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Foreign investors and the speed of price adjustment across multiple correlation regimes in Korea

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  • Kim, Jinyong
  • Kim, Yongsik

Abstract

This paper investigates whether foreign investors have information advantage by testing for the speed of price adjustment between the portfolios of stocks sorted by foreign ownership in Korea. The tests are performed across multiple correlation regimes between the world and domestic markets estimated by the dynamic conditional correlation model. We find that, while the stocks with high foreign ownership have higher adjustment speed in the low-correlation regimes, the evidence becomes weaker in the high-correlation regimes. This result indicates that the information advantage of foreign investors found in the literature is mainly driven by the pattern in the low-correlation regimes.

Suggested Citation

  • Kim, Jinyong & Kim, Yongsik, 2018. "Foreign investors and the speed of price adjustment across multiple correlation regimes in Korea," Finance Research Letters, Elsevier, vol. 25(C), pages 137-144.
    • Handle: RePEc:eee:finlet:v:25:y:2018:i:c:p:137-144
    DOI: 10.1016/j.frl.2017.10.022
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    More about this item

    Keywords

    Foreign investors; Speed of price adjustment; Correlation regimes;
    All these keywords.

    JEL classification:

    • 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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