Does Foreign Trading Destabilize Local Stock Markets?
نویسنده
چکیده
This paper investigates the impact of foreign trading on short term volatility and on the correlation of local with world returns. I find that trading in general is associated with higher volatility, whether it is trading by foreigners or domestic investors. However, controlling for total trading volume, foreign trading has no impact on volatility in developed countries, and only a marginally significant impact in developing countries. Thus, in developed markets, foreigners generate as much volatility as domestic investors, but foreigners are able to destabilize emerging markets.
منابع مشابه
On the inherent instability of international financial markets: natural nonlinear interactions between stock and foreign exchange markets
We develop a novel financial market model in which the stock markets of two countries are linked via and with the foreign exchange market. To be precise, there are domestic and foreign speculators in each of the two stock markets which rely either on linear technical or linear fundamental trading strategies to determine their orders. Since foreign stock market speculators require foreign curren...
متن کاملDoes Disclosure Lead to Lower Informed Trading and Symmetric Order-follow Shocks in the Tehran Stock Exchange?
In financial markets, the symmetry of information and the homogeneous interpretation of information among traders is one of the main conditions for market efficiency, but these conditions are in fact violated. In this paper first; we accurately estimated the dynamic measures of trades stemming from information asymmetry and diverse opinions among investors indices by a hidden Markov model. Ther...
متن کاملEquity Flows and Returns: a Quantitative Equilibrium Approach
4 Non-technical summary 5 1 Introduction 7 2 Related literature 11 3 The model 14 3.1 Setup 14 3.2 Stationary equilibria 18 4 Characterizing equilibrium flows and returns 19 4.1 The evolution of beliefs 20 4.2 Optimal portfolio choice 22 4.3 Equilibrium prices, predictability and hedging 24 4.4 Equilibrium flows and returns 26 5 Data 29 5.1 Dividends 29 5.2 Equity flows 32 5.2.1 Data sources 32...
متن کاملFurther study of adaptive supervised learning decision (ASLD) network in stock market
This paper further studies the recently proposed Adaptive Supervised Learning Decision (ASLD) network for trading and portfolio management [5] in two sets of stock market data. One is the Hang Seng index in Hong Kong markets. The other is a portfolio of indexes from six major markets in the world. Being different from the study on foreign exchange rates [5], we find that in generating the tradi...
متن کاملBig Fish in Small Ponds: the Trading Behaviour and Price Impact of Foreign Investors in Asian Emerging Equity Markets
This paper analyses data for the aggregate daily trading of all foreign investors in six Asian emerging equity markets and provides two new findings. First, foreigners’ flows into several markets show positive-feedback trading with respect to global, as well as domestic, equity returns. In particular, foreigners tend to be buyers in these markets on the day after rises in these markets or in US...
متن کامل