Foreign Portfolio Investors Before and During a Crisis

By Woochan Kim, Shang-jin Wei. 2002

495 citations recorded by the source corpus.

Using a unique data set, we study the trading behavior of foreign portfolio investors in Korea before and during the currency crisis. Different categories of investors have significant differences as well as similarities. First, non-resident institutional investors are always positive feedback traders, whereas resident investors before the crisis were negative feedback (contrarian) traders but switch to be positive feedback traders during the crisis. Second, individual investors herd significantly more than institutional investors. Non-resident (institutional as well individual) investors herd significantly more than their resident counterparts. Third, differences in the Western and Korean news coverage are correlated with differences in net selling by non-resident investors relative to resident investors.

Subfields: Economics and Econometrics, Finance, Management Science and Operations Research

View Paper: https://www.semanticscholar.org/paper/fee31b4989397fa5ff96efde5e6c94826d20c191

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Citations in the corpus

Emerging Markets Finance (2003, background): “These include Borensztein and Gelos (2001), Kim and Wei (2002b), and Frankel and Schmukler (2000).”
Herd Behavior in Financial Markets (2000, methodology): “…and we suspect this is due to the availability of microlevel data that is needed to shed light on questions relating to the trading strategy of investors.30 Kim and Wei (1999a), using data for December 1996 to June 1998, investigate the trading strategies of investors in the Korean stock market.”
Transparency and International Investor Behavior (2002, unknown): “…measure the degree of herding among funds, including Lakonishok, Shleifer and Vishny (1992), Grinblatt, Titman and Wermers (1995), and Wermers (1999) for the U.S., Choe, Kho and Stulz (1999) and Kim and Wei (2002) for Korea, and Borensztein and Gelos (forthcoming) for emerging markets worldwide.”
On the International Transmission of Shocks : Micro-Evidence from Mutual Fund Portfolios (2012, unknown): “See, for example, Grinblatt et al. (1995), Wermers (1999), and Gompers and Metrick (2001) for the U.S. domestic funds, and Kang and Stulz (1997), Dahlquist and Robertsson (2001), Kim and Wei (2002), Chan et al. (2005), Gelos and Wei (2005), and Didier et al. (2010) for the international ones.”
A note on foreigners' trading and price effects across firms (2004, background): “This supports the findings of Karolyi (2002), Grinblatt and Keloharju (2000), Seasholes (2000), Froot et al. (2001) and Kim and Wei (2002) , who report that international flows are influenced by past returns.”