Foreign Portfolio Investors Before and During a Crisis
Woochan Kim
Korea University Business School; European Corporate Governance Institute (ECGI); Asia Corporate Governance Institute (AICG)
Shang-Jin Wei
Columbia Business School - Finance and Economics; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); International Monetary Fund (IMF); Tsinghua University - School of Economics & Management
Journal of International Economics, Vol. 56, No. 1, pp. 77-96
Abstract:
Using a unique data set, we study the trading behavior of foreign portfolio investors in Korea before and during the currency crisis. The central message is that investors in different categories have different trading patterns. For example, foreign investors outside Korea are more likely to engage in positive feedback trading strategies and are more likely to engage in herding than the branches/subsidiaries of foreign institutions in Korea or foreign individuals living in Korea. This difference in trading behavior is possibly related to the difference in their information. This paper suggests that it may be worth exploring policies that can encourage foreign investors to acquire more information (e.g. by setting up a branch or a subsidiary in the emerging country).
JEL Classification: F21, F3, G15
Accepted Paper Series
Suggested Citation
Kim, Woochan and Wei, Shang-Jin, Foreign Portfolio Investors Before and During a Crisis. Journal of International Economics, Vol. 56, No. 1, pp. 77-96. Available at SSRN: http://ssrn.com/abstract=313640
