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Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets

Author

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  • Paramita Mukherjee

    (Narsee Monjee Institute of Management Studies)

  • Sweta Tiwari

    (International Management Institute)

Abstract

The existence of behavioural bias such as positive feedback trading (PFT) and herding is well researched for advanced economies. This paper explores whether foreign institutional investors (FIIs), a prominent investor group, pursue these strategies in India. The contribution lies in the application of multiple measures of herding. Results indicate that FIIs exhibit PFT behaviour in equity and to some extent, in debt. At the individual stock level, FIIs herd during non-extreme market conditions, but market-level measures indicate absence of herding in extreme market conditions. In the bullish market, they behave more rationally compared to bearish or normal market conditions.

Suggested Citation

  • Paramita Mukherjee & Sweta Tiwari, 2022. "Trading Behaviour of Foreign Institutional Investors: Evidence from Indian Stock Markets," Asia-Pacific Financial Markets, Springer;Japanese Association of Financial Economics and Engineering, vol. 29(4), pages 605-629, December.
    • Handle: RePEc:kap:apfinm:v:29:y:2022:i:4:d:10.1007_s10690-022-09361-z
    DOI: 10.1007/s10690-022-09361-z
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    More about this item

    Keywords

    Foreign investment; Feedback trading; Herding; Indian stock market; Trading behaviour; Institutional investment;
    All these keywords.

    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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