Causes and Impacts of Foreign and Domestic Institutional Investors’ Herding in the Taiwan Stock Market

Fang, Hao; Lu, Yang-Cheng; Yau, Hwey-Yun; Lee, Yen‐Hsien

doi:10.1080/1540496x.2015.1103126

Cited by 11 publications

(8 citation statements)

References 27 publications

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“…Table 2 shows that the random-effect model results support the feedback trading hypothesis and FII herding behavior. The results are in accordance with the findings of Hiremath and Kattuman (2017), Fang et al (2017), andChattopadhyay et al (2018). Foreign institutions tend to herd their own or other foreign institutions' investments in the previous, fourth lagged and seventh lagged periods.…”

Section: Resultssupporting

confidence: 91%

“…In their research, Chattopadhyay et al (2018) find that foreign institutions tend to follow a herding behavior in the Indian stock market, and that this herding tends to persist. In their study, Fang et al (2017) reveal that foreign institutions herd the trades of other foreign institutions rather than herding their own trades in the Taiwan market. This herding is most common in large-cap securities and is driven by investigative herding rather than cascades.…”

Section: Theoretical Modelsmentioning

confidence: 99%

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Foreign Institutional Investments (FIIs) and the Saudi Stock Market: What Drives Foreign Institutions to Invest?

Alhussayen¹

2022

IJEF

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This paper analyzes the drivers behind foreign institutional investments (FIIs) in the Saudi stock market and their impact on market stability from 2015 till 2019 using quarterly data. The results of OLS panel regression and ARCH/GARCH model support the feedback trading hypothesis and reveal a herding and momentum behavior of foreign institutions. Foreign institutions are attracted to invest in large Saudi firms with high liquidity. Interest rates, GDP growth and oil prices all have a negative and significant impact on FIIs. In contrast, inflation indicates economic growth and has a positive impact on FIIs. FIIs tend to stabilize market returns and predict future values.

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Section: Resultssupporting

confidence: 91%

Section: Theoretical Modelsmentioning

confidence: 99%

Foreign Institutional Investments (FIIs) and the Saudi Stock Market: What Drives Foreign Institutions to Invest?

Alhussayen¹

2022

IJEF

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“…Chung et al (2016) investigated the trading activity of institutional investors in the stock market in South Korea and found evidence suggesting that they may be considered as the contrarian traders and that their transactions are consistent with persistent trading and/or herding behavior effects 3 . Fang et al (2017) find the existence of herding effects among the foreign institutional investors also on the stock market in Taiwan, where the main reason for their herding behavior is investigative herding rather than informational cascades. Bravo and Ruiz (2015) analyze pension system in Chile and they discuss herding effects as well; however, their research is focused more specifically on the herding behavior of pension funds managers.…”

Section: Literature Reviewmentioning

confidence: 99%

Pension funds, large capital inflows and stock returns in a thin market

Brzeszczyński

Bohl

Serwa

2018

Journal of Pension Economics and Finance

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Using unique data about capital flows from the public social security institute ZUS (Zakład Ubezpieczeń Społecznych) to private pension funds OFEs (Otwarte Fundusze Emerytalne) in Poland, we find that their impact, as a group of large institutional investors, on stock returns is statistically significant in short-term but no such effect exists in the long-run. This result is consistent with the temporary price pressure hypothesis of Ben-Rephael et al. (2011). We analyze the capital transfers, in the form of the aggregated pension contributions collected from all employees in the entire Polish economy, from the ZUS to the private pension funds, which further invest this capital on the stock market. The average time for the subsequent reaction of stock prices is found to be 4 days. The trading strategy based on this result generates superior outcomes in comparison with the passive strategy, which further confirms the price impact of capital inflows. Our findings are not only relevant for stock market investors but they also have broader policy implications for stock market regulators and for the national pension regulators.

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“…Moreover, many researchers used the measure of Hwang and Salmon (Güvercı̇n, 2016;Krokida, Spyrou, & Tsouknidis, 2017;Lin, (2017); Teng, 2018). The measures of the second group, Lakonishoket al (1992) and Sias (2004), were also used in many studies to measure herding behavior (Boyd, Buyuksahin, Haigh, & Harris, 2016;Cai, Han, Li, & Li, 2019;Choi, 2016;Fang, Lu, Yau, & Lee, 2017;Popescu & Xu, 2018). In addition, many studies were conducted using more than one measure including Shrotryia and Kalra (2019) who used three measures of CSSD, CSAD, and a modified CSSD measure introduced by Yao, Ma, and He (2014).…”

Section: Measures Of Herding Behaviormentioning

confidence: 99%

Remeasuring Sectoral Herding in the Financial Markets

Elshqirat¹

2020

IBR

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Herding behavior was concluded to exist in some sectors and under some market conditions in the Jordanian stock market when measured using the cross-sectional absolute deviation. The purpose of this study was to retest the existence of the sectoral herding using the cross-sectional dispersion of betas and compare the results with those reached using the measure of the cross-sectional absolute deviation. Behavioral finance theory represents the main base on which this study was built. In this study, the researcher tried to answer questions related to whether herding behavior exists in the Jordanian market and its sectors if measured using cross-sectional dispersion of betas and whether results will be different from those reached using other measures. In this quantitative study, data from Amman stock exchange were used and the period covered was from 2000 to 2018. These data were used to calculate the cross-sectional dispersion of betas which was tested using t-test, Kruskal–Wallis test, Mann-Whitney U test, and Wilcoxon Signed-Rank test. Results indicated that herding behavior existed in market and in each sector at the same level which was not affected by the financial crisis. Furthermore, the study revealed that herding level was the same when the market (sector) was rising and when it was falling and this similarity has not been changed by the occurrence of the global financial crisis. Finally, results indicated that herding was at its lowest level in the entire market and in the industrial sector during the time of financial crisis. These results are different from those of the study conducted in Jordan using cross-sectional absolute deviation which implies that using different herding measures yields different results.

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Causes and Impacts of Foreign and Domestic Institutional Investors’ Herding in the Taiwan Stock Market

Cited by 11 publications

References 27 publications

Foreign Institutional Investments (FIIs) and the Saudi Stock Market: What Drives Foreign Institutions to Invest?

Foreign Institutional Investments (FIIs) and the Saudi Stock Market: What Drives Foreign Institutions to Invest?

Pension funds, large capital inflows and stock returns in a thin market

Remeasuring Sectoral Herding in the Financial Markets

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