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Foreign Portfolio Investors before and during a Crisis

Listed author(s):
  • Woochan Kim
  • Shang-Jin Wei

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.

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File URL: http://www.cid.harvard.edu/cidwp/pdf/006.pdf
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Paper provided by Center for International Development at Harvard University in its series CID Working Papers with number 6.

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Date of creation: Mar 1999
Handle: RePEc:wop:cidhav:6
Contact details of provider: Postal:
Center for International Development at Harvard University (CID). 79 John F. Kennedy Street, Cambridge, MA 02138.

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