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Herding Momentum Effect And Feedback Trading Of Qualified Foreign Institutional Investors In The Taiwan Stock Market

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  • Yang-Cheng Lu
  • Jehn-Yih Wong
  • Hao Fang

Abstract

This study extends the herding measures proposed by Warmers (1999), Lakonishok, Shleifer and Vishny (1992) and Borensztein and Gaston (2003) for stocks overbought and oversold by institutional investors as well as the information content related to institutional herding proposed by Nofsinger and Sias (1999). Our analysis further develops a herding measure related to the overbought herding measure, oversold herding measure, and overbought–oversold in dollar ratio for Qualified Foreign Institutional Investors (QFIIs) in the Taiwan stock market. Our results show that the short-term overbought herding measure and the mid-to-long-term oversold in dollar ratio by QFIIs are associated with herding effects resulting from positive feedback trading among QFIIs. The short-to mid-term overbought in dollar ratio by QFIIs is associated with clear herding effects, primarily resulting from the price-impact of herding. The results of this study contribute to the literature on herding measured by the buying number and dollar amounts of institutional investor. The results are also to be integrated with a series of research studies regarding reactions to information on securities markets.

Suggested Citation

  • Yang-Cheng Lu & Jehn-Yih Wong & Hao Fang, 2009. "Herding Momentum Effect And Feedback Trading Of Qualified Foreign Institutional Investors In The Taiwan Stock Market," The International Journal of Business and Finance Research, The Institute for Business and Finance Research, vol. 3(2), pages 147-167.
    • Handle: RePEc:ibf:ijbfre:v:3:y:2009:i:2:p:147-167
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    References listed on IDEAS

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    Cited by:

    1. Chen, Ching-Lung & Weng, Pei-Yu & Chien, Chu-Yang, 2018. "Qualified foreign institutional investor ownership deregulation and the restatement of financial reports --- empirical findings from Taiwan," International Review of Economics & Finance, Elsevier, vol. 56(C), pages 465-485.

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    More about this item

    Keywords

    herding; feedback trading; cascading; momentum; QFIIs.;
    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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