Do foreign short-sellers predict stock returns? Evidence from daily short-selling in Korean stock market ¬リニ

Article history: Received 12 September 2014 Accepted 20 January 2015 Available online 24 January 2015 We investigate the daily short-selling by foreign investors and their impact on stock price, liquidity, and volatility in the Korean stock market. From January 1, 2006, to May 31, 2010, we find that the majority of short-selling is performed by foreign, rather than by domestic, investors and that foreign short-sellers are contrarians, whose large short-selling predicts short-run future return. We also find that foreign investors' short-selling is performed when buying-pressure is high, but does not improve stock liquidity. Furthermore, we find that foreign investors' short-selling does not increase volatility, providing evidence against the foreign investors' destabilizing role in emerging markets. © 2015 Elsevier B.V. All rights reserved. JEL Classification: G12 G14 G15