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Foreigners’ Short Selling in the Korean Stock Market around the Financial Crisis

Author

Listed:
  • Hahn, Sang Buhm

    (Kyonggi University)

  • Kwon, Sehoon

    (Sangmyung University)

  • Rhee, Yeongseop

    (Seoul National University)

Abstract

This paper investigates short selling behavior, particularly by foreign investors, during event days of non-normal times on an intraday basis in the Korean stock market around the global financial crisis. Although, in the several subsamples, we cannot exclude the predatory short-selling possibility, we did not find any conclusive evidence of abusive short selling behaviors in the overall intraday trading activities. While foreign investors demonstrate higher levels of participation in short-sale trading, their impact on price declines is not as pronounced compared to the effects of pure selling. Following the lift of the short-sale ban, foreign investors appear to engage in long selling trading more frequently, and their influence on price changes primarily stems from long selling rather than short selling compared to the past.

Suggested Citation

  • Hahn, Sang Buhm & Kwon, Sehoon & Rhee, Yeongseop, 2023. "Foreigners’ Short Selling in the Korean Stock Market around the Financial Crisis," East Asian Economic Review, Korea Institute for International Economic Policy, vol. 27(2), pages 145-176, June.
    • Handle: RePEc:ris:eaerev:0421
    DOI: 10.11644/KIEP.EAER.2023.27.2.421
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    More about this item

    Keywords

    Short Selling; Financial Crisis; Foreign Investors; Price Reversals; Short-sale Ban;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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