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Which Types of Stocks Herded by Foreign Institutional Investors are Informational in the Emerging Stock Market?

Author

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  • Hao FANG

    (Graduate Institute of Finance, National Taiwan University of Science and Technology No.43, Keelung Rd., Sec.4, Da'an Dist., Taipei 10607, Taiwan, ROC, and Associate Professor at the School of Economics in Qufu Normal University)

  • Joseph C. P. SHIEH

    (Graduate Institute of Finance, National Taiwan University of Science and Technology No.43, Keelung Rd., Sec.4, Da'an Dist., Taipei 10607, Taiwan, ROC)

  • Tsang-Yao CHANG

    (Corresponding author, Department of Finance, Feng Chia University No. 100, Wenhwa Rd., Seatwen, Taichung, Taiwan 40724, R.O.C.)

  • Meng-Wen WU

    (Department of Business Administration, National Taipei University 151, University Rd., San Shia District, New Taipei City, Taiwan 23741, R.O.C)

Abstract

This study analyses which types of the stocks herded by foreign institutional investors (FII) in buying side are informational in the stock markets of the emerging countries such as Taiwan. By employing a panel smooth transition regression (PSTR) model, we find that the FII buying herding patterns are informational for lower firms’ unexpected earning and lower return stocks and undervalued value stocks. Next, the price effects of the FII buying herding on stock types are different in bull and bear periods. To improve portfolio performance, general investors can follow FII to purchase the stock types of FII buying herding in the emerging markets. The price persistence of institutional herding can be further integrat

Suggested Citation

  • Hao FANG & Joseph C. P. SHIEH & Tsang-Yao CHANG & Meng-Wen WU, 2020. "Which Types of Stocks Herded by Foreign Institutional Investors are Informational in the Emerging Stock Market?," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(3), pages 31-48, September.
    • Handle: RePEc:rjr:romjef:v::y:2020:i:3:p:31-48
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    References listed on IDEAS

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    More about this item

    Keywords

    price impact; herding; stock types; institutional investors; PSTR;
    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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