statistically significant implicit transaction cost disadvantage (CKS).…”

Section: Previous Studies Comparing Domestic and Foreign Investor's Pmentioning

confidence: 99%

Do Foreign Investors Pay More for Stocks in the United States? An Analysis By Country of Origin

2007

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“…The IMF identifies these surges as 1995Q4-1998Q2, 2006Q4-2008Q2, and the ongoing wave which began in the third quarter (Q3) of 2009. The episodes do not coincide closely in their starting point (suggesting country-specific "pull" factors although there is also evidence of correlated inflows (Richards 2005) but often end in coincidence (suggesting common foreign explanation such as global risk aversion). Frankel (2011) also sees the profile of flows in terms of cycles, not structurally excessive flows.…”

Section: Source: Imf (2011d)mentioning

confidence: 93%

Rethinking Capital Flows for Emerging East Asia

Grenville

2014

Reform of the International Monetary System

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in Asian Development Bank InstituteThe Working Paper series is a continuation of the formerly named Discussion Paper series; the numbering of the papers continued without interruption or change. ADBI's working papers reflect initial ideas on a topic and are posted online for discussion. ADBI encourages readers to post their comments on the main page for each working paper (given in the citation below). Some working papers may develop into other forms of publication. The views expressed in this paper are the views of the author and do not necessarily reflect the views or policies of ADBI, the ADB, its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.Asian Development Bank Institute Kasumigaseki Building 8F 3-2-5 Kasumigaseki, Chiyoda-ku Tokyo 100-6008, Japan AbstractSince the 1980s, emerging countries have been urged to welcome foreign capital inflows. The result has often been a pattern of surges, where excessive inflows were followed by damaging "sudden stops" and reversals. This was dramatically evident in the Asian crisis of 1997-1998. Since that crisis, the emerging countries of East Asia have typically run current account surpluses and have accumulated substantial foreign exchange reserves. This has kept them largely protected from the impact of volatile capital flows, but this strategy is neither sustainable nor optimal.What is needed is a strategy that makes use of the potential benefits of capital "flowing downhill" (that would require these countries to run current account deficits) while at the same time protecting them from both the excessive inflows and the reversals. This strategy needs to take account not only of the fickle nature of the capital flows, but the structurally-higher profitability which is characteristic of emerging countries, which motivates the excessive inflows. This strategy would require more active management of both exchange rates and capital flows than has been the accepted "best practice". This requires a substantial shift in the current policy mindset. The International Monetary Fund has shifted some distance on this issue, but has further to go.

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

Cited by 106 publications

References 30 publications

International fund investment and local market returns

International fund investment and local market returns

Do Foreign Investors Pay More for Stocks in the United States? An Analysis By Country of Origin

Rethinking Capital Flows for Emerging East Asia

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