Summary
Herding occurs when investors intensively buy or sell the same stock at the same time. This study examines foreign investor herding on the Taiwan Stock Market from 2001 to 2005 using quarterly stock returns and changes in foreign ownership. Our results show that foreign ownership-change is not mean-reverting, and that foreign investor herding impacts stock prices. Foreign investors follow positive-feedback trading, and they are not better informed than other investors.
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Extract
Foreign Investor Herding On the Taiwanese Stock Market
1. Introduction
By the end of 2000, when Taiwan joined the World Trade Organization (WTO), almost all limitations to foreign investment had been removed. In 2000, the weights of Taiwan stock index in the MSCI (Morgan Stanley Capital Index) increased from 50% to 100%. Foreign investors' transactions in the Taiwan Stock Market have increased dramatically in the past several years, especially after 2000. In view of the increasi...See the full content of this document
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