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Stock Characteristics Herded By Foreign Investors With Higher Abnormal Returns In The Taiwan Stock Market

Author

Listed:
  • Hao FANG

    (Department of Assets and Property Management, Hwa Hsia Institute of Technology, Taipei, Taiwan 23568, R.O.C.)

  • Yang-Cheng Lu

    (Department of Finance at Ming Chuan University, Taipei, Taiwan)

  • Hwey-Yun Yau

    (Department of Accounting and Information at National Taipei College of Business, Taipei)

  • Yen-Hsien Lee

    (Department of Finance at Chung Yuan Christian University, Chung Li, Taiwan)

Abstract

This paper analyses the types of stocks herded by foreign institutional investors (FIIs) with higher positive abnormal returns in the emerging stock markets. Using a panel smooth transition regression (PSTR) model, we demonstrate that the positive price impact of the herd buying patterns of FIIs in Taiwan depends on preferences for higher-turnover stocks, and larger-size stocks. Furthermore, the price impact of FIIs herd buying behavior influenced by stock characteristics is different during bullish and bearish periods. Investors in the emerging market can follow FIIs and purchase stocks that the latter have overbought to improve the portfolio performance.

Suggested Citation

  • Hao FANG & Yang-Cheng Lu & Hwey-Yun Yau & Yen-Hsien Lee, 2013. "Stock Characteristics Herded By Foreign Investors With Higher Abnormal Returns In The Taiwan Stock Market," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 232-245, December.
    • Handle: RePEc:rjr:romjef:v::y:2013:i:4:p:232-245
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    References listed on IDEAS

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    More about this item

    Keywords

    price impact; herding; stock characteristics; FIIs; PSTR;
    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
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models

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