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Foreigners' perceptions of U.S. markets: Do foreigners exhibit herding tendencies?

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  • Lin, Anchor Y.
  • Swanson, Peggy E.
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    Abstract

    This paper investigates the herding behaviors and investment performance of foreign investors in the U.S. market. Little evidence is found of foreigners' herding behavior within one time period. However, there is strong evidence that foreign investors follow their past behavior into and out of the U.S. market over adjacent months. Foreigners' buy-side behavior of buying U.S. equities as a group is positively related to past high returns in the U.S. market and this buy-side behavior leads to superior investment performance. Evidence shows that independent of whether the U.S. market is up or down, foreign investors continue to increase their holdings of U.S. equities and these purchasing activities result in superior performance. When the U.S. market experiences extreme ups and downs, foreigners are net purchasers one month before and after the market moves and, in general, they perform well.

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    Bibliographic Info

    Article provided by Elsevier in its journal Journal of Economics and Business.

    Volume (Year): 60 (2008)
    Issue (Month): 3 ()
    Pages: 179-203

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    Handle: RePEc:eee:jebusi:v:60:y:2008:i:3:p:179-203

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    Web page: http://www.elsevier.com/locate/jeconbus

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    Cited by:
    1. Wang, Yudong & Liu, Li & Gu, Rongbao & Cao, Jianjun & Wang, Haiyan, 2010. "Analysis of market efficiency for the Shanghai stock market over time," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 389(8), pages 1635-1642.
    2. Hagerman, Amy D. & Jin, Yanhong H., 2009. "The Buzz In The Pits: Livestock Futures' Response To A Rumor Of Foreign Animal Disease," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49493, Agricultural and Applied Economics Association.

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